Third-Party Delivery Services: What Restaurants Need to Know
Less than a decade ago, you likely equated delivery food with pizza or Chinese takeout. Today, with the help of third-party delivery services, you can now get groceries, restaurant food, pharmaceuticals, and much more delivered to you in under an hour.
The food delivery global market has tripled since 2017 and had an estimated worth of more than $150 billion in 2021. A large portion of the delivery service market is third-party delivery.
Third-party delivery is when a business outsources its delivery logistics to another company. We’ll be focusing on third-party delivery food services where restaurants will partner with third-party providers to deliver food to customers for a commission fee. These third-party delivery food services often have apps and integrate with search engines like Google.
As a multi-location marketer for a restaurant brand, one of your main goals is to increase sales, and third-party delivery services can help you achieve this.
Within this blog, we’ll explain how promoting third-party delivery services your restaurant brand partners with must be part of your localized marketing efforts. We’ll also discuss the following:
- The most popular third-party delivery services
- The benefits of third-party delivery services
- The drawbacks of third-party delivery services
- How to gather diners’ data and how to optimize your local listings and local pages
The 4 Most Popular Third-Party Delivery Services
According to Statista, in March 2022, DoorDash owned 59 percent of the market share for online meal delivery companies, with Uber Eats coming in second with 24 percent, followed by Grubhub with 14 percent. Here are the five best third-party delivery services for restaurants in 2022. We’ve based these rankings on consumer popularity and features for restaurants.
As stated earlier, DoorDash is currently owning the third-party delivery food service industry with a 59 percent market share. Because of DoorDash’s popularity with consumers, partnering with the third-party app will likely get your restaurants in front of many hungry consumers.
- Most popular food delivery service amongst consumers
- Numerous point of sale (POS) system integrations
- Available in all 50 states and across ~900 cities
- 15, 25, and 30 percent commission fees are also tied to in-app marketing and DashPass, the platform’s loyalty program. See DoorDash’s plans here.
2. Uber Eats
Uber Eats is an extension of the ride request app, which is widely used. Uber Eats’ revenue has steadily increased since Q1 of 2020 and hit a record $25.12 million in revenue in Q1 of 2022. Also, in November 2020, Uber Eats acquired Postmates (another third-party delivery service), expanding its market share.
Uber Eats Pros:
- Growing user network due to Uber ride share
- Has self-delivery, pickup, and white-label delivery options
- Offer monthly deals for end-uses to sign up and get restaurant discounts
Uber Eats Cons:
- Similar to DoorDash, Uber Eats has 15, 25, and 30 percent tiered delivery commission fees and a six percent pickup fee. See Uber Eats plans here.
Grubhub was one of the original online food delivery services. They’ve stayed relevant by buying more minor third-party delivery services such as Seamless, Eat24, and OrderUp. They do offer a convenient price calculator to help determine your restaurant brand’s estimated monthly profit when adding Grubhub as a delivery option.
- After joining, you get free marketing materials, a free tablet that integrates with many POS systems, and a free photoshoot
- Access to loyalty perks and promotions with higher plan levels
- There’s a ten percent delivery fee to the consumer and restaurant on all delivery orders, which is more than DoorDash or Uber Eats’ six percent delivery fee
- Confusing marketing, delivery, and processing fees
2ndKitchen is a unique third-party food delivery service that partners restaurants with local businesses that choose not to cook and sell their own in-house food like breweries, hotels, bars, and residential buildings. For example, this app helps kitchen-less hotels offer room service or breweries and wineries to offer food to customers.
- Can increase guest and customer satisfaction for hotels, breweries, bars, multi-family properties, etc.
- Curate a unique menu with your top local restaurant offerings
- Other local businesses promote your restaurant’s brand
- Pricing is not disclosed online and is behind an email gate
Third-Party Delivery Service Benefits
For multi-location restaurant brands, partnering with third-party delivery services can have significant benefits. Yes, some costs and fees are associated with these third-party delivery apps; however, it seems that “convenience culture” is only growing, so it’s worth not being left behind.
Below are some of the main benefits restaurant brands get when partnering with third-party delivery apps.
Increase Local Online Visibility
A recent study by Zion & Zion found that nearly two-thirds of adults 18 to 29 have used multi-restaurant delivery services, followed by 51 percent for those 40 to 44 years old.
Having your local restaurants listed on delivery apps can help drastically increase your restaurant brand’s visibility. Third-party delivery app users might not have known your restaurant existed until seeing your local listing on the app. Moreover, if you’re not on these apps, you’re likely losing potential consumers that could become lifelong diners to competitors.
Counteract Staff Shortage
According to the National Restaurant Association’s 2022 State of the Restaurant Industry report, seven in ten operators say they don’t have enough staff to support their current service demand. Low restaurant staff makes offering your own food delivery service even more challenging.
Third-party delivery services can help you save on:
- Staffing delivery drivers
- Vehicles, car insurance, and gas
- Software costs for in-house restaurant delivery software
Benefit From Multiple Third-Party Delivery Services
The majority of third-party delivery apps charge on a commission basis. Because of this format, your restaurant can use multiple delivery apps simultaneously. You’re gaining even more customers and expanding your restaurant brand by appearing on multiple online marketplaces and apps.
In addition, leveraging multiple delivery apps can help your restaurant brand determine which apps have the highest ROI, and you can quickly scrap low-return services.
Third-Party Delivery Service Drawbacks
There are some possible downsides to partnering with third-party delivery services. The main drawback is the costs involved. Here are three disadvantages for your multi-location restaurant when using third-party delivery apps.
As noted earlier, high food costs and staffing shortages are currently squeezing restaurants’ margins. Unfortunately, third-party delivery apps also carry a high cost.
The margins are razor-thin when examining commission, delivery, and processing fees with delivery apps. However, you need to factor in increased online visibility, which can be difficult to calculate when using third-party delivery apps since they don’t always provide you with their data. More on that later.
When customers purchase food through a third-party food delivery app, it decreases your restaurant’s ability to interact with them and build a positive reputation. Customers use the app to find your restaurant, pay on the app, and then get food delivered by a food delivery employee. The only control you have over your reputation is the menu displayed on the delivery apps and how your food tastes.
In addition, third-party food delivery services sometimes unfairly blame restaurants for ordering issues. Consumers and food delivery companies accuse your restaurant of:
- Late or tardy delivery
- Food being cold due to a late delivery
- Incorrect order delivered
- Driver not following delivery instructions
Sometimes, these issues affect your restaurant brand’s online reputation and result in negative online reviews or social media comments. If these negative reviews happen to your restaurant brand, read our Online Reputation Management Guide for Restaurant Brands for critical tips on how to handle negative reviews along with additional SEO and search visibility tactics.
Lack of Control of Customer Data
Restaurants benefit from customer data, like any other business. However, when restaurants use third-party delivery services, customer information and data are often hidden or shrouded.
Third-party delivery services collect consumer data and aren’t always willing to share it with the restaurants they support. The primary food delivery apps often share a customer’s name, order information, address, and phone number with restaurants.
By relying more and more on third-party tech and data, restaurant brands are missing out on their ability to analyze consumer behavior and create more personalized marketing and sales strategies. In another section, we’ll discuss how to gather your own first-party customer data.
Should You Partner With a Third-Party Food Delivery Service?
While there’s no clear answer to whether your restaurant brand should partner with third-party delivery services or have your own in-house delivery service, there are factors to help you decide. Here’s a list of questions you should ask yourself before choosing a third-party food delivery service.
- What is the population density around my restaurants’ locations?
- The denser the area, the more likely you’ll get delivery requests.
- What are the demographics around my restaurants?
- Gen Z and millennials use food delivery apps the most. You’ll want a high percentage of these groups when considering whether to leverage third-party delivery apps.
- Are my direct local competitors on these third-party apps?
- Consider their reviews, ranking, and popularity on each app. If competitors are popular on a specific app, you should also consider being on it.
- What are my overhead costs?
- Consider if your kitchen staff can take on more delivery orders. Also, consider if your current margins can take the 15-30 percent commission fees.
Remember, as a multi-location restaurant business, not every location will benefit from partnering with third-party delivery apps. It’s likely best to contact each service to see what deals they offer and which locations are best suited to take advantage of the partnership.
How to Gather Customer Data
Using third-party delivery services doesn’t mean your restaurant should stop collecting customer data. It actually means the opposite. Your restaurant brand should always try to gather consumer insight whenever possible. You can work with third-party delivery services or independently to gather this data. Here are two ways to collect your customers’ data.
Create High-Dollar Partnerships With Third-Party Delivery Services
Some multi-location businesses, like Yum! Brands, Inc. took a three percent stake in Grubhub to access the data it collects on its fast-food chains such as Taco Bell, KFC, and Pizza Hut. Similarly, Shake Shack partnered with Grubhub in August of 2019 after the delivery platform offered access to consumer data that both companies can use to market to consumers jointly.
Know Your Local and State Laws
Another strategic tactic is to be aware of privacy and information security laws that city and state laws pass regarding third-party delivery services and restaurants.
For instance, as of December 27, 2021, third-party food delivery services in New York City are required to provide (on at least a monthly basis) customer data to the restaurants they partner with. This customer data includes their name, delivery address, email address, and phone number. However, customers can request that this personal information not be shared with restaurants.
California passed a similar bill in August 2020 that allows restaurants to request similar consumer information to the NYC law once a year, and the third-party delivery platforms must furnish the information within 30 days of the inquiry.
Collect Data Through Your POS System
While many restaurant brands are likely already doing this, you can collect in-person diners and online customer data through your point of sales (POS) software. Your POS system can help you determine which dishes are the most and least ordered, when most sales occur, and the proportion of diners coming from online or in-person. You can also use your POS system with your online ordering and third-party platforms to provide comprehensive insight into customer trends.
Third-Party Delivery Apps, Online Ordering, and Google’s Effect on Your Restaurant Brand
Because more people are ordering food online than ever, search engines like Google are trying to keep them within their framework. Let’s look at how to optimize your local restaurants for Google and how to better collect data despite some users’ ordering through Google’s framework.
How Consumers Order Through Google
If you look up Five Guys on Google, you’ll likely get the Google Local Pack (also called the Google 3-Pack). You can click “order” within the Local Pack, which will keep you in Google’s search framework.
Depending on how your local restaurant’s online presence is set up, you’ll see several options to order from: Either your own delivery service, a third-party delivery service, or your preferred online ordering system for pick-up. Here’s an example:
Suppose an online user clicks a third-party delivery option. In that case, they’re almost always brought to that third-party platform’s website and can order through it, making it challenging for your restaurant business to track consumer data. So, your net consumer data will be reduced. You can retain more customer data by having your own delivery service or signifying your preferred online ordering system, which often gives you more control and insight into consumer data.
Therefore, regardless if you use your own or third-party delivery services, optimizing your local restaurant listings on Google is essential.
How to Better Gather Data From Online Orders on Google With SOCi and Olo
SOCi can assist you in not only optimizing your local restaurant’s online presence, but we can also help you better gather and track consumer data. SOCi’s Listings platform allows restaurant brands to manage 100s or 1,000s of their local listings across North America. Many clients find it beneficial to pair SOCi’s Listings tool with SOCi’s Local Pages. SOCi’s Local Pages helps you create multiple top-notch local landing pages. Together, SOCi’s Listings and Local Pages will help you increase the accuracy of your listings data and improve local search rankings.
SOCi’s also recently partnered with Olo, one of the leading online ordering SaaS platforms for restaurants. In 2019, Olo integrated with Google to allow consumers to order on Google Search and Maps if the restaurant uses Olo’s software.
SOCi’s partnership and integration with Olo allow restaurants to track orders and gain ROI insights around the success of their ordering link in online listings. With Olo and SOCi, restaurants can track the number of orders than come directly from clicking the “Order ahead” URL in your business listing.
Note that the Olo integration works with SOCi Listings and Local Pages, but you must have SOCi’s Listings to take advantage of this integration. Request a demo today, to learn more!