Pizza Man Dan offers his opinions and insights on third-party delivery
The business of pizza delivery has changed. Third-Party Delivery Services like GrubHub, Uber Eats, and DoorDash have created options for both customers and pizzeria owners. Consider this: food delivery in the United States increased by 30 percent from 2019-2021 to 28.4 billion dollars. This unprecedented growth certainly was a result of COVID restrictions, but the growth in restaurant delivery is expected to continue at a rate of over eight percent annually*. If your pizzeria is to benefit from this growth by delivering your food to the customer, you are faced with a decision: Third Party or DIY (do it yourself).
Let us begin by defining what a Third Party Delivery Service (3PDS) is. 3PDS are like anchovies on pizza. You either love ‘em or you hate ‘em. There is probably more of the latter going around among our pizza peers, but customers must love ‘em because they are growing at a rate of 13.5 percent annually, almost five times the total food industry rate. Over 85 percent of consumers say they expect to use 3PDS as much, or more often, in the future**. If nothing else, this article will help you understand them so you can take Michael Corleone’s advice: “Keep your friends close, but your enemies closer.”
A 3PDS has an app or online site for customers to view menus from all participating (and some non-participating, but we will get to that later) restaurants, and to place orders for delivery to their home or business from any one or more of those restaurants. In most cases, the 3PDS then send one of their drivers to the restaurant to pick up the food and deliver it to the customer. Some third party delivery companies will take the customer’s order and allow the restaurant to deliver the food themselves.
From the Customer’s perspective
• A single place where they can shop for any type of food delivery. A one-stop-shop.
• There is no need to speak with a
human. Everything is done through the app or online.
• Once their account is setup, their
address and card information are stored, so that step of the ordering process is eliminated.
• They can often place their delivery order with very few ‘clicks’, allowing the task to be completed in under a minute.
• They receive promotion offers regularly.
• Problems with service encounter no argument, a refund or credit is given instantly.
• Missing items. Since the 3PDS cannot open the bags, they cannot check that the order is complete.
• No human to help. Problems are generally dealt with through the app or e-mail. For food items, this means credit or refund, but for other issues, it usually means an e-mail that gets no reply.
• Mistakes are not corrected. If the food is wrong or missing, a refund or credit for the item is issued. If the customer wants the correct food, they must place another delivery order, and pay all the fees again associated with that delivery.
• Expensive. 3PDS add a delivery fee and a service fee. In addition, many restaurants have higher menu prices in-app to offset the fees the 3PDS charges the restaurant. With fees and the price hike, it is not unheard of to pay double the price for the same food if you dined-in or picked-up.
From the Restaurant’s perspective
• No need to staff delivery drivers: no hiring and scheduling.
• Marketing. By listing you on their platform, all their customers see your pizzeria.
• No overhead. Costs of do-it-yourself (DIY) delivery are huge. Here is what you save:
o Labor cost: no delivery driver or phone operator wages.
o Uniforms for delivery drivers.
o Non-owned (delivery) auto insurance.
o No need to setup online ordering or apps.
• The customers are not your customers. They are customers of the 3PDS.
• The cost. Expect to pay on average 30 percent of your menu price to the 3PDS.
• Integration. While some POS companies are integrating 3PDS, most do not. That means the order will be coming to you on a separate printer in your kitchen, and the sales information will be on separate reporting. Or you could manually input into your POS system, which takes more labor cost and mistakes when entering the order.
• Unethical business practices by some 3PDS. When they list your pizzeria, they publish a different phone number than yours. They control that phone number. That means you lose all marketing you have ever done with your phone number, and this new number that is not yours is what gets stored in the customer’s phone.
• More unethical business practices by some 3PDS. They list restaurants that have not signed up with them, in essence competing to move your customers from your platform to theirs.
• Even more unethical business practices by some 3PDS. They charge a higher price for your products than you charge. The customer believes these are your menu prices.
• And yes, more unethical business practices by some 3PDS. They make changes to your restaurant’s information on Google. A customer may not notice that the link is not to your pizzeria’s site when it goes to the 3PDS site.
• Your pizzeria’s brand and marketing are diminished. Rather than using your website, your online ordering, or your app, the customer is more familiar with the brand and ordering process of the 3PDS.
• The customer will always blame your pizzeria for the problem, although you have given up control of your product and service.
• Food quality. The 3PDS driver may be placing the food in a dirty car, with no hot bag to maintain temperature.
• Delivery times. Since you do not control the scheduling or the driver, the delivery may take longer to get to the customer’s door.
Whether 3PDS or DIY is in your pizzeria’s future, I encourage you to attend Pizza Expo to learn more about both. Delivery is the fastest growing segment of the restaurant business, and your pizzeria can reap the benefits.
*Data presented by StockApps.com.
**Pentallect report: Third-Party Food Delivery Service Market
Dan Collier is the founder of Pizza Man Dan’s in California and a speaker at International Pizza Expo.