Restaurant Delivery Service: Outsource or In-House?

Restaurant service

Restaurant delivery and the rise in off-premise dining are changing the food service industry. What was once a novel concept, practiced by only pizza joints and the most tech savvy of establishments, is quickly becoming the standard. As more and more restaurants adapt to the landscape, those who aren’t yet offering delivery or off-premise dining options must grapple with the reality that eventually, they could be a dying minority. This article isn’t to say that every restaurant should implement a food delivery service right away – but industry trends suggest that every restaurant, regardless of size, will need to confront the question of a food delivery service eventually.

Many factors go into deciding upon a restaurant delivery service: What resources do you already have? Will you need to hire more staff? Is your restaurant optimized for online orders? Ultimately, whether to keep a restaurant delivery service in-house, or outsource to a third party, becomes the question an operator must ask. There’s no perfect choice, as all restaurants are unique, but follow our list of the pros and cons to decide which method is best for you.

Outsourcing to Third Party Delivery: Pros

Expose you to new customers

For a restaurant, outsourcing to a third party means exposure to a vast new customer base. In most cases, a third party will already have loyal users, but the utility extends even further when you consider those guests who are coming from out of town and ordering takeout or delivery. They often depend upon the recommendations provided by useful apps from third parties like Uber Eats, and can usually filter their decisions by “category.” (i.e., Mediterranean). Association with a third party means your business gets in front of many customers who just wouldn’t find you otherwise.

Increased Revenue Potential

While both types of restaurant delivery service offer an increase in potential profits, a third party’s potential is backed by its loyal customer base. By getting in front of more customers seeking a convenient dining option, you stand to earn more money. When considering the volume of online orders against those that come from in-house, an operator should find an automated solution like a KDS that can blend the dual streams of traffic.

Cut Down on Staffing and Labor

When you outsource your food delivery service to a third party, they supply the staffing resources regarding drivers and delivery. Outsourcing the delivery portion keeps that labor burden off of your kitchen, so your staff can focus on preparing the food. Furthermore, hiring decisions, and most liability issues associated with driving and insurance, are handled by the third party.

Outsourcing to a Third Party Delivery: Cons

Costs

Third Party Delivery Services will take a percentage of every delivery sale you make. It’s how they stay in business. So while a third party can push your restaurant to their network, it comes at a premium — sometimes as much as 30 percent of the overall sale. Restaurants can develop an online or delivery only menu, relegated strictly to higher margin items, to curb these losses. Still, before taking on a third party, ensure you can handle these imminent costs.

Lack of Control and Liabilities

When you outsource your delivery service to a third party, you relinquish significant control over this part of your operation. Once the food leaves your restaurant, you really can’t control what happens to it. These drivers don’t work for you, technically, so if they give lousy service, many customers won’t necessarily distinguish between companies; the bad name may fall on you, and they won’t order again. Third parties can sometimes provide menu information directly on their platform, which can create consistency issues for restaurants who amend their menus frequently.

Less Brand Spotlight

While these third parties usually offer a great UI experience via mobile apps, it’s their brand that gets the spotlight. Yes, your restaurant does appear in their listings, but it’s on their portal, surrounded by their logos and design. Restaurant owners with particular branding preferences may prefer a more hands-on approach to their delivery.

In-House Delivery: Pros

Higher Profits (with a catch)

Some studies suggest that maintaining an in-house delivery team runs roughly 50% less expensive than employing the services of third parties. Restaurants with the existing staff and resources stand to earn more in revenue and retain more profit from each order. Furthermore, an in-house delivery team sidesteps set-up costs and other hidden fees that come with a third party. Remember though, the staffing burden, as well as incidental expenses, will all fall on you.

Keep the Brand Consistent

When you keep your food delivery service in-house, you keep your brand consistent on all platforms, and your loyal customers will appreciate it. Some studies suggest that if given a choice, 76% of delivery consumers would prefer to order directly from the restaurant of their choice rather than a third party. When you handle these efforts yourself, you reward your existing customer base with added convenience and stand to gain more with the added dining option. You also keep your brand front and center and maintain control over styling and verbiage across all platforms.

The Buck Stops with You

An in-house delivery team reports to you. You have an active, actionable part of the delivery process and customer service aspects. When something isn’t working right, you can make direct changes without having to work through someone else’s management. You make the decisions on how the delivery service runs, and you also collect more of the financial benefit. Of course, that autonomy comes with its own price.

In-House Delivery: Cons

100% Liability

With an in-house delivery service, you are entirely liable for everything that happens. You incur all the costs, you bear the entire brunt of every angry customer, and must use your own time and resources to restructure when things aren’t working. It’s a “with great power comes great responsibility” concept, the other side of the coin of high profits. Your restaurant should be able to handle these kinds of incidentals.

Staffing and Administrative Burden

A restaurant delivery service needs drivers and vehicles. Those vehicles need fuel and insurance. Those drivers need paychecks. A third party handles these kinds of nuts and bolts tasks for you, but in-house you’ve got to make all these decisions. You’ll be in charge of hiring, training, and goal-setting with your team, an iterative process that requires substantial time and effort. Make sure you’ve got those kinds of intangible resources before opting for in-house.

Startup Costs

Restaurants who are new to delivery may find that the upstart costs of an in-house delivery service, hiring staff and vehicles, for example,  are too high. This shouldn’t discourage them from embracing delivery outright. In these cases, they may try out a third party to get a feel for it and develop a strategy, before going in-house when the time is right.

What’s right for one restaurant will be different for another. Regardless, delivery will only become a more popular dining option in the future. Take a proper accounting of your restaurant, and these pros and cons, to determine which delivery strategy is best for you.

Looking to launch an off-premise dining strategy? Our industry leading kitchen display system can help your restaurant with a successful implementation. Through real-time order tracking and meal throttling, guests have access to real-time information while your kitchen maintains a steady flow of tickets – both for in-house and off-premise orders.

About the Author

Dylan Chadwick is a Content Marketing Specialist at QSR Automations. He graduated from Brigham Young University with an English degree and journalism focus and loves to write about technology. When left to his own devices, he enjoys loud music, adorable dogs and documentaries about the aforementioned.

About Mohit Tater

Mohit is the co-founder and editor of Entrepreneurship Life, a place where entrepreneurs, start-ups, and business owners can find wide ranging information, advice, resources, and tools for starting, running, and growing their businesses.

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