Food Delivery Services
Food delivery services allow customers to order meals from a range of restaurants and have them delivered to their homes. These businesses have seen a sharp spike in sales during the COVID-19 pandemic.
A food delivery business requires efficient management of three basic components – ordering, cooking and delivering. Using an online food delivery route planner such as Upper can help you streamline your operations and perform faster deliveries.
Restaurant to Consumer Model
Food delivery companies use this business model by hosting a range of restaurants on their virtual platform and act as a mediator between these restaurants and consumers. These companies also hire drivers and handle all logistics. Examples include Uber Eats and DoorDash. These companies typically charge a flat commission to the restaurants for each order and then charge the customers a delivery fee based on their location.
Restaurants that choose to partner with these third-party companies may see their prices increase (through added listed fees or menu markups) to cover the restaurant’s commission costs and driver pay. Moreover, the restaurant might also be required to provide training for delivery boys.
The average order duration is an important metric that provides insight into the speed of delivery for your food delivery service. This metric takes into account how long it takes to process each order and deliver it to the customer’s doorstep. It is essential for ensuring that your delivery system operates smoothly and efficiently.
Restaurant to Aggregator Model
With this food delivery model, restaurants register with aggregator platforms and then serve their customers through them. Aggregators earn service fees from the customers and commission from the restaurants. They also prioritize supply and set prices, causing them to become quasi-monopolies in their areas.
This model is ideal for restaurant owners who don’t have a courier service at their disposal. However, the biggest drawback is that the restaurant loses access to customer data. For instance, it cannot know how many customers order from them frequently or which ones prefer to buy more than one item.
The aggregators also do not allow the restaurant to use its unique visual presentation as a competitive advantage. For example, Miss Lily’s vibrant Caribbean gist and original designs are not displayed on their Uber profile, so they are missing out on a valuable marketing tool. Moreover, these aggregators often have separate, higher per-order and monthly service charges apart from the high aggregator commissions.
Restaurant to Third-Party Platform
If you don’t have the capacity to invest in developing your own delivery channel, you can sign up with a third-party food delivery service. These services partner with restaurants, offer a convenient online ordering option and handle the logistics of dispatching drivers to fulfill orders. In return, they take a commission of between 6% and 30% of each order.
This is the most popular option among independent restaurateurs. Companies like Uber Eats and DoorDash make it easy to offer delivery to your customers in a matter of minutes by integrating their systems with your POS. They also save you the expense of hiring and training a delivery driver in-house.
The downside of using these services is that you lose control over the end-to-end customer experience. This can hurt your reputation and cause loyalty to shift away from your business. Plus, these fees can eat into razor-thin margins for many restaurants. This is why it’s important to carefully weigh your options before deciding which route to take.
Restaurant to Customer Model
This food delivery model involves a third-party listing restaurants that are close to customers’ proximity, normally through an online platform or mobile app. They charge a flat fixed or variable fee for every transaction they facilitate between end-users and eateries.
This type of business can also offer premium features such as metabolic meal customization and corporate meals for businesses. In addition, it is able to attract more restaurants and users as it does not require them to create an app or hire delivery drivers.
On the downside, it carries more risks due to high operating costs such as those of DoorDash that reportedly lost $400 million in 2019 and Postmates which had to lay off workers and close offices. The other risk is that the business can easily become a price monopoly and may put pressure on traditional restaurants. It also does not have a direct relationship with the drivers and restaurants which can have an impact on delivery quality.