The arrival of food delivery apps in Australia has changed the shape of the industry! But while it has introduced some benefits to venues and diners alike, many hospitality business owners are hesitant to adopt one of the main online delivery platforms.
The Australian online food ordering industry is dominated by just four companies: UberEATS, Foodora, Menulog, and Deliveroo. In fact, these four apps control a whopping 75% of all online delivery orders.
And with more people these days using such third party platforms rather than ordering directly through the venues, they’re becoming an increasingly unavoidable option for many venues.
This is how Assaf Stizki, co-owner of Ziggy’s Eatery, felt when he made the decision to stop using their own delivery drivers and move over to Deliveroo and UberEATS.
“They came into the picture and basically, there wasn’t much choice. The fact that everybody was going to the app … I don’t know how to make enough noise to cut through their noise,” Assaf says.
Deciding whether to use a food delivery app for your venue is a simple matter of weighing the pros and the cons.
But to help illuminate the picture for you, we’ve chatted with Assaf and other hospitality business owners to gain their unique perspective into hospitality’s latest trend.
The Benefits of Food Delivery Apps
More Exposure for Small Businesses
With 75% of all online food orders going through third-party platforms, food delivery apps guarantee greater exposure for small business, with little marketing effort required on their part.
Assaf says using Deliveroo and UberEATS has extended their customer base well beyond their immediate Balaclava community.
“They expose us to different markets rather than the immediate neighbourhood that we had until now. So now we go to Elwood, we go to South Yarra – places we weren’t exposed to prior to having the platforms.”
More Orders – Especially During Traditional Downtime
In the past year, food delivery apps are said to have contributed a 2% increase in restaurant revenue. Indeed, in the first half of 2016, Menulog alone produced $260 million worth of orders for its partnered restaurants in Australia and New Zealand.
So naturally, the number one reason venues are adopting these platforms is because they result in an increase in orders.
Assaf noted that since using food delivery services, orders have become far more consistent, with an increase in orders during typical downtime.
“We get constant work … more orders, even in quiet times. Let’s say between 3 to 4, or 3 to 5, normally there’s not much happening in the restaurant. With these services in the picture, we’re getting more business through. There’s constant ordering coming into the restaurant.”
Food Delivery Apps: The Inevitable Downsides
Less Control Over Delivery Service
One of the largest disincentives for venues looking to use food delivery apps is the lack of control over the delivery service. Many venues claim that poor service during the delivery stage can negatively impact the venue’s reputation.
Three of the four major platforms (Menulog excepted) provide their own drivers, who Assaf claims aren’t always trained to provide the best service.
“When some drivers aren’t adequately trained to do the job properly, the customers and the food suffer as a result … We have to take the money out of our own pockets, chase it up, and replace the orders, and so on. It’s just because they didn’t train their staff.”
Indeed, Melbourne’s Pizza Religion recently announced it was leaving UberEATS partly because it spent too much time handling customer complaints about the service.
Unfeasible Delivery Commissions
Another reason Pizza Religion decided to cut ties with UberEATS was the company’s unsustainable fees. Food ordering apps demand delivery commissions of up to 35%, a hefty amount, particularly for small businesses.
Even Assaf states that using their own delivery service was more profitable, throwing the cost-benefits of online food delivery apps into question.
“Our own deliveries were much more profitable,” he says. “We used to charge the same delivery fee from the customer, which was about $5, which covered the cost of the delivery drivers. So let’s say you do about 4 to 5 deliveries per hour, that covered that cost. Plus the food was at full price. So we didn’t have any losses.”
“Now the online apps are making cuts, so we had to adopt the menu and pricing of them to make it sustainable.”
The Negative Impact on Seated Guests
Geraldine from Sailors Rest in Geelong states that their main decision for not using any food delivery apps is its potential negative impact on their seated guests.
Indeed, this is common cause for concern for many hospitality business owners. Will your dine-in customers suffer because your kitchen is overwhelmed with meeting online orders?
On the flip side of this, are your customers choosing to eat at home instead, affecting your bottom line because you’re missing out on impromptu last-minute orders, such as second drinks or dessert orders?
A good way to combat these issues is to offer only a portion of your menu online. For example, Bill Makris from Tank Fish and Chippery developed a limited menu for the online apps, tailoring it to meals that were easy to create and fared well during delivery.
This shortened menu provides a teaser of their full in-store menu, so that those who enjoy the dish are enticed to visit the venue to try out a greater range of options.
Food Delivery Apps: Changing the Shape of the Industry
It’s no surprise these online ordering platforms have revolutionised the way customers engage with restaurants.
They have introduced a far greater variety of food options to consumers, facilitated the order process in many cases, and eliminated the need for cash payments. All of which make them an enticing service for consumers.
But their rise in popularity has also grossly impacted the way hospitality venues operate. Many, including Assaf, cite reductions in sit-down customers.
“It did change business,” Assaf says. “We noticed that much fewer people went out of their houses because suddenly that service was available. They interrupted the industry.”
Others venues have been forced to change their opening hours, adjust their pricing models, and create delivery-only menus.
Some fledgling business owners have even shifted to delivery-only kitchens, bypassing the high costs of venue fit-outs altogether.
At the end of the day, these online food ordering platforms will work well for some businesses, while others won’t see the same cost-benefits. Geraldine from Sailors Rest, for example, states that the venue’s business model does not currently support these services.
“Our menu is not really designed for takeaway, and our business is not set up for phone sales. But if we already had a strong takeaway business, I’d do it.”
Many venue owners consider food ordering apps a necessary evil, while others consider it a godsend, helping them promote their businesses and gain more exposure. It’s up to you to weigh the pros and cons and consider if it’s right for your business.
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