Food delivery platforms, a threat or an opportunity?

According to a research done by McKinsey, the worldwide food delivery market is roughy €83 billion and growing rapidly. The percentage of food delivery is still about 4% of the total food sold through restaurants. There is no denial that this remains a massive opportunity for restaurants. 

However, an often heard complaint is the power of 3rd party delivery platforms. Rising delivery fees and a lack of building relationships between guests and a restaurant brand are major obstacles. Are food delivery platforms a threat or an opportunity?

The pros and cons of a food delivery platform

Let’s start with the advantages of a food delivery platform, First, these platforms brings you a ton of business without spending any out of pocket marketing budget. Some restaurant owners even claim that up to 80% of their revenue is coming via food delivery platforms. 

Starting via a food delivery platform is also relatively easy. There are no upfront or investment costs, just sign the contract and the orders will come in. But there is also a downside to food delivery platforms.

The first challenge with a food delivery platform is it’s fee’s. To understand their fee structure, you have to take a closer look at what a food delivery platform does. Some platforms like UberEats will create demand and will do delivery for you. The will charge you 30-35% for the full service. Other platforms like Takeway.com gives you the possibility to handle delivery yourself, which means that the platform only does demand creation for you. Takeaway charges 13% for demand creation.

Fee structures has changed over the recent years as well. For example Takeway.com started with a 6% commission but increased it over the years to 13%. On top of that, CEO of Takeaway.com Jitse Groen mentioned in the media that the fee structure might be increased again in the future. Other revenue streams for the platforms are also created, costing the restaurant owner more money. Again Takeaway.com wants to charge for higher listings on their platform next to their regular fee setup. In this case a restaurant brand needs to pay extra to be visible at the platform and to get business.  

Being dependent on a 3rd party platform for your business also faces a high risk. There are stories of restaurant owners that got banned overnight from a platform, losing their business.

Finally there is the risk of reputational damage. Orders that got delivered too late due to the fault of a delivery platform will lead to customer complaints and reputational damage for your restaurant brand. People will be harsh when an experience is not the way they would have expected it to be, if it’s your fault or not. 

Alternatives for food delivery platforms

Are there any good alternatives to food delivery platforms? Alternatives that enables a restaurant brand to still profit from the increased demand for food delivery, but without the negative side effects of the platforms? 

You can start building your own, direct channels. For example at Table Duck, we build chatbots that can take delivery orders via Facebook Messenger and WhatsApp. It brings the convenience of existing messaging apps to the guest, and it brings a restaurant brand in direct control. 

Building your own, direct channels also brings you lots of data about your guests so you can learn and  improve your restaurant business.

Having direct channels, also brings loyalty, supported by a loyalty program. You can focus on building 1-1 relationships with your valuable guests instead of fighting for top positions with other restaurants at a food delivery platform.

How to get traffic to your direct channels? Well here you can actually use the food delivery platforms. At Table Duck we conducted research about behavior at food delivery platforms. It turns out that people often have 3-5 favorite restaurants where they like to order. They tend to order the same dishes at these restaurants. So there is a strong repeat buying behavior going on at these food delivery platforms. 

You can use the food delivery platforms to get the first order in, but use your direct channels for a second and third purchase and build a 1-1 relationship with the guest. 

So at the end of the day, food delivery platforms are a great opportunity to profit from the growing delivery business. However, before you jumps into it, you need to consider the risks and the disadvantages of a food delivery platform. A combination between food delivery platforms and building your own strong direct channels supported by a loyalty program seems to be the right thing to do, benefitting from both worlds. 

Robbert Bregman – Co-Founder of Table Duck

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