Third party delivery services vs in house delivery: which is best for your restaurant?

Let’s face it. You threw your restaurant’s delivery service together in under a day, didn’t you?

It’s most likely the smartest thing you’ve done this year.

Around 1 in 5 people in the world are under lockdown right now because of the COVID-19 pandemic, and most countries are doing some form of social distancing. Dine-in customers have vanished overnight. Your restaurant’s chairs stay flipped on their tables, and food orders now come from delivery and takeout alone.

If you hadn’t started the delivery service when you did, your business and staff would be hurting far worse today. Making that decision swiftly was the right move (If you still don’t have delivery set up and are looking to start, here are the essentials you need to get started right now.)

But is your delivery service the right one for your restaurant as the outbreak develops?

Experts aren’t sure how long the coronavirus crisis will last, but this story will be told in months rather than weeks. The UK expects the pandemic to last until spring 2021, and President Trump sees social distancing measures in the US continuing until at least August 2020. As things stand today, a coronavirus vaccine or cure seems at least a year away.

That’s a long time for restaurants and food service businesses to wait.

And even when the virus finally goes away for good, there’s no guarantee that customers will flood back into restaurants. People might get used to cooking affordable meals at home and the convenience of food delivery. They may also simply fear eating in public until a few more months have passed.

Still, there is some good news for food service businesses: there are many delivery orders coming your way soon—and possibly for a rather long time. Having the right delivery service can mean the difference between your restaurant making enough cash to survive the coronavirus crisis and closing its operations for good.

In this article, we compare the two main ways your restaurant’s delivery service can survive the coronavirus situation and be prepared for when it passes.

Third party delivery services vs in house delivery

Third party delivery services:

In house delivery:

Both third party delivery services and in house delivery are viable options for surviving the current crisis if done well. To help you figure out what’s best for your business, let’s take a closer look at the advantages and disadvantages of each.

Third party delivery services (pros)

Convenience and urgency

Joining a third party delivery service is by far the easiest way to get a restaurant delivery up and running. Putting your restaurant up on the app takes just an hour, and the paperwork after that should take a few days at most. If you’re like most restaurant owners, your margins and cash reserves were already thin before the coronavirus outbreak hit. Every day without delivery is cash left on the table, and platforms are great for getting demand through the door right away.

There are many options to choose from, and you really can't go wrong with signing up with the big names e.g. Uber Eats and Doordash in the US, or Grab Food and Food Panda in South East Asia.

Customer base and network effects

The rise of platform businesses and third party delivery services has been well studied by market strategists in recent years. When they grow large enough, platforms offer a huge customer base and network effects, bringing in more value as more people use them. The instant access to potential customers that a platform gives might take you a while to build yourself. Not all of these customers will buy your restaurant’s product or engage with your brand, but it might well be worth a shot.

No new delivery staff needed

Hiring and training new delivery staff in the middle of a crisis can be demanding. Perhaps your business just doesn’t have the capacity to handle that right now, with all that’s been going on around COVID-19. Maybe you’d rather focus on preparing the delicious meals that drew customers to your shopfront. That’s a perfectly good call.  

Third party delivery services (cons)

High fees

It’s no secret that almost all third party delivery services on the market charge high fees—and they’re not planning to reduce them for COVID-19. Some cities, such as San Francisco in the US, have passed emergency legislation capping delivery fees for restaurants at 15 percent, but these are few and far between.

Everyone else gives up around 30 percent of their product’s price in fees. Considering how crowded the delivery market is right now, most businesses won’t be able to pass this cost on to customers.

While food lovers all over the world are boycotting delivery platforms in solidarity with their favorite restaurants, there’s a hidden short-term cost to this. If platforms refuse to reduce their fees despite this pressure, fewer people will look at your restaurant on them.

Visibility depends on algorithms

The great part about third party delivery services is their use of technology to streamline the order and delivery process for your restaurant. But what happens when an algorithm decides your restaurant has had its time? Is there anything you can do to change its mind? How do you know when a dip in your business comes from an algorithm, your product, or something else entirely?

Third party delivery services ask for a lot of trust with their algorithms. Unfortunately, there is no way for individual businesses to have a clear view on how these algorithms make their decisions. It’s simply a risk that platform users must take.

Low control over marketing

Here’s a question: How many writers can you name on your favorite daily news site? If you struggled to name any, what makes you think the average customer will remember your restaurant among the hundreds in your area on a delivery platform?

As food orders move online, brands that stick and marketing campaigns that speak to customers will spell the difference between a loyal following and the occasional visitor who chances upon your listing.

This isn’t something most restaurant owners think about, but here’s the reality: the cost of accessing a platform’s customers is often how memorable your restaurant will be to them.

In house delivery (pros)

Keep all your revenue

Setting up your delivery systems and hiring drivers will cost you in the beginning. But once that is all done, you’ll pay much less than the 30 percent most delivery platforms charge, even with hiring your own drivers.

These savings add up quickly, giving you more cash as the coronavirus outbreak develops.

Control your marketing and sales

Owning an in house delivery service offers a degree of control over marketing that delivery platforms just can’t.

With your own delivery service, you can put up discounts and promotions whenever it’s best for your business, and even collaborate with other restaurants in the area to boost one another’s efforts. Your sales aren’t dependent on algorithmic changes, and you can even track your marketing directly if you’re savvy.

For businesses reluctant to pay online transaction fees or serve communities that prefer cash, running your own delivery service frees you from using the platform’s payment method. This way, you can meet customers where they’re at.

Provide excellent service yourself

Before the coronavirus lockdowns and social distancing measures kicked in, many of us took face-to-face interactions with food service staff for granted. These days, people crave the comfort of seeing familiar faces behind the counter of their favorite restaurant when they order a meal they know they’ll enjoy.

For many of us, eating at home just isn’t the same.

If your service staff are willing to do delivery, train them to offer a personal touch to customers supporting your business. Simple gestures like a hand-drawn smiley or casual comments (e.g., “That pan-seared duck breast is my favorite! I hope you’ll enjoy it as much as I do”) go a long way toward creating a remarkable experience around your food. That’s something you’ll never get with a third party delivery service.

In house delivery (cons)

Carve out your own customer base

The flip side to offering customers a personal touch with in house delivery and customizing your marketing is, naturally, that you’ll have to do it all yourself. Then again, this isn’t necessarily a bad thing. If you’ve chosen to start a food service business, chances are you value the hustle of setting things up exactly the way you want. Creating special experiences around food and drink is probably the reason you went into it in the first place. Bringing that special quality to your in house delivery is simply the next step.

Setting up your delivery system can seem complicated

Creating your own delivery app yourself or hiring a developer—not to mention testing it, fixing bugs, and tweaking design until the app works great—can cost thousands of dollars and many hours of work.

It’s a serious undertaking, and a crisis might not be the best time to get started on a project this big.

That said, you don’t have to do it all from scratch.

At RouteBasic, we’ve created a free route planner app that lets you optimize routes, track your drivers in real-time, and let customers know their food is coming with a single click. Apps like this let you use the same technology that delivery platforms use at zero cost. You’ll likely miss out on the network effect, but the savings alone are worth the trade.

Conclusion

At the end of the day, your approach to the third party vs in house delivery question comes down to where your business is right now and what its unique challenges are. If you haven’t started your delivery service and need a quick solution that lets you focus on your product, a third party delivery service is great. You’ll pay a premium for that convenience and lose some control over your marketing, but that may be a trade-off worth taking.

Need a free route planner to manage restaurant food delivery? Take a look at our 1-minute video and give RouteBasic (available on iOS and Android) a try! You’ll be surprised at what you can do with the right tools.