Online ordering has many benefits. It can help restaurants reach more customers, increase convenience, and drive more sales. On the surface, online ordering seems like an obvious path to restaurant growth, but look a little deeper and you’ll find a number of concerning pitfalls.
In an obsessive quest to get more customers, restaurant owners often lose sight of the bigger picture. The increasing demand for convenience is pushing customers to order online more and more, so naturally, restaurant owners feel the pressure to respond. Restaurant owners are rushing to join portals in fear their competitors will steal their customers and the revenues they represent. The catch: These portals generally charge restaurants anywhere between 20 and 30 percent-plus per order.
Then There’s the Delivery Fee
It’s hard for delivery services to make money by only charging customers a small delivery fee so the only way they can profit on an order is by offsetting the delivery fee with the sizable service fees charged to restaurants.
It’s reasonable to suggest, that in order to accommodate the pricing pressure on restaurants, portals should shift their fees. But,that’s a tough decision, because the only other party involved in this transaction is the customer. Customers can only absorb so much. Paying a $15 delivery fee on a $15 order isn’t going to work.
The Numbers Don’t Add Up
Why would restaurants pay such huge fees? Well, the sales pitch from a portal is often that the increased volume of marginal sales will result in meaningful profits.
In an obsessive quest to get more customers, restaurant owners often lose sight of the bigger picture.
This makes sense in theory, but what happens when a customer who would normally order from a restaurant, and has previously done so, orders again using a third-party portal? While the customer is still technically ordering from the restaurant, the restaurant just lost a full paying customer.
As a result, restaurants are cannibalizing their own business. Think about it: The higher the volume of orders a restaurant has through a portal, the lower the profit percentage they make. If 25 percent of a restaurant’s total business is done through an online portal that charges 25 percent, that strips 6.25 percent away from its revenue. This can cripple a restaurant’s profits.
Unfortunately, the cost to attract more customers isn’t always factored into the decision making process. Restaurants have a perpetual need to efficiently attract customers. This includes new customers and getting existing customers to return. For many restaurants, however, the fees portals charge are unsustainable and restaurants are left without a real solution.
The benefits of online ordering to help restaurants grow is undeniable. Online ordering provides restaurants huge benefits, and portals can have a place at the table, but adjustments need to be made to make the system sustainable.
The online ordering market is only getting bigger and the problem this presents to restaurants can’t be ignored. There is a solution out there, and once it’s found, it will likely be valuable for all parties. In the meantime, no restaurant owner should use a service that might cripple their business.