Have you noticed the shift in your margins and in your customer needs? As restaurant owners, we need to take advantage of the trends that are changing our industry and grow our profits by making just a few adjustments in order to capture 100% of the market.
After all, if you do nothing now, by 2020, you will only be catering to 30% of consumers according to the NRA.
I started my company Fit2Go, a healthy meal delivery service, in 2004 when I was 24. As a Gen Y, I saw the opportunity early on and entered the market ahead of the curve. The model is now popping up everywhere, currently considered the darling of the financial market and declared the future of the restaurant industry. More than half a billion venture capital dollars went into food delivery startups last year; that’s more than triple the amount invested in the previous year.
But before you start offering restaurant delivery services to your customers, you need to remember that adding a delivery component adds more complexity—and with more complexity comes more important decisions you need to make. To make the process easier for you and to help you determine the right course of action for your business, I’ve compiled a 5-point delivery checklist questionnaire based on my experience.
1. Why should I consider adding delivery to my model?
You want your restaurant to do well now and in the future. That means you need to start marketing to millennials. These are the people who were born in 1979 or after. By 2020, they will account for 80% of the workforce!
As I mentioned before, 70% of all restaurant foot traffic will be outside the restaurant by 2020! This is a trend you can’t ignore. This does not mean that the people will stop coming to your restaurant. It just means that millenials do not like to cook and are considered the “now” generation. They will continue to dine out twice or three times per week socially, but they need their breakfast, lunch and dinner for every other day made fast, convenient and readily available. Even if after going through this 5-point list, delivery is not for you… please consider takeout, curbside pick-up, adding a food truck, or any future off-premise model on top of your current model to capture this market.
2. Should I use a third party delivery company?
The restaurant industry is changing fast and we are doing close to nothing about it as restaurant owners. Most of the solutions are coming from technology and marketing companies like Amazon, PostMates, Eat24, Grubhub, Uber, DeliveryDudes, etc.
These companies sell themselves as marketing for your restaurant, but in the end, their clients are not yours and they place you in direct competition with other restaurants. They charge their clients a delivery fee and negotiate a part of your food cost depending on your volume. Why are restaurants giving away their margins to middlemen?
The answer depends on the demand your food business has for delivery, as well as how much time you have to put into your delivery plan. In regards to your menu, if you cater to a specific lifestyle niche (vegetarian, organic, kosher, X Diet, family dinners, gluten or dairy free, etc), you can create sticky customers that order from you 3+ times per week. In that case, it would make more sense to have your delivery in-house. If you don’t have the time or demand for delivery, you can at least save money by using a restaurant delivery system integrated with your POS.
As restaurant owners, we need to understand what the shift is and be able to cater to the market. Let’s stop giving our margins away to others. It is time for us to boost our margins and understand what our customers want. Maybe you can even create a lifestyle menu from your current menu without changing a thing.
3. What’s the best way to get food from my restaurant to my customers?
This will depend on your clients and what they need from you as their food supplier. Make sure to ask your best customers what alternative would work for them and see if it makes sense for your business. The most common options are:
- Routes, which are best for lifestyle restaurants that have sticky clients (like Fit2Go) and deliver daily / weekly food to customers
- Back and forth delivery, which is good for companies that want to dispatch an employee when a delivery order comes because they don’t necessarily have a high demand for delivery. Examples of this are pizzeria or Chinese delivery companies.
- Pick-up locations, which often work well for companies that deliver mass quantities of food for a specific crowd, like in gyms, supermarkets or schools.
- On-demand delivery providers, which are useful for restaurants that don’t receive many delivery orders and thus don’t need a dedicated delivery driver in the restaurant at all times
4. What system or software do I need in order to start delivering?
Many restaurant POS systems are adding a delivery option to their offering, so online ordering, delivery, and customer data can all be tracked within the same system. Make sure these adapt to the option you pick as the best delivery style. Usually, these are best for back and forth and on-demand delivery options.
If you choose to use routes or pick up locations, how will you find the optimal route? This is a question where technology really comes into play. While every area is different, there are routing systems that can design the optimal route for you and even send it out to your drivers Uber style.
5. Do I hire independent 1099 drivers or hire them as hourly employees?
This is a question that is best for your attorney. Please consult in your state for any local labor laws. In my experience, it all depends on how much control and supervision you want as part of the hiring and delivery process:
If you want to train your delivery staff, have them wear your uniform, have your company signage on their cars and be available permanently at your restaurant, the Department of Labor would generally consider them employees. Be aware that this would imply labor taxes and workers comp. There are ways around it as Domino’s Pizza and other traditional delivery companies can attest to.
If you have a standard guideline, your drivers can be replaced by any person on a daily basis, or if you use an Uber style app to assign delivery drops, you may be able to hire them as 1099. The best way to pay them is by delivery drop instead of per hour or mileage. Make sure your liability insurance covers them and you have a labor attorney assist you in this structure.
When you add a delivery service to your restaurant, you’ve added a new revenue source but also a new level of complexity to manage. The right technology and strategy will help you keep control of your delivery operation and make it more profitable.
Given the trend toward 70% of food traffic being outside the restaurant by 2020, which is only a little over 5 years away, there is a huge opportunity to grow your market by adding an off-premise component to your business. Consider a delivery fleet, a food truck, curb-side pickup or any feature that provides more convenience to your customers. We need to focus on our volume first to be relevant. What better way to grow volume than by riding the fastest growing trend and expanding your customer base using your same space and facilities?
I shifted Fit2Go’s initial vision from a healthy café to a meal delivery service because as a Gen Y, I saw the shift of consumers looking for convenience. That was 11 years ago!In my book, The Profit Recipe, I share my 11 years of experience in managing a food delivery company so restaurant owners don’t have to go through the same mistakes I did.
Imagine having that extra income when you have a retail location and an off-premise solution! How many times do you get asked: When are you opening in our part of town? Imagine the extra money by using the same fixed costs you use now? It all goes straight to your pocket! Let’s start the Restaurant Revolution!