An image of a third-party food delivery service, UberEats, in an article on food delivery services

Direct or third-party food delivery: Which is best for your business?

In the first quarter of 2023, Meta’s total daily active user population reached $3.02 billion. This refers to the number of people who use at least Facebook, WhatsApp, Instagram, or Messenger – proof of increased internet usage across the globe. 

Combine this with the meal delivery sector’s projected revenue of $394.40 billion, and it is clear online food delivery services are bigger than ever. With such a large market, businesses have to decide whether they should deliver their own meals directly or use third-party delivery platforms, such as Uber Eats or Grubhub. 

But which one is the best avenue for your business? 

Discover the pros and cons of both fast food delivery services in order to make an informed decision.

What are third-party food delivery services?

Those who have used the services of DoorDash, JustEats, Deliveroo, or Grubhub will be familiar with third-party food delivery services. In part, restaurants owe the sudden boom in food delivery to such services. 

Essentially, third-party delivery platforms are intermediaries between customers and restaurants that offer meal delivery services. They facilitate the entire delivery process, from taking orders to providing customer service. In exchange for their services, they tend to take a commission fee from restaurants or charge clients an extra fee for using their platform.

According to recent research, third-party food delivery platforms can enjoy a predicted user percentage of 15.4 in 2023, with a remarkable increase to 18.7% by 2027. However, it is important to note these services can have certain drawbacks. 

What are the cons of using third-party services?

Food business owners may encounter challenges when using third-party services. For instance, restaurants will find they’ll have to pay a commission fee for each order. This fee usually ranges from between 15% and 30%, which can significantly reduce the restaurant’s profits. This could be difficult for businesses with low margins or small orders.

With third party-delivery systems, customers are ordering directly through an intermediary service, rather than directly from a restaurant. As a result, restaurants could lose out on potential repeat customers and marketing opportunities, including the chance to build direct relationships with customers.

Additionally, third-party services are often unable to guarantee high customer service standards because restaurants have no control over delivery drivers. With that said restaurant owners must carefully weigh their options and consider whether third-party services are worth it. To do so, they must compare their own direct delivery services with third-party platforms. 

An image of a fast food operator completing a takeout order for delivery, third-party food delivery using UberEats in an article on food delivery services

Who is responsible for paying third-party delivery fees?

The restaurant is responsible for paying third-party delivery fees. These fees are usually based on a percentage of the total order cost and can vary depending on the platform and location.

If owners opt to, they can also pass the responsibility on to customers and charge a subset fee for delivery. It is important that restaurant owners are aware of their local laws when they choose how to handle these fees.

There should also be plenty of research on how restaurants can lower such fees so businesses may save profits from them. By doing this, businesses can ensure that they are not being overcharged on delivery or commission fees.

Negotiating fees: Other actions to take to reduce delivery costs 

The first thing a restaurant should do is ensure that it is negotiating its third-party delivery fee with the service provider properly. Restaurant owners can also investigate promotions and loyalty programs offered through these services in order to get discounts or receive additional benefits, such as marketing support.

Additionally, they can look into hosting multiple third-party platforms on their website to negotiate better rates from one platform over another. This may help them decide which markups work best for their business model. 

Food business owners should also consider partnering with an established delivery company such as DoorDash Delivery Partners, or setting up in-house delivery services if possible. With the latter, they can bypass commissions and increase revenues, as well as have complete control over their delivery operations.

An image of sustainable fast food packaging, sustainable takeout containers, delivered by direct food delivery in an article on food delivery services

What should restaurants consider before transitioning to direct food delivery?

The good news is for many restaurants, transitioning to direct food delivery can be a great opportunity. However, like any other business decision, there are several key considerations that need to be taken into account before making the switch. 

The most important consideration is order tracking capabilities. Businesses must ensure they have an effective system in place. This system must accurately track orders from start to finish and estimate accurate delivery times for customers. 

Restaurants must also look into whether additional staff or resources will be required. If their existing space or budget can accommodate these changes accordingly, transitioning to direct food delivery can be highly profitable.

Supply chain distribution management must also be assessed as part of this transition. This includes processes such as sourcing ingredients, inventory control, and sustainability measures.

More so, businesses must consider the long-term implications of new technology investments needed for a successful shift towards direct food deliveries, such as contactless delivery systems, too. Doing so will involve formulating strategies on how to maintain customer loyalty while adapting quickly enough. This is done to meet changing consumer demands over time.

Do the benefits justify the cost and effort? 

Direct food delivery can be a way for most restaurants to grow their business. It allows for greater control over all stages of the customer journey and improved visibility of data to make informed decisions. However, evaluating whether it is a worthwhile investment in terms of time, money, and resources is essential for success. 

Ultimately, restaurants need to consider if the benefits of direct delivery are enough to justify any associated costs and efforts required before making that leap. Some actions they need to take may include: 

  • Drafting a comprehensive strategy
  • Preparing for potential technological investments
  • Optimising supply chain and delivery processes
  • Training staff members and tracking orders

What is reassuring is that by 2027, restaurant delivery’s user penetration is projected to reach 18.5%, which is only 0.2% less than that of third-party platforms.