Evolution of Restaurant Delivery - Past, Present and the Future

What is going on with the Restaurant Delivery Industry?

Restaurants are learning in a hard way how to sell online.

Restaurant delivery is nothing new. Pizzarias have been doing it for the last 40 years. So, why is everyone talking about restaurant deliveries as if something is new here.

What is new is: Everyone has a computer with internet connection in their pocket now - that’s new. These Online Food Delivery Behemoths capitalized on this technology trend and  made food ordering insanely easy for regular people. And we all fell for it. 

When the first generation online ordering platforms started with GrubHub and Seamless in the US in 2008-09, it was about incremental businesses for restaurants. Online orders to increase revenue in a downturned economy. 

The second generation App based delivery companies starting with DoorDash, UberEats employed an army of gig workers for food delivery and made the service even better. 

Because of the convenience they offered, restaurants depended on them for all their online sales despite the 25-30% commission they charged. It still worked because overall online sales was still small relative to the dining-in sales. 

Now what we are seeing during this pandemic is like a time travel to 2030 in terms of e-commerce adoption. Everyone is ordering online and no one is coming to stores.  

We are now forced to act this way because of the virus - but it can be a normal way of life in 10-15 years with more sales from online. 

So - the hard question for restaurants: Does relying on 3rd parties still work for you? 

The answer is probably a big NO for the majority of the restaurants. 

You are serving ghost customers through these marketplaces and paying one third of your sales income as commission. What are you becoming? A wholesale supplier of prepared meals to these marketplace with no connection to end customers.

There is no way you can run a profitable retail restaurant business without owning your online sales now and in future. You have to. It is not your extra revenue that  once you thought - it is THE REVENUE!  You have to own it to survive. 

So, what does the future look like?

Future is bright for businesses that will successfully operate their online sales directly on their website. They will have their regular customers who often can order online for convenience. They can pick up or you can deliver to them - Just like the pizza guys doing for 40 years. 

But now you can manage all these with easy to use software solutions that helps you to take online orders and manage deliveries seamlessly. 

If you only rely on marketplaces, your profitability will suffer and you will struggle to stay in retail business. Either you have to transform to a Ghost Kitchen, or go out of business. 

This current crisis has cracked open a window into the future for us. It’s time for a change if you have not done it yet.

A Commission Free Delivery Model For Restaurants

The current coronavirus pandemic has affected restaurant industry pretty hard. There is no easy way to say this - It’s really bad!

Most of the restaurants are close now for dine-in guests in all cities and towns across America. They can serve take-out and deliveries which generates only a fraction of their usual income everyday.

Some of the restaurant owners are sadly finding out that it does not make sense to operate with traditional take outs and deliveries - and they are closing their restaurants.

One may ask - why? Online ordering and deliveries can still bring sizable revenue. Shouldn’t that be enough to continue?

At surface, yes - but when you look in the details - the numbers don’t add up.

Most of these takeout and delivery orders for restaurants come from third party platforms like GrubHub, DoorDash and UberEats along with others.

These platforms usually charges commission between 25%- 30% of the sales. Some of them now waived fees for limited time but that’s not going to continue very long.

They are still stuck with their rent and other fixed expenses. Also, overall sales is probably down 40% or more, but these fixed expenses are not.

On top of that giving 25-30% commission on limited revenue leave them with no profits at all.

We always believed that the current restaurant delivery model is broken. The margin issue of online platform ordering was a growing problem for restaurant, but it was hidden under larger revenue from dine-in guests.

Now all of a sudden when 100% of the business is relying on these online ordering and delivery platforms - this broken business model is very obvious to everyone.

What is the solution then? How can COVID-19 transform the restaurant delivery model for the better?

GO ONLINE - GO LOCAL !

Take control of your online sales and find local delivery companies for managing deliveries - It’s possible and more sustainable model.

Have a commission free online ordering system, which costs less than $2-$3/day and work with a local restaurant delivery company for deliveries.

QuestTag is proving tools for local entrepreneurs to start their own restaurant delivery businesses by providing an easy integration with all types of restaurant ordering systems including GloriaFood, ChowNow, Slice, GrubHub and others.

Restaurants don’t have to provide any commission for their online orders, they can offer a bit generous delivery fees along with 100% of delivery tips. That can work.

This is especially lucrative option for mid to high $$ tier restaurants. Restaurants can save $1000s on commission fees every month with this model.

We hope the coronavirus pandemic be a defining moment for restaurants to find an alternatives to current high-fees delivery model.