When it comes to restaurants' relationship with third-party delivery providers, an old adage is becoming applicable: If you can’t beat ‘em, join ‘em.
“We fought third-party delivery tooth and nail,” said Todd Madlener, president and COO of salad chain Coolgreens, at this week’s FSTEC conference. “A colossal amount of revenue was spent” on trying to get customers to quit using the services, he said, but to no avail.
“Call it the pandemic, call it what you want, but third-party is here to stay. It just is.”
Indeed, the big third-party delivery providers have continued to grow in recent months, even as consumers started returning to restaurants. In the quarter ended June 30, Uber Eats’ revenue was up 122% year over year. DoorDash revenues increased 83% over the same period.
“Consumers are continuing to say that they will continue to use [third-party delivery] for the convenience,” said Melissa Wilson, principal with researcher Technomic, during a presentation at FSTEC.
The industry’s relationship with delivery providers is complicated. Some operators view them as a necessary evil; others see them as a key customer acquisition tool. But as the reality sets in that delivery is here to stay, it's becoming more crucial for restaurants to make it work. Here are some ways they can do that, gathered over the course of the conference in Dallas. FSTEC is hosted by Winsight, the parent company of Restaurant Business.
Spend money
At the end of the day, the most attractive benefit offered by the delivery companies is the ability to attract new customers. But as more restaurants join third-party marketplaces, it becomes more difficult to stand out.
There are several things restaurants can do to get their brands to show up more prominently. One surefire way is to pay for it.
“If you view [delivery service providers] as a customer acquisition cost, then doing a crazy promotion on that platform, while it feels bad from a profitability standpoint, is probably a great idea,” said Meredith Sandland, former COO for ghost kitchen provider Kitchen United and co-author of “Delivering the Digital Restaurant.”
On DoorDash, for instance, restaurants can pay to offer free delivery for first-time customers. It will also place them higher in the app. “Stores that enroll in First Order, $0 Delivery Fee are given priority placement in our app and website via carousel inclusion,” DoorDash says on its website.
“You have to invest in customer acquisition, ultimately, and I wish I could say that they were free,” said Aaron Noveshen, founder and CEO of the Starbird Chicken chain.
Execute
Paying to acquire a delivery customer is only worth it if that person comes back. That’s where execution comes in.
“Your No. 1 job as a restaurant is to execute perfectly and ideally move them over to your first-party platform,” Sandland said.
Plus, execution affects other variables, like ticket times and ratings, that can impact a restaurant’s placement on the marketplaces.
At Starbird, “our biggest Achilles' heel is accuracy,” Noveshen said. Incorrect orders can be easily remedied when the customer is in the restaurant, but when 85% of orders are off-premise, like Starbird’s are, mistakes can be costly.
“If there’s any tech folks out there who have accuracy fixes or thoughts, come talk to us,” Noveshen said. We’re “looking for a silver bullet for accuracy, and hot fries, because those are tough too.”
Optimize your brand
Just like restaurants had to master search engine optimization for Google, they have to do the same thing for third-party marketplaces, Sandland said.
“You’re making your menu, you’re making your name as easy to find and show up on the first page as you can,” she said.
That is one of the foundational strategies behind delivery-only virtual brands. Almost all of them have their cuisine in the name, like It’s Just Wings, MrBeast Burger and Bad-Ass Breakfast Burritos, to capture customers searching for those items.
Particularly for independent operators, Sandland said, “the No. 1 thing you can do is check your menu.” Search for your product and see what happens. And make sure your listing includes high-quality photos of each item.
Sandland cautioned that the formulas that determine placement within delivery apps will become as much of a moving target as Google’s have been. “Every time we figure out that’s how you get to the top of the page … they change the algorithm,” she said.
Get data
One of the biggest challenges of working with delivery providers is that once the order leaves the restaurant, the operator loses a lot of visibility into the customer experience.
“When you look at the importance of operations … information is harder to get to in this channel,” said James Walker, SVP, restaurants, for Nathan’s Famous. He said the delivery providers are great at providing information about what the restaurant is doing wrong, but not so much when it comes to what they’re doing wrong.
In an effort to get more intel, Nathan’s is working with a company called Freatz to help gather and analyze customer feedback. Nathan’s delivery orders will include a QR code on the bag that customers can scan to answer questions about their delivery, including how the driver behaved and whether the food was hot. Nathan’s will then be able to view results in a dashboard and compare the service provided by each of its delivery partners.
“We can create that cause and effect relationship to really understand which DSP is doing better for Nathan’s Famous or which DSP is providing the best experience to the end user,” said Lucas Judice, CEO and founder of Freatz, in an interview.
“You have to treat that delivery customer experience with the same care and information you do in-restaurant customers,” Walker said.