How to Navigate the Third-Party Delivery App Landscape

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IndustryInsider InsightsPared On-Air

Summary:

  • Customer demand for food delivery is skyrocketing. Sales projections estimate 20% annual growth, reaching $365B by 2030.
  • Operators should consider factors such as physical space, labor costs, packaging, menu design, and commission fees.
  • Longer ticket times for sit-down customers are a good indicator of whether delivery is negatively impacting your business.

In the third episode of Pared On-Air, Chef Dave Cruz discussed how he integrated delivery into his business. Prior to opening Little Gem, Dave worked at acclaimed restaurants such as Nobu in New York City and Bouchon in Yountville, California. He also co-authored the cookbook Ad Hoc at Home. Cruz tried four different delivery apps before deciding on an exclusive partnership for Little Gem.

Delivery landscape overview

According to a UBS study, global delivery sales are estimated to grow annually by 20% to reach $365B by 2030 from $35B. The mobile data firm App Annie also reported that food delivery app downloads have increased 380% since 2015 through the beginning of 2019. Consumers’ growing preference for convenient food delivery has created opportunities for technology firms to meet these demands. With the rise of third-party delivery apps such as UberEats and Caviar, the dining experience as we know it is evolving rapidly. Some operators view the technology as a way to enable a new revenue stream. Others may eye it with reluctance and see the apps as a new arena with rigid rules to play by.  

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Deciding whether or not to integrate delivery

Dave Cruz’s Little Gem – nestled on a popular corner of San Francisco’s Hayes Valley neighborhood – offers Californian and globally-inspired cuisine. In addition to dining in, Little Gem also partners exclusively with Caviar to offer delivery. Before this partnership, however, Little Gem tested integrations with UberEats, DoorDash, and Postmates. Cruz felt delivery made sense for his business due to observations about his customers. 

Little Gem’s customers are health-conscious, tech-savvy consumers, making them a group likely to try menu items using delivery. He added, “the first question that someone would have to answer is if they can justify whether or not it’s something that they’re going to make money on, or if they’re just going to use that as a marketing tool.” Secondly, “is whether or not [the food] is something they want to have. If it’s something that we don’t even want to have delivered, we wouldn’t choose to deliver. It’s hard to imagine a T-bone steak coming through a cardboard box.”

What to consider in a delivery partner

In the beginning, Cruz tried partnerships with various platforms like UberEats, DoorDash, and Postmates. Of all the factors that Cruz considered when selecting partners, he admits “exposure was a huge one.” The other critical factor was each partners’ commission fees. Those two factors together also helped Cruz narrow down which menu items Little Gem would be able to offer through delivery and have them still remain profitable. 

Ultimately, Cruz decided on an exclusive partnership with Caviar. First, he lightheartedly admitted that he’s “very fortunate to have a business partner who negotiates very well.” For operators without such a savvy business partner, Cruz’s other piece of advice was to get in early with partners so that you’re growing your business alongside theirs. That way it’s more of a partnership and you can position yourself as an early adopter willing to try new features and share initial feedback.

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What to consider as a business owner

Whether you’re trying delivery for the first time or adding new partners, Cruz shared considerations for operators at any stage. 

Menu design

Cruz recommended starting with a limited menu. Pick items that are not just great representations of your brand, but also travel well. “It’s sometimes 20, 30 minutes before it can get to someone’s door. [Consider] the appearance, its flavor at a different temperature, and then certainly the safety of it” advised Cruz.

Cruz noticed that “things that are one bowl or plate where everything can be easily eaten in one container like bibimbap or an Asian-style bowl” tend to be the most successful. Another trend he noticed was that “people aren’t at all shy about paying for the convenience.  We have a dessert on our menu that’s priced at $6.50 and we can have a delivery order for just one of those.”

The right packaging

The packaging is also an important component of the delivery experience. It has a functional purpose while also serving as an extension of your brand. Cruz acknowledged that delivery orders can generate a lot of waste due to the packaging. “One of the main criteria was that the packaging is compostable,” said Cruz. He found that some types did not hold up well for delivery. So he recommended trying different producers to find the right balance of style, function, and cost. 

Your physical space

Integrating delivery means adjusting standard operating procedures to accommodate this new business line. For operators, this means finding the space in your facility to support production and packing. Consider whether you’ll be cross-training staff to support delivery or hiring dedicated staff.

“[We] set up our work base in such a way that we don’t have to include any more staff for delivery… We even went so far as to design in certain spaces for delivery so that we wouldn’t have to add labor to it,” Cruz described. Additionally, he suggested thinking through what delivery mise en place would look like to maximize efficiency. Cruz recalled, “the biggest thing is where you’re going to put your forks, your spoons, your tongs or salt and easily grab it in one or two moves. [We know] where we put our boxes, our bags. Then we also go even one step further [with] things like sauces or condiments, things that can be pre-packaged to make the whole process more efficient and easier.”

Introducing current customers to delivery

When you have your delivery operation up and running, now it’s time to encourage your sit-down diners to try delivery. One way that Cruz promoted delivery was to include flyers on tables and popups on the website. Every touch point you have with a customer is an opportunity to introduce or encourage more delivery. “We’ve created postcards that we’ve included on the table and we even included cards in the bag” Cruz described. 

How to know when delivery is not successful

While delivery can be lucrative, it’s good to have a measure in place to monitor how it’s impacting your business. For Cruz, that measure was tracking ticket times. “Ticket times, 100%. If we were taking too long to serve the guests at Little Gem, we would make changes right away.”

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