Delivery Fees And  Other Thoughts During the Pandemic

Dec 17, 2020 | COVID-19, Restaurant Marketing | 0 comments

The pandemic has been a good thing for the business of delivering food to consumers’ homes. Sales have been a legitimate lifeline for a lot of restaurants, especially casual dining and other concepts that needed the takeout business. And consumers have needed it, too, both as a source of food at a time when grocery supplies ran scarce but also as a break from the monotony of the quarantine.

Third-party delivery remains uncertain. Consider price increases on delivery orders to encourage customers to pick up their own orders. 

Third-party delivery orders are more expensive for restaurants because of the fees that these companies charge per order, which amounts to at least 15%. to 25%

When these sales were incremental, that 15% to 25% was less of a concern because the restaurants wouldn’t get those sales otherwise, enabling them to leverage existing costs like labor and utilities. That enabled operators to say that its delivery sales added to profitability last year—At the time about two-thirds of delivery sales were incremental.

Ah, but delivery sales were not going to remain “incremental” forever. That inevitability arrived during the pandemic when consumers had little choice but to order their food delivered. With companies now relying more on delivery, that 15% to 30% fee starts to look more and more problematic.

The result?  More operators are either raising prices on delivery orders (not good) or setting up their own online ordering and delivery service, which will pay big dividends when this pandemic is over and is the silver lining since future trends show delivery is a major profit-generating vehicle in the future.

Consumers have been willing to pay these higher prices because they’ve had more cash—incomes actually rose during the pandemic thanks to excess unemployment benefits and stimulus—and they had nothing else to spend their money on but food and consumer goods. Eventually the economy takes over, and those substantially higher prices on delivery orders become problematic.

Setting up a delivery/ take out infrastructure will be the most important one thing you can do within the next six months. Not only will it pay dividends now, but in the future, especially for those operators who had a minimal delivery program.