Dozens of restaurant owners drop 3rd Party Delivery Services today, Monday, July 8, 2019. These restaurant owners believe 3rd Party Delivery Services are sucking the profits out of restaurants and leaving a trail of bad experiences with customers in their wake. Fed up with unexpected rate hikes and profit loss the following owners are sending a message by dropping these services today.
Local restaurants who dropped 3rd party delivery effective July 8, 2019 that we can confirm.
Foghorn’s Wings Burgers and More
Jose’s Bar & Grill
Sauced Barbeque & Brews
Big Sexy Food
Whole Hog Cafe – Fayetteville
Whole Hog Cafe – Bentonville
At end of month these locals are dropping
Shogun of Fayetteville, AR
Shogun of Bentonville
Ginger Rice & Noodle Bar
On the Mark Sports Bar & Grill
As a consumer you should know the facts about 3rd Party Delivery Services. The delivery service can offer restaurant owners thousands of potential customers ordering through their apps and websites. Having access to this customer database sounds amazing to most restaurants. The restaurant gets more orders, customer gets access to their favorite restaurant at home, and service takes a fee for making it all possible. Sounds like a win for everyone right?
Wrong! The problem is, after the restaurant joins the program several common side effects start to reveal themselves. Let talk about a few of them.
High Service Fees and Low Margins
Most 3rd Party Delivery Services charge the restaurant a 30%-38% fee on every order and normally is disclosed and is an expected cost. Problems start when customers use the apps and only order entrees where the profit margins are super low.
A restaurant owner must buy the food, pay the cook, pay for the building, pay utilities, pay cleaning staff, and provide basic condiments and supplies you use when dining out. Hard enough to cover the cost of all this with only entrée orders and losing an additional 30%-38% per order in many cases is a break-even deal. Let’s not forget the added cost for delivery supplies and an extra employee to bag those orders up. Most of this cost is covered by the incremental sales from people dining at the restaurant and that leads to the next topic.
Loss of Incremental Sales
Incremental sales needed to make a profit like people ordering drinks, appetizers, and desserts also go down because people order delivery instead of coming out. Some of the mentioned items are available on the apps but people don’t order them due to the high delivery fees. The reality is people aren’t going to pay $10 to add a basket of fries or chips and salsa through an app, especially when they are going to be cold and soggy by the time they reach the destination.
Lack of Price Transparency to Customers
The lack of price transparency to the consumer can leave the impression that a restaurant is expensive. A $10 meal in the restaurant can be displayed as a $14-$15 item on the apps and websites. After delivery fees that $10 meal can turn into a $20+ order. Remember, the service is still charging 30%-38% per delivery so an order of $100 will give $30-$38 to the 3rd Party service just to deliver your meal. The apps do a bad job at showing how these additions charges apply to online ordering. If people get the impression that the restaurant is expensive on the app it may slow down foot traffic based off online this modified pricing.
So, what’s the solution?
For theses owners, their solution is to drop the service and ask their customers to support their decisions by coming out to eat. As a foodie I want to see my favorite restaurants thrive so I can continue to enjoy their food. If you have the option do everyone a favor and go out and support your favorite restaurant.
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