As almost anyone in the food service industry will tell you, attracting more customers is the aim of the game. And so it really comes as no surprise that more and more Australian restaurants, cafes, and caterers are turning to online systems and third-party delivery apps to meet growing customer demand for the convenience of technology based ordering.
But how do you know if this type of service will be beneficial for your business? And which one should you choose to join? Like with any decision there are pros and cons to weigh up before you dive in, so we’ve developed this guide to assist you in making an informed choice before you spend any of your hard-earned profits.
How Popular Are Food Delivery Apps?
There’s no denying food delivery apps such as Uber Eats, Menulog, EatNow, and Deliveroo are popular, and that the demand for takeaway food is growing at a rapid rate across Australia. It’s thought this could be largely due to millennials, who have been found to be the least likely to cook meals for themselves, or go out to eat, preferring instead to order takeaway from the comfort of their home.
And the evidence of our take-out delivery addiction just keeps piling up. In fact, recent survey results from comparison site finder.com.au found Australians are spending a staggering $2.6 billion each year on food and drink deliveries through mobile and online apps. Those in capital cities — with Sydney leading the charge, followed closely by Melbourne and Perth — are ordering the most frequently — at least once a week — with men tending to order more times on average than women.
From a business perspective, how does this translate to a per order breakdown?
- According to finder’s research, the average food order placed totals around $37.50, with a yearly average food spend of $1590 per household
- Approximately one-third of adults living in capital cities are regular food delivery users
- Online food delivery services are now worth 12% of sales in Australia’s highly profitable $44.1 billion cafe, restaurant and takeaway food services industry
- According to the Australian Bureau of Statistics, takeaway food sales have increased by 18% in just three years
- NAB’s December 2016 Online Retail Sales Report also showed that takeaway food grew by 34% from 2015
And so, it’s becoming very clear the reach of these systems and the potential profits they can help you generate is undeniable. Menulog, for example, as one of the first apps introduced to the Australian market, currently hosts over 2.6 million active customers on its platform, and Uber Eats’ top restaurants are reported to make over $6,400 a month (over $75,000 a year) from the food delivery platform alone.
Food delivery apps have met our need for convenience when it comes to ordering takeaway food. But the question is, as a business owner or manager, can you use them to your advantage, and if so, how?
The Advantages of Food Delivery Apps
With even fine dining restaurants like Nobu hopping on the food delivery bandwagon, now is an excellent time to consider how going mobile could benefit your business. As a general rule, it can be a smart and easy way of increasing your market reach without investing in actual physical expansion, letting you bring in extra income without a whole lot of extra work.
The major third-party delivery apps available in Australia include:
- Uber Eats
- Menulog
- Eat Now
- Deliveroo
These mobile apps are also very good for generating business during times that may have been traditionally quiet for you (such as early in the week), or when foot traffic is low due to uncontrollable external factors such as bad weather. As a business owner you will probably know not as many people are inclined to go out on a cold, rainy night, and that’s an opportune time to pick up new customers and boost your profits with online orders.
When it comes to placing an order, the process is streamlined and totally managed through the mobile apps, assigning the responsibility of submitting the order correctly directly to the customer. This means the risk of incorrect orders being taken over the phone is eliminated, and not having to have staff available to take phone orders frees up time so they can focus on dine-in guests, cleaning, or other tasks. Some restaurants and cafes have reportedly noticed a significant boost in customer service quality due to this change in focus (and of course, desire for positive reviews), which in turn has had a positive impact on the business’ reputation as a whole.
Real time tracking: With mobile delivery apps comes real-time tracking where customers can track the progression of their order as it makes its way to them. That means means no more phone calls chasing delivery times and with payments made at the time of ordering, there’s no need for customers to have cash on hand or for you to worry about your driver having correct change.
Another positive reason for going mobile is that apps can be used as an effective restaurant marketing tool, giving businesses the ability to promote discounts and offers without any additional costs or resources. And with everything being digital, business owners are now able to easily build a database and send one-off email promotions to their regular customers with new offers or new dishes whenever they like. This is a very simple and cost-effective step that can help you further build your brand.
As you can see, there are many advantages and opportunities for business growth when you sign on with a food delivery service provider, especially for those businesses in low foot traffic areas, or with limited means for providing takeaway delivery services. Apps have been shown to be an excellent long-term investment for those who jump on board the trend.
The Disadvantages of Food Delivery Apps
As no two food businesses are the same, you need to think carefully about whether joining a food delivery platform will be in your best interests. There are a number of questions worth asking before you sign up, such as:
- Do your kitchen staff have the capacity to handle more orders than they are currently managing?
- Will your meals travel well?
- Are delivery services going to appeal to customers based in your location?
- Can you meet the obligations and fees imposed by these app-based delivery services?
No one can answer these questions for you, and what works for another restaurant or cafe in your location may not work for you and your customer base. It’s important to do your own research to ensure you are making the decision that’s right for you and your business.
Possibly the biggest potential negative to consider is the commission fees. Key players Uber Eats, Menulog and Deliveroo can take up to as much as 35% of each order in fees, which for a small business can be a hefty price to pay. If your takings are relatively low to begin with, handing over such a high percentage could be detrimental, rather than beneficial, to your profit margin.
Another factor you need to think about is quality control. With the exception of Menulog, food delivery services in Australia use their own drivers or cyclists for deliveries, meaning you as the business owner or manager have little to no control over how the food is transported, and what state it arrives in. This means you run the risk of a rise in complaints due to issues with delivery, such as food arriving cold, being tampered with, or otherwise damaged in transit.
Just as positive reviews can work in your favour, negative ones can send things downhill fast. And with all delivery services offering almost instant review functionality, you absolutely need to be prepared to receive bad feedback and establish a sound process for managing complaints efficiently and appropriately.
Be aware of the rules and regulations enforced by delivery companies: For example, recent changes to Uber Eats’ customer refund policy now means businesses are responsible for sharing the cost of error refunds - a responsibility previously handled solely by the delivery service. Uber Eats also stipulate that menu prices cannot be changed, and that menu items on their app must be priced at the same cost as those on your in-house menu.
Are Food Delivery Apps Worth It?
If you’ve read this far and have made the decision to sign on with a delivery service, you now need to work out which one will best suit your business. It’s likely your decision will be financially driven, so a comparison of fees is a good place to start.
As a guide, the following commission percentages will apply to each order you receive through the app:
- Uber Eats: 20%-35%
- Menulog: 14%-30%
- Eat Now: 14%-30%
- Deliveroo: 20%-25%
It’s also worth noting that Menulog and Eat Now don’t provide their own drivers, which explains the generally lower fees. Of course, this means that you will need to outlay the cost of employing your own delivery driver, which may cancel out the benefits of joining the app in the first place.
Article: We have a handy article on accounting basics for restaurants which may be able to help you organise your accounts before you decide on this new venture.
You also need to have a good look at your menu. Will you need to offer a smaller, more limited version through the app to ensure high standards are maintained? Do you have appropriate food and drink packaging for transporting meals? Is this additional cost sustainable? Do you want to include extras such as disposable cutlery and napkins for your customers? Will you need to restrict the range of your delivery area?
In order to maintain your reputation, you should only deliver the food or meals you are confident will travel well. For example, a Vietnamese restaurant may choose not to deliver hot soups, due to potential for spillage.
All of these questions are important and should be thought over before you sign up. On a positive note, some businesses who choose to offer a limited menu to preserve the quality of their food have noticed an increase in dine-in customers looking to try some of their other dishes.
How to Package Food Deliveries?
When it comes to serving food in your restaurant or cafe, chances are you spend a fair amount of time ensuring the food not only tastes good but looks good as well. The same standards should therefore apply to your delivery orders. If you want repeat business, packaging and presentation is key, and there are a few simple guidelines you can follow to ensure your deliveries arrive to your customers looking as good as they should.
- Keep hot and cold food separate
- Place sauce and other liquids on the side
- Use proper delivery food packaging
When it comes to food, we all know temperature is just as important as taste. And if your food arrives stone cold, it won’t matter a bit what it tastes like or looks like - your customers will not be happy with a cold meal, and rightfully so. Not only does transporting hot food compromise the integrity of the ingredients, it can also pose a potential safety risk to your customers. How to avoid this? Make sure your delivery driver uses insulated food delivery bags to keep food at an optimum temperature and keeps them separate.
You need to package your meals in a way that allows for the possibility of spillage, without creating a giant mess for your customer when it arrives. By keeping sauce on the side in a condiment pot, you can ensure its safety during delivery, and also give the customer the opportunity to decide how much they put on their food. You might even consider wrapping items such as soup or other liquids in cling wrap as an extra security measure.
Having appropriate takeaway containers for delivery is definitely worth the investment. There are many options available, all ranging in cost, and it’s up to you to decide which suits your menu and budget. These days there is a trend towards eco friendly disposables, such as cardboard over Styrofoam, and removing plastic straws altogether. It’s important to consider how your packaging reflects your brand and environmental standpoint, and what will resonate well with your customers, as well as its ability to effectively transport your food. Above all, the packaging needs to suit the style of cuisine you’re serving, and allow you to present it in a visually appealing way.
What’s a Ghost Restaurant?
Did you know there are food businesses out there who offer delivery service only, with no physical shopfront? They’re known as ‘ghost restaurants’, and they’re starting to pop up everywhere (particularly in high cost areas) due to the attractiveness of lower rent and reduced staffing costs. And, thanks to online delivery services, this virtual restaurant concept is showing business owners a new way to make money in the industry, without all the expensive overheads.
While some ghost restaurants opt to manage their own deliveries, many choose to partner with delivery apps to attract more customers. If you are able to become a featured restaurant on one of these apps, you will gain exposure to customers who have the immediate intention of ordering, and as a bonus, most apps will pick up your customers’ food and deliver it to them. When you use apps to manage takeaway business, all you need to worry about is preparing orders for delivery.
Without a physical location, ghost restaurants also allow more room to experiment with new ideas, because being app or web-based means you can change your menu whenever you like, without having to worry about updating signage or printed marketing materials. And, if a particular ingredient becomes too expensive or is no longer available in your area, you can simply swap out menu items to suit what is accessible to you.
Because of this, opening a virtual restaurant allows for more creativity than you would have with a traditional establishment. Compared to a regular eatery, the investment in a ghost restaurant is very small — just think about all the things you don’t have to pay for. Interior fit-out, signage, tableware, décor, restaurant furniture, and additional staff members to serve as servers or floor managers. Ghost restaurants are the perfect opportunity to experiment with new concepts, as you can easily scrap ideas that aren’t working.
Of course, to operate a virtual restaurant or cafe you’ll still need a commercial kitchen space and commercial catering equipment, and room to package up orders, but the amount of space required is much smaller than that needed for a traditional food business, and not having to pay staff to look after dine-in customers saves you plenty in wages. If you’re just starting out in the food industry, this could be a good option to consider.
So, are you ready to get on board and reap the benefits? Or do the cons far outweigh the pros in your mind? Remember, what works for some may not work for you, and it is your reputation on the line. But if you’ve done your homework and decided to jump on the food delivery train, the opportunities for substantial business growth are definitely out there.
