How Much 3rd Party Delivery is Really Costing You
If you’re anything like most consumers right now, then you’ve probably ordered food online either for pickup or delivery. After all, online ordering is a booming market for the restaurant industry, especially for food delivery, where the pandemic has drastically increased the market’s revenue.
In 2015, U.S. food delivery revenue was $8.7 billion, with 66 million third-party app users. That number tripled in 2020, with revenue surpassing $26 billion and 111 million app users. These numbers directly affect your restaurant(s) profitability. While third-party vendors offer a convenient way to reach a wide array of restaurants and place orders, they cost a hefty price for your brand and the guest. The best way to profit off the booming food delivery market is to have your own branded app with an online ordering system that offers pickup and delivery at a small flat-rate rather than excessive paying fees and commissions to third-party delivery services.
The Difference Between First-Party and Third-Party Online Ordering
First-party orders originate on your own branded web ordering application or mobile app. With first-party ordering, you own the data, the guest relationship, and you don't pay any commission fees.
Third-party orders are restaurant food orders that come in from marketplaces. Marketplaces usually charge a commission from the restaurant and provide exposure to new customers and drivers in return. The most popular marketplaces in the US are Doordash, Uber Eats, and Grubhub (in that order).
Guests’ expectations have changed as on-demand service is high-value, and they are actively looking for your restaurant online. According to data from Toast, guests prefer placing online orders directly from a restaurant’s website rather than a third-party service. In 2019, 51% of guests ordered food directly from a restaurant’s website or app. Due to the pandemic, that number jumped significantly to 82% in 2020. This trend won’t change when the pandemic subsides because being able to order your favorite meal without ever speaking to someone or leaving your home has become a necessary commodity.
Commission Fees of Third-Party Delivery Services
Third-party online ordering services charge restaurant owners a significant chunk of their revenue in fees and do not provide them access to the customer data that the apps collect as consumers place orders. In the restaurant industry, data drives business.
Despite this, many restaurants have turned to using third-party delivery services as they offer a network of new potential customers in response to the growing demand for food delivery. We’ve gathered the cost for restaurants to use the top third-party delivery services below.
DoorDash. DoorDash has recently introduced three new plans for restaurants to meet their needs in this new climate.
DoorDash Basic charges restaurants a 15% commission on all deliveries and includes a small delivery area.
DoorDash Plus charges restaurants a 25% commission on all deliveries to be part of DoorDash’s DashPass subscription program and get increased visibility in the DoorDash app.
DoorDash Premier charges restaurants a 30% commission on all deliveries in exchange for the lowest customer fees, the largest delivery area, and a growth guarantee of at least 20 orders per month across pickup and delivery.
There is a 6% commission for pickup orders across all plans.
Uber Eats. Uber Eats also offers three plans depending on restaurants' needs.
The Lite Plan charges a 15% fee for delivery orders and only shows your restaurant in the app to guests searching for you by name.
The Plus Plan charges a 25% fee for delivery orders and shows your restaurant in the home screen and search results of the app.
The Premium Plan charges a 30% fee for delivery orders and shows your restaurant higher in the home screen and search results of the app, 0% fees if you don’t get at least 25 orders (meeting certain criteria), and matched Uber ad spending up to $100 per month (meeting certain criteria).
Grubhub. Grubhub charges eligible restaurants a fee for each item ordered, a percentage of the order total, delivery fees, and a percentage commission of the restaurant’s total earnings.
Third-Party Delivery Apps vs. Third-Party Delivery as a Service (DaaS)
Third-party delivery apps offer delivery through their respective marketplace, which means directly through their app, and usually offers different pricing plans. Another option for brands to use third–party delivery is through Delivery as a Service (DaaS). Delivery as a Service is the process of providing an on-demand delivery fleet to businesses that can utilize it while allowing them to use their existing online ordering software. Brands that use DaaS don't need to hire drivers, insure them, manage them or procure fleet management software - DaaS provides all those functions. Uber Eats calls their DaaS Uber Direct, and DoorDash calls their Daas DoorDash Drive. We are currently partnered with DoorDash Drive for DaaS.
How to Control the Guest Experience With First-Party Ordering
Using a first-party online ordering system to host delivery rather than third-party delivery services saves you and guests from paying commission fees as they can now order directly through your site or app. With this data, you can build a loyal customer base as you now control the guest experience.
As soon as a customer inputs their data to create an account, you automatically have a history of what items they purchase, how much they spend per order, the days and times they like to order, how often they order, and much more.
This data can be used to build a loyalty program to retain customers and influence the buyer’s journey with machine learning that autonomously suggests upsells, cross-sells and helps turn first-time visitors into regulars.
An all-in-one first-party ordering system, like Incentivio, that integrates with the best point of sale systems and largest payment processors and offers robust features to manage marketing, branded mobile apps and web ordering, loyalty programs, delivery, gift cards, curbside pickup, and customer database is key to driving incremental restaurant revenue.
Knowing your customer database allows you to control the guest experience and create meaningful relationships with your guests. Customer relationship management gives you the ability to segment and target specific guests based on activity and past behavior. You own the guest relationship and the data to set up automated restaurant marketing campaigns. Features like customizable sign-up pages to capture any guest information you’d like and custom tags (like VIP for certain guests) to segment guests and create tailored restaurant marketing campaigns help you control the guest experience. With a powerful segmentation tool, you can also create segments using combinations of rules such as “days since last purchase” to target guests with campaigns to bring them back. Having a tool to view and utilize customer data can help you influence the buyer’s journey and turn new customers into loyal guests.
Calculate Savings for Delivery Orders with ROI Cost Calculator
Stop letting guests pay a delivery fee and service fee while also sacrificing your revenue on a 15-30% commission on each order. You can take back your guests and revenue by switching from third-party delivery marketplaces to in-house delivery or Delivery as a Service (DaaS)! Restaurants using first-party for delivery usually save 30-70% over a comparable third-party delivery order. In addition, you own the guest data and the relationship and don't run the risk of guests choosing another restaurant in a crowded marketplace.
To know how much your brand can save, click to download the Delivery ROI Cost Calculator below!