To Deliver Or Not To Deliver

The way we are eating “out” is rapidly changing, especially as more millennials enter the workforce. While millennials dine-in an average of two to three times per week, 74 percent of the cohort would order delivery from traditional restaurants, according to the National Restaurant Association (NRA). Given this evolution in dining, restaurants should consider offering delivery options.
 
In 2016, billions in venture capital dollars went into food delivery startups, more than triple the amount invested in the previous year. As both the retail and restaurants industries move online, the NRA reports that 70 percent of all restaurant traffic will be outside the restaurant by 2020. Of course, businesses will still see foot traffic as millennials dine-out socially, but unlike other generations, they are likely to order their breakfast, lunch and dinner rather than make it at home.
 
Before offering or expanding delivery services to customers, it’s important for restaurant operators to consider the added complexity and tough decision-making involved. To help determine the right course of action for your business, consider the following opportunities and challenges:
 

Opportunities presented by offering delivery services:

 
  • New Revenue Stream - A delivery service allows restaurants to increase revenue despite having a limited number of seats in the dining room, and to capture more orders on busy nights. A well-executed to-go service is a smart alternative that can generate new income and loyal patrons.
 
  • Wider Market - With a delivery service, marketing is key. Internet-based marketing gives your business far-reaching exposure and puts you in front of a whole new group of diners.
 
  • Overcoming Weather Woes - A delivery service can keep business steady when the elements outside are not ideal. When it’s raining, snowing or frigid cold, restaurants often see a dip in the number of guests and in sales. Providing an option for patrons to dine in the comfort of their own homes can help drive revenue that would otherwise be lost to Mother Nature.
 
  • Digital Benefits - An online ordering option helps to increase accuracy and provides a valuable database of customer information. Users of the online system can specify whether they have food allergies or preferences for food preparation. The enhanced clarity in each order reduces meal preparation errors and costs. Best of all, inputs to online systems result in a built-in library of customer information which can be used to send special offers and incentives.

 
Potential challenges of offering delivery services:

 
  • Potential Kitchen Setbacks - Handling carryout orders can slow down in-house service. Since the same kitchen produces orders for both the delivery service and dining room, consider the potential logistical complications and disruption when there is an unexpected fluctuation in the number of incoming orders.
 
  • Space Wars - You’ll need to establish sufficient space to prep delivery orders and store to-go containers and utensils. For some restaurants, the required footage to operate your off-premise business may take away valuable dining room or kitchen space.
 
  • Labor Costs - Additional staff and supervision will be needed to properly coordinate a high-volume of delivery orders. Anticipate the human cost factors for processing orders, preparing the meals and packaging for delivery.
 
  • Driving the Bottom Line - Consider all of the direct and indirect costs of delivering orders. Depending on volume, third-party meal delivery services may be worth exploring. Be sure to calculate their fees into your expense analysis, which range from 10 to 30 percent of the bill. Additionally, if your business is not relying on a third-party delivery service, you’ll need a vehicle, insurance and delivery staff.
 
Adding a delivery service to your restaurant means adding a new revenue stream, but it can also mean managing a new level of complexity. The right technology and strategy can help control your delivery operation and make it more profitable. Done right, there is a huge opportunity to grow your market by adding an off-premise component to your business.
 
Be sure to keep up with the Restaurant practice’s latest thoughts by following us on Twitter at @BDORestaurant.

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