The rise of third-party delivery services has transformed how we order food, a trend accelerated by the COVID-19 pandemic.
Restaurant owners now face a key decision: develop in-house delivery or partner with third-party food delivery services.
This guide offers insights into 3rd party delivery companies, helping you weigh the pros and cons to make informed choices in the food delivery landscape.
Key Takeaways
- Third-party delivery services popularity: Rising demand for convenience has fueled the growth of third-party delivery services.
- Key decision factors: Cost, control, customer experience, and brand identity are critical when choosing between third-party or in-house delivery.
- Drawbacks of third-party services: Potential cons of third-party services include high fees, loss of control, brand dilution, limited customer data, and dependence on external factors.
- Online ordering systems as an alternative: Restaurants can use direct online ordering through their website to gain better control and enhance the customer experience.
- In-house online ordering systems: Offer customization, restaurant branding control, and stronger customer relationships.
- Combination approach: Many restaurants use both third-party delivery platforms and direct online ordering systems for flexibility.
What is a Third-Party Delivery Service?
A third-party delivery service connects customers with restaurants to efficiently deliver goods, primarily food.
Acting as intermediaries, these services handle the logistics of the delivery process, helping restaurants extend their reach without relying solely on in-house delivery staff.
These services operate via mobile apps or websites, allowing customers to browse menus, place orders, and track deliveries in real time.
Once an order is placed, the third-party delivery service coordinates with a delivery driver to pick up the food from the restaurant and deliver it to the customer.
Third-party delivery apps offer convenience to customers by providing access to a wide variety of food options, while restaurants benefit from increased sales and a broader customer base.
However, partnering with third-party delivery companies also has its downsides, which we’ll explore further in this article.
Insights on Food Delivery Apps and Online Ordering
- According to Statista, by 2027, it is projected that the Meal Delivery segment will witness a significant surge, reaching a staggering 2.45 billion users and the revenue in the online food delivery market is projected to reach US$1.02tn in 2023.
- According to FastCasual, a majority of U.S. consumers, precisely 58%, opt to bypass aggregators and order directly from restaurants.
- According to Restaurant Business, most delivery orders, precisely 78%, are placed directly through the restaurant, while only 22% are made via third-party delivery companies. The primary reason behind this preference is trust.
Restaurateurs have two primary choices when integrating delivery into their operations. They can either partner with a third-party delivery vendor or develop their own delivery system through their website.
Let’s start with food delivery app options they can choose from, and then we will cover developing their own delivery system for a restaurant.
While thinking about the best third-party delivery apps, what comes to one’s mind are the most popular companies that offer food delivery services on behalf of restaurants.
Below is a list of the 5 best third-party food delivery service providers.
1. Doordash
Doordash is a third-party app that allows customers to order food from their favorite restaurants easily. As a restaurant listed on DoorDash, you can use their reliable food delivery services.
Customers enjoy the variety of cuisines on the app and the option to browse restaurant menus. Many local customers also enjoy the added benefit of DoorDash Pass, which provides free food delivery services.
DoorDash doesn’t stop at restaurant deliveries. They also offer grocery delivery.
Marketing tools to attract new customers
High commissions
The option to reach new customers
No own branded restaurant app
On-demand delivery with DoorDash Drive
No own branded website
Pricing
2. UberEats
Uber Eats is a third-party delivery app operating in over 45 countries worldwide. Uber Eats was launched in 2014 as an extension of Uber, a renowned company known for its car ride services.
With Uber Eats, customers can experience the convenience of ordering food from their favorite local restaurants directly through the food delivery app.
If you decide to use this service, you might want to better understand how to get more Uber Eats orders.
Widely recognizable brand in most major cities
Listing your restaurant among your competitors
Convenient delivery tracking feature powered by GPS technology
High commission fees
Uber Eats retains ownership of the customer data generated through the app
Pricing
How much does Uber Eats charge restaurants? Charges include a commission fee of 15% to 30% for deliveries and a 6% commission on pickup orders.
3. GrubHub
GrubHub is one of the most popular third-party apps. It offers two key services for restaurants: listing them on their platform and integrating their online ordering system onto the restaurant’s own website.
Through the GrubHub marketplace, customers can easily browse menus, place orders, and choose between delivery or pickup from nearby restaurants.
On the other hand, with GrubHub Direct, customers can order directly from a restaurant’s website, streamlining the online ordering process.
Real-time driver tracking
High fees
The option to create a restaurant website with online ordering with GrubHub
Listing your restaurant among your competitors
GrubHub allows restaurants to offer cash payments as an option for their customers
Pricing
4. Delivery.com
Delivery.com is an online platform and mobile app that offers a range of services, including food ordering from restaurants, liquor stores, grocery stores, and even arranging laundry services.
With Delivery.com, users can easily browse and order from a wide selection of establishments.
One of the standout features of Delivery.com is the group ordering feature, which allows users to split orders with others in their household or building.
Marketing tools to attract new customers
When using Delivery.com, your business will be listed alongside numerous other restaurants on the app.
Strong brand recognition among customers
High Commission
Pricing
5. ChowNow
ChowNow is an online food ordering platform that was established in 2011. It provides two solutions for restaurants: ChowNow Direct and ChowNow Marketplace.
With ChowNow, restaurant owners have the opportunity to create their own branded app, offering a unique and personalized experience for their customers. This includes providing food delivery services directly to their loyal patrons.
The platform prides itself on transparency, assuring restaurant owners that no hidden fees are involved.
Ownership of customer data
High price for a monthly subscription
It allows restaurant owners to create their own customized website and mobile app
If you opt for ChowNow Marketplace, your restaurant will be listed among your competitors
Pricing
ChowNow operates on a subscription-based pricing model, starting at $199 per month. In addition, there is a delivery fee of $3.99 for each order and a credit card fee of 2.95% plus $0.20.
You can also check out articles on 10 Best Food Delivery Apps and 6 Best UK Food Delivery Apps.
Pros & Cons of Third-Party Food Delivery Services
When deciding if you want to use a third-party delivery company or focus on developing your own food delivery channel, consider the pros & cons of third-party food delivery services.
Pros
- Increased Reach and Customer Base: Partnering with a third-party delivery app expands a restaurant’s customer base, leveraging the platform’s large user base and marketing reach.
- Convenience: Restaurants can post their menus and rely on the platform for delivery logistics, saving time and effort.
- Efficient Delivery Logistics: Delivery services handle delivery drivers, tracking, and prompt deliveries, letting restaurants focus on operations.
- Access to Technology: Many third-party apps offer advanced restaurant technology and infrastructure, such as user-friendly mobile apps and websites for seamless ordering and delivery tracking.
- Labor Cost Savings: Using third-party drivers cuts the cost of hiring and insuring an in-house team.
- Meeting Customer Needs: Many customers expect online ordering and delivery options.
Cons
- High Commission Fees: Commission fees range from 15% to 30%, reducing profit margins.
- Loss of Control: Restaurants lose control over the delivery experience, including food handling and customer interactions.
- Brand Dilution: Customers may associate their experience more with the third-party delivery brand than the restaurant.
- Limited Customer Access: Restaurants lack direct contact and valuable customer data for marketing or loyalty programs.
- Payment Delays: Weekly payouts can strain cash flow.
- External Dependency: Technical issues or platform disruptions can impact order fulfillment and revenue.
Restaurants must thoroughly evaluate the pros and cons in light of their unique business requirements, objectives, and available resources before making a decision to collaborate with a food delivery app.
Each restaurant’s unique circumstances, resources, and goals should be taken into account to make an informed decision.
If you’re a restaurant owner looking to optimize your delivery services, see these 5 tips on how to increase food delivery sales
Understanding How Third-Party Delivery Platforms Work
All third-party food delivery services function similarly. They provide user-friendly apps where customers can conveniently place food orders from your restaurant or shop.
These orders are transmitted through a mobile device or direct integration with your point-of-sale (POS) system. Subsequently, the platform connects you with local delivery drivers who facilitate the prompt delivery of these orders.
Usually, both restaurants and their customers pay for third-party food delivery services, as the delivery providers charge a commission on each order from a restaurant and add delivery fees to customers placing orders.
Guidelines for Establishing a Partnership with a Third-Party Delivery Service Provider
Partnering with delivery apps can be a strategic move for restaurants looking to expand their reach and offer delivery services.
Here are vital steps to consider when establishing a partnership:
- Research and Evaluate: Explore third-party delivery companies in your area, assessing their fees, market reach, and reputation. Align their services with your restaurant goals to ensure they meet your business needs and objectives.
- Contact potential partners: Reach out to selected third-party companies to understand their onboarding process, terms, and requirements.
- Assess terms and fees: Review the partnership agreement, focusing on commission fees, delivery costs, and profit margins.
- Set up your partner account: Follow the instructions on the chosen platform’s website to create an account. Check if they offer integration with your POS system, enabling streamlined order management.
- Technical integration: Collaborate with the platform’s team to sync your menu, pricing, and availability for seamless ordering.
- Menu optimization and pricing: Adapt your menu for online ordering with clear menu descriptions and competitive pricing.
- Choose your preferred order-receiving method: Choose how to receive orders, either through the platform’s app or integrated POS system.
- Provide staff training and establish effective communication: Prepare staff to handle delivery orders efficiently and communicate effectively with the third-party delivery service.
- Start receiving orders: Process orders, prepare meals, and rely on the platform’s delivery drivers to handle fulfillment.
- Monitor and evaluate performance: Regularly review data, including order volume and customer satisfaction, to optimize the partnership.
Keep in mind that each third-party delivery service may have its own unique procedures and requirements.
Adapt the outlined steps according to the specific platform you choose.
What Are the Alternatives to Third-Party Delivery Services?
Online ordering and delivery present significant opportunities for small businesses.
It’s important to note that while using third-party online ordering and delivery services can be one approach to meeting customer demand, it’s not the only option available.
If you use a POS system, check if it is integrated with an online ordering system. Some point-of-sale software provides integrated features that allow businesses to manage their own team of in-house drivers efficiently.
These features include maps-based dispatch and driver smartphone apps, streamlining the process of coordinating deliveries and ensuring effective communication within the team.
If you are not using a POS, you can also look for an online ordering system that enables you to offer direct online ordering from your restaurant.
If you don’t have a restaurant website, look for a restaurant website builder. These tools help restaurants create a website in a few simple steps.
You can choose from various professional restaurant website templates, and add your content, menu, photos of your dishes, and contact data.
Then, you add online ordering to your website, and that’s it! Your customers can order food online directly from your own restaurant website.
UpMenu is an example of an online ordering system you can use in your restaurant. It offers a restaurant website builder that can be used by the restaurant without a website yet.
There are many additional functions that you can use in your restaurant, like a loyalty program and restaurant marketing tools.
Numerous independent restaurants adopt a combination approach by utilizing both third-party platforms and their own in-house online ordering systems.
By doing so, they can leverage the benefits of third-party reach while, simultaneously, encouraging customers to place future orders directly with the restaurant.
This is often facilitated by including coupons or flyers with third-party orders, offering enticing restaurant discounts or freebies to incentivize customers to order directly from the restaurant in the future.
Building Your Own In-House Delivery Service
If you are considering developing your own delivery service for your restaurant, it requires thorough analysis, budgeting, and planning.
To help you decide, below you will find some essential considerations and critical factors to consider.
1. Drivers and Vehicle Expenses
To deliver your food, you will need to buy vehicles, pay for gas and insurance, and hire at least one own delivery driver. An additional option is to compensate your own drivers for using their personal cars for deliveries.
Alternatively, use delivery services integrated with online ordering systems like UpMenu, which partners with platforms like Stuart, Wolt, and Shipday, to streamline courier hiring.
2. Staffing for Delivery Preparation
If your restaurant receives more than 35-40 online orders daily, hiring a dedicated employee might be necessary to coordinate receiving orders and ensure the food preparation and delivery process.
Hiring a dedicated delivery staff member ensures efficient order management and helps maintain quality control throughout the delivery process.
If you use an online ordering system, ensure that the person responsible for receiving orders is properly trained to ensure coordinated handling of online orders.
3. Space for High-Volume Deliveries
Make sure you set aside a dedicated area in your restaurant to handle many delivery orders efficiently. This designated space will help you stay organized and manage the high volume of orders smoothly.
A specific area for handling deliveries can streamline your operations, make order processing more manageable, and ensure effective kitchen staff and delivery team coordination.
4. Efficient Food Storage
When it comes to food delivery, you want to make sure your food stays fresh and delicious. That’s where efficient food storage comes in.
It’s all about having a system to keep your food organized, maintain quality, and meet safety standards during transportation.
Organized, safe storage ensures your food delivered meets customer expectations.
5. Smart Packaging for Delivery
When delivering food, the right packaging makes all the difference. You want to ensure your delicious meals arrive in perfect shape and taste amazing.
That’s why choosing the right packaging materials is super important. It protects your food, prevents any spills or leaks, and ensures it stays at the right temperature.
6. Payment methods
When paying for your in-house deliveries, you want to keep things simple and secure. That’s why it’s important to set up a smooth payment process.
Give your customers different options like cash, card, or online payments, so they can choose what works best for them.
By offering multiple payment types, you make it convenient for everyone.
