The pros and cons of delivery

27 March, 2018 by
Brittney Levinson

With the online food delivery industry set to be worth $2.4 billion in just seven years, restaurants are jumping at the chance to take a slice of the pie — but education is key when it comes to selecting a delivery service. 

When Menulog delivered its first meal in 2006, the ordering process still involved fax machines. Fast-forward to 2018, and online food delivery has evolved into a $600 million industry and is forecasted to grow to $2.4 billion by 2025 according to research firm Morgan Stanley. For first-timers, introducing delivery can be daunting, so take the time to understand what each platform offers to ensure delivery gives and doesn’t take from your business.

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The good and the bad

MAdE Establishment (Jimmy Grants, Hellenic Republic, Gazi and The Press Club) is reaping the rewards from the delivery boom, partnering with Deliveroo and Uber Eats to serve its customers.

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“We have had great foundational relationships with both partners since the early days, plus each have slightly different user experiences, which appeals to different customer profiles,” says MAdE Establishment CEO Troy McDonagh.

McDonagh says the biggest concern for the group going into delivery was that it would disrupt dine-in customers. “We have had to invest in our restaurant and store design to ensure we have fully integrated delivery and take-away [systems in place] without diminishing the dining experience,” he says. “At our new Hellenic Republic Brighton location, you will not see any of the delivery partners in operation yet it is fully operational.”

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However, cashing in on the delivery market hasn’t been smooth sailing for every venue. After joining Uber Eats in May last year, Sydney’s Petty Cash Café recently ‘broke up’ with the delivery platform after the owners realised it just wasn’t for them.

“All my staff were so relieved when I did,” says co-owner Caitlin Craufurd. “Delivery was an added stress you don’t need on a busy day.”

Craufurd says part of the reason for her decision was due to a change in Uber Eats’ policy, which sees restaurants taking responsibility for the cost of refunds issued to customers for missing order items.

“I’d have to go through all my orders every week when they would send me a statement and compare that to the orders we’ve done at the café,” says Craufurd. “So [there was] a lot of time and effort involved.”

Do your homework

Delivery isn’t for everyone, so it’s important to do some research before jumping on board. Jodie Auster is Uber Eats’ general manager for Australia and New Zealand, and says restaurants need to consider all variables that may affect their business.

“Delivery is a different experience for customers, so restaurants have to think about how to adapt their menu and packaging,” she says. Auster says it’s also important for venues to “understand the flow of orders in the kitchen and the pick-up experience for delivery partners to make sure high-quality food is delivered fast to customers. Our most successful restaurant partners embrace the online delivery channel with creative thinking and an understanding that they have to adapt to succeed.”

Adapting for delivery may include making adjustments to your menu to ensure it arrives in one piece and at the right temperature.

“It’s important to consider the types of food that are suited to delivery — this may be your entire menu or it may be a selection of your menu depending on how well certain dishes will travel during delivery,” says Alistair Venn, managing director at Menulog.

Deliveroo country manager Australia Levi Aron says ensuring food is well packaged and delivered in a timely manner will keep customers coming back.

“Deliveroo has specially designed heat-proof bags to ensure food reaches customers hot and uses smart algorithms to optimise deliveries to customers,” he says.

Assess whether there is demand from your customers for delivery and be mindful of your location.

“Depending on where a restaurant is located, it’s important to look at the customer base on offer in that area to ensure you can increase orders by reaching more people in your selected delivery suburbs,” says Venn.

Choosing the right platform for your business is key to delivery success as each service is different. While Uber Eats, Foodora and Deliveroo each operate on a percentage commission fee that is negotiated with the restaurant partner before they join, restaurants can expect to pay up to 35 per cent commission on each order. Menulog charges a fixed 14 per cent commission as it only provides the ordering platform, leaving the restaurant to organise their own drivers. Menulog also offers an ‘order now’ button that allows customers to book through the restaurant’s website, which is set at a lower commission of 7 per cent.

The future is dark

Dark kitchens and virtual restaurants are set to shake up the industry, allowing restaurants to fill gaps in the market by offering menus that are only available via delivery. Uber Eats’ virtual restaurants enable restaurants and cafés to branch out from their regular in-store menus and offer delivery-only menus to increase their revenue and reach new customers.

“At the moment, there are more than 150 virtual restaurants operating on Uber Eats in Australia utilising underused kitchen space to create more choice for their customers, experiment with the latest food trends and connect with new customers,” says Auster.

Similarly, Deliveroo recently launched dark kitchens, known as Deliveroo Editions, in Australia. The kitchens house multiple delivery-only kitchens, which enable popular restaurants to set up shop in different locations without the need for a bricks-and-mortar store.

“We do this by providing restaurants with delivery-only tech-enabled kitchens, local marketing support and riders so they can set up in new areas without upfront capital costs,” says Aron. “Deliveroo uses data to identify customer demand in underserved areas and predict which restaurants are likely to succeed in each area, thereby reducing risk for restaurants.”

While the market is currently dominated by 18–35-year-olds, there is potential for wider demographics to embrace delivery, too.

“Older demographics may begin to engage with delivery more, especially as perceptions about delivery being ‘unhealthy’ are broken down, [which could result in] older Australians ordering in,” says Foodora spokesperson Lizzie Kaye.

For Menulog, the future of delivery involves emerging technology, such as artificial intelligence.

“Being part of the global Just Eat network allows us access to world-class technology that can be launched locally, from cutting-edge app and site functionality to the likes of delivery robots,” says Venn. “It also allows us to tap into global partnerships, such as Amazon’s Alexa or Sony PlayStation, and connect with customers wherever they are via their chosen medium.”

If delivery is the next step for your business, do your research and find out which platform suits your venue and the food you’re offering. Armed with this information, you’ll be better placed to capitalise on the growing market and ultimately reach more customers and maximise your profits.

This story originally appeared in Hospitality’s March issue. Subscribe here.