Should my restaurant use third party delivery?

Should I Use a Third-Party Delivery Service or Create My Own?

Tessa ZuluagaAuthor

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Many restaurants continue to face a tough decision when it comes to accommodating guests’ delivery preferences: Is it a better idea to sign up with a third-party delivery service or invest in developing an in-house delivery channel for my restaurant? 

The pandemic revolutionized what convenience looks like to the typical restaurant guest. After all, so many restaurants that hadn’t previously offered delivery and takeout options were forced to adapt.

As a result, many guests — especially those among the younger generations — have stuck to off-premise options. According to a study by Toast, younger generations order delivery more often, as guests ages 25-34 use food delivery apps the most (20% order 6-10 times a month).

Jeremy Seaver, owner of Tios Mexican Cafe in Michigan, is a veteran of the restaurant delivery game and knows the positive impact delivery can have on a restaurant’s bottom line.

“We’ve been doing delivery since 1986. Delivery has been a big part of our business forever since we’re in a college town and open late nights.”

Due to the harsh Michigan winter, roughly 40% of Tios’ business is delivery for almost half of the year. 

When it comes to choosing how to incorporate delivery into your restaurant operations, restaurateurs have two core options: build your own delivery system through your website/app or sign up with a third-party delivery vendor.

But how do you decide whether a third-party delivery service or in-house solution is best for your restaurant?

10 Best Third-Party Delivery Services

Everything you need to know about using third-party food delivery services

Although there are many benefits to starting an in-house delivery system for your restaurant — we’ll get into those in the next section — using a third-party delivery model has serious perks. With over 40% of diners using food delivery apps or ordering takeout 3-5 times a month, it’s crucial that restaurant operators use the best apps on the market. 

Using a third-party delivery service is great for restaurants just starting out, seeking new customers, or restaurants that can’t afford to start their own delivery service. These apps also serve as a great marketing tool because they expand your reach to customers you might never have reached otherwise. 

Google has also partnered with third-party delivery companies and online food ordering platforms to allow diners to order delivery directly through Google, expanding your restaurant’s reach even further. For example, to order from a participating restaurant, consumers can hit the “order online” button directly through a Google search and get their food delivered through companies like DoorDash and Postmates, without downloading the third-party app.

Some of the biggest players in the third-party food delivery space are Uber Eats, DoorDash, GrubHub, ChowNow, Postmates, Caviar, and Seamless.

According to insights from Sensor Tower, DoorDash was the top delivery app in Q1 of 2024 (490K downloads in the first week of January 2024), with Uber Eats closely following (265K in the last week of February 2024). This means that when your restaurant is listed on these third-party delivery apps, you have the potential to reach a large pool of hungry diners. 

So, how does third-party service delivery actually work? These companies have consumer smartphone apps that aggregate an endless stream of restaurant options for hungry diners to choose from. As a restaurant owner, you are tasked with uploading your menu and crucial information.

Then, guests place orders directly from their phones to your in-house tablet, where an expediter calls out their order to the kitchen or, if you choose a POS system that directly integrates with third-party delivery platforms, they are sent directly to your kitchen printers or kitchen display system (KDS).

Setting up a third-party delivery platform is no small feat. In some cases, restaurants have had to hire an extra person to focus specifically on inputting third-party orders into the POS, packing up delivery orders, and getting them ready for a driver to pick them up. 

If you’re outsourcing a third-party delivery vendor, it’s important to know that it will cost you. It’s standard for a third-party delivery platform to take a percentage of every order they send your way for delivery fees. Uber Eats, for example, charges restaurants a commission of 15% to 30% on each delivery and 6% on pickup orders. This can be an intolerable cost for restaurants that operate on razor-thin margins.

It’s also important to note that these third-party delivery apps often drive up the cost of an order for the guest.

Anthony Miyazaki, a professor of marketing at Florida International University, told Business Insider

“Demand for delivery [pushes] consumers to unknowingly compete against each other, with a willingness to pay more for delivery and more for tips to get their food delivery times lower."

This leads delivery app companies to take a higher cut from restaurants and raise fees for customers, while at the same time, drivers are looking for higher tips, Miyazaki explained, which all results in a much pricier food order.

According to Bloomberg, in 2024 New Yorkers saw a 58% increase in food delivery and commission fees. While these fees and markups are often set by the delivery app itself, and not the local restaurants, they can leave a bad taste in the guest’s mouth. This may prevent them from ordering delivery from your restaurant in the future if they feel they have been blindsided by extra costs, which may hurt small businesses. 

Additionally, the major players in the food delivery apps scene have historically come under fire for questionable and deceptive business practices and high fees that contribute to restaurant closures across the country. In short, working with a third-party delivery service comes with some concerns and risks amid ongoing controversy.

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Everything you need to know about creating a food delivery service for your restaurant

According to a study conducted by Toast, 33% of guests prefer to place an order through a restaurant’s app.

You probably recognize just how important offering online ordering options for your restaurant is. But, to really hammer it home, 30% of guests claim that the frequency with which they use delivery apps is about the same as the frequency with which they dine out. Restaurant-goers are no longer going out more than they’re ordering in!

And did we mention that guests who order directly from your delivery app tend to spend more? If you’re offering a loyalty program for your restaurant, you’re even more likely to keep guests coming back time and time again.

So, if you’re interested in keeping delivery in-house rather than signing up with a third-party delivery service, that data is encouraging.

Creating and operating your own delivery and online ordering system gives you greater control over the guest experience, ensuring that at-home diners can enjoy the same high-quality offerings from their delivery experience as dine-in. After all, a study by Service Management Group found that 35% of at-home diners who had a problem with a third-party delivery service ultimately blamed the restaurant.

Choosing to develop an in-house delivery system for your restaurant involves some careful analysis, budgeting, and planning. Here are some considerations and questions to consider if you’re interested in developing your own delivery service rather than relying on a third-party delivery company:

1. Delivery vehicles and staff

In order to deliver meals to your customers, you’ll need to pay for delivery cars or pay your delivery drivers to use their personal cars. If you don't have a parking lot or street parking readily available for your restaurant, this could also pose a problem. 

2. Gas money

Regardless of whose car is being used — the company's or the courier’s — you'll need to set up a system to track gas use and reimburse couriers for filling up the tank. And, as gas prices fluctuate, many third-party delivery services are stepping up to cover gas prices for their drivers as well. In other words, providing a stipend or reimbursement for your delivery drivers is a must.

3. Hiring dedicated delivery prep staff

As soon as your restaurant processes 30+ delivery orders per day, you’ll need to hire an employee dedicated to delivery. This person would be in charge of receiving orders, making sure the food is prepared correctly, getting to-go bags ready with any promotional materials, and double-checking orders before they leave the restaurant.

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4. Choosing a POS platform that directly integrates with your delivery system

Admittedly, no matter whether you choose to go with an in-house delivery service or a third-party platform, ensuring your point-of-sale platform can keep up with off-prem orders is crucial. A cloud-based POS, like Toast, allows you to easily keep track of orders no matter where they are placed. And when you directly integrate your third-party delivery platforms you will avoid double entry, input errors, or the dreaded order that slips through the cracks. 

5. Insurance

How will you insure your delivery drivers, and your business, in the case of an accident? Will they need to pay for their own insurance or will your restaurant cover the cost? There are delivery insurance plans that cover car insurance, business owners’ policies that cover general liabilities, and workers’ compensation in case the driver gets injured.

6. Your packaging

It’s important to make sure your customers have a good experience that aligns with your restaurant brand, whether they are in your restaurant or their homes. No one likes soggy food or mushed entrees. If your fries can’t withstand the drive from your restaurant to the guest’s front door, you may want to rethink your packaging (and maybe your to-go menu!) 

Ensure that your packaging and menu items pass the delivery test. Otherwise, guests may never want to eat the restaurant's food again — especially not via delivery. And don’t forget to factor packaging costs into an adjusted plate cost calculation. This will give you a truer read on menu item profitability across sales channels.

P.S. If you need help curating the perfect online ordering menu with food that travels well check out this guide.

7. Designate space for high-volume deliveries

Have a tight kitchen? You’ll need room to store each order after they’re prepared. Shelves make it easier for couriers to gather orders together by making them easily visible. Bonus points if you can alphabetize the orders to make it easier for drivers to find. The more you can do upfront, the fewer delivery errors you’re likely to have.

8. Food storage and transportation process

Prepared foods need to stay at a certain temperature before being consumed. You will need to invest in insulated bags, coolers, and boxes to transport food without it becoming too warm or too cold en route to the guest. Health codes and food safety are certainly not areas to cut corners. This is just as true for your dine-in operations as it is on the go. 

It’s critical that you define a process for how you manage items that are ready for delivery. You’ll want to keep track of which items go to which address. And you’ll want to prepare dishes appropriately. For example, if you get an order for three large pizzas and a Caesar salad, you’re not going to make and dress the salad immediately. It takes no time at all compared to the pizzas, and having it sit and dressed would destroy the quality.

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9. A reliable delivery tracking system

You’ll need to come up with a way to see where your drivers are in the delivery process, whether that’s on the way to a customer, dropping off the food, or returning. Knowing when your drivers are ready to deliver the next batch of orders will play a huge part in determining when the next orders get fired. If left unmanaged, an untracked delivery system could lead to long wait times, theft, or unruly delivery overhead.

10. Establish a payment process

When will the customer submit payment? When will their food be ordered or delivered? Will you accept cash, cards, and smart payment like Apple Pay? How will they receive a receipt? All of these questions must be considered when deciding on payment processes.

11. Choose a communication method

When a driver goes on dispatch, they need to be able to communicate with you if something goes wrong. Should you give delivery couriers a dedicated phone? Or should they use their own phone? 

All of these considerations cost money, but in the long run, it can be well worth the investment — instead of ceding a large percentage of your profits to third-party delivery companies. 

The impact delivery has on restaurants across the country

Clearly, off-premise options such as takeout and delivery are here to stay. 

The Online Food Delivery market in North America is expected to experience significant growth, with projected revenue reaching $457.50 billion this year.

And, as previously mentioned, the booming food delivery industry is mainly driven by young people. If you haven’t already, your restaurant needs to figure out your delivery plan — stat.

With so many delivery options out there for restaurant owners and operators, it can be hard to navigate which option is the best for you. If you decide to use a third-party delivery service (or even multiple), check which services are operating in your area, what percentage of each check the service absorbs, and whether diners in your region are using third-party delivery services or they prefer to order straight from you.

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DISCLAIMER: This information is provided for general informational purposes only, and publication does not constitute an endorsement. Toast does not warrant the accuracy or completeness of any information, text, graphics, links, or other items contained within this content. Toast does not guarantee you will achieve any specific results if you follow any advice herein. It may be advisable for you to consult with a professional such as a lawyer, accountant, or business advisor for advice specific to your situation.