- May 31, 2023
- Posted by: Morgan Ayres
- Categories: Cafe, Restaurant
Optimizing Third-Party Delivery Services for Profitability in Your Vancouver Hospitality Business
To ensure profitability and survival during these challenging times, it is crucial for hospitality businesses to leverage pick-up and delivery services effectively.
The Impact of Online Orders on Restaurants
During the pandemic, many restaurants experienced a substantial increase of at least 50% in online orders. Even beyond the pandemic, experts predict a continued growth in online orders as customers have become accustomed to the convenience and quality of enjoying restaurant meals at home. This shift in consumer behavior presents an opportunity for hospitality businesses to optimize their operations and generate revenue through pick-up and delivery services.
The Costly Reality of Third-Party Delivery Services
While third-party delivery services offer convenience and ease of use, they come at a cost. Restaurant owners are well aware of the substantial fees and expenses associated with using these apps. On average, these fees account for 20-30% of the total revenue, significantly impacting profitability. Additionally, partnering with third-party vendors means sacrificing control over valuable customer data and relinquishing control of your brand’s identity and experience. Furthermore, working exclusively with these delivery services limits future opportunities for revenue growth.
Understanding the Financial Impact
To effectively manage the financial impact of third-party delivery services, it is essential to regularly assess your restaurant’s finances. This practice provides a clear understanding of the cash flow and helps identify the extent of potential losses incurred through third-party delivery. Armed with this information, you can devise strategies to mitigate these costs and redirect revenue back into your business.
Strategies to Offset Third-Party Delivery Fees
- Strategically Increase Prices: Offset the high fees charged by third-party delivery services by raising prices on these platforms while keeping prices lower on your own website’s online ordering platform. This approach compensates for the delivery fees incurred by customers who continue to use third-party services, encouraging them to order directly from your website instead.
- Channel Online Delivery Orders to Alternative Platforms: Implement a system to incentivize customers to avoid third-party delivery apps while still maintaining their loyalty. One effective method is to promote your lowest fee delivery app through other apps and platforms, encouraging customers to order from there. Additionally, offer incentives for dine-in or pick-up orders, such as special discounts or exclusive menu items. Simple marketing materials like postcards or messages on takeout bags can drive these transactions from other delivery orders.
- Streamline and Limit the Menu: Optimize profitability by removing popular items from your third-party delivery menu and exclusively offering them on your own online ordering platform. Market these items as exclusively available when ordering directly from your restaurant. Moreover, selectively limit the options available through third-party apps to those items that yield healthy profits capable of covering the associated fees.
- Integrate Loyalty Programs: Customers value rewards and incentives. Integrate your first-party delivery program with a loyalty program, enabling guests to earn points and rewards with each order. This approach not only encourages repeat business but also creates a sense of exclusivity and appreciation among your customers.
- Expanding Offerings with Alcohol: In some municipalities, restaurants are now permitted to deliver and offer add-on alcohol with pick-up and delivery orders. If applicable to your city, take advantage of this opportunity. However, ensure compliance with local laws and regulations regarding pricing and accessibility of alcoholic beverages.
Partnering for Success
Navigating the complexities of high delivery fees and rising costs can be challenging for any hospitality business. Our team at Pinnacle Hospitality Consulting Agency are here to support and guide you through this process. Engage with us to explore partnership opportunities and discover customized solutions tailored to your unique needs. For more information, please reach out to us at Morgan@hospitalityconsulting.co
As the hospitality industry continues to change from the impacts of the pandemic, rising costs and inflation, optimizing third-party delivery services becomes critical for restaurants in Vancouver. By implementing strategies such as strategic price adjustments, channeling orders to alternative platforms, limiting menu options, integrating loyalty programs, and exploring opportunities with alcohol delivery, hospitality businesses can maximize their profitability and adapt to the changing landscape of the industry. Embracing these strategies while maintaining control over customer data and brand identity will position your business for long-term success in the competitive Vancouver market.