3rd Party Food Delivery is going to ruin the restaurant industry
3rd party food delivery services charges ridiculous fees to its restaurant customers. I believe the commission rates are in the 30% range. When you add in advertising, coupons, premium placement, delivery fees, and service charges the restaurant is left with barely anything. If you think that is bad, you aren't going to be a big fan of what I am going to say next.
Cities are started to create legislation to limit the fees that delivery services can charge. There is such a law in Chicago. With a limit on its business model, delivery companies are surely looking for new ways to increase their revenue and profits. How long before they realize that they need to open up their own kitchens? Grubhub will eventually have a Sushi restaurant, a pizza restaurant, a wings restaurant and many other concepts. They can do this all out of the same kitchen. Grubhub can strategically place ghost kitchens throughout a city or area so that they are strategically located.
How are they going to know how to do this all? They have all of the countries delivery data for the last several years. They know each household and they know what type of food you order. They can use this data to compile the best locations for the best concept kitchens.
Are you saying that this could never happen? You don't think Grubhub or Doordash has what it takes to compete with its customers? I am going to say the restaurants don't have what they need to compete. The future is going to be about brand and data. The restaurants have the brand but they don't have the data. Grubhub has been collecting data for so many years and the restaurants are going to struggle to compete.
If all of a sudden a wing place called Wingstock opens up and has good reviews and good placement on Grubhub, it will get orders. They just need to create a few different concepts based on their data. They know exactly what we eat and they can structure their offerings around the various areas. They can have different types of bar b cue and different types of pizza depending on where they are located.
Is it all doom and gloom? Of course not. Restaurants can compete. I think the restaurants that come out ahead are the ones who stop using 3rd party delivery services and find ways around it.
- Create unique coupons and offers for your loyal customers
- Come up with the best curbside pickup in the country
- Put some park benches outside so people want to pickup and eat outside
- Hire your own delivery staff like Domino's so you can control the experience from start to finish.
- Collect data on your customer so you can send them offers
- Learn how to use social media to advertise
- make sure your food tastes better than their generic offerings
- get big enough so that they can't compete in your category in your town
- order custom swag from your local PPAI or ASI dealer to hand out
- Ask your customers for good reviews.
- advertise to your customers when they are hungry using local ads