Are Delivery Services Profitable?

As the world becomes all about convenience and having things delivered to the door with one click of a button, we take a look at the pros and cons of food delivery services and whether or not they are a profitable strategy your business can implement.

Dining out has been a favourite pastime for couples, families and friends for decades. Spending time around the table talking, eating and enjoying a bottle of wine can be the social highlight of someone's week. Yet in the last 20 years something has changed; people simply enjoy staying home.

Why?

With streaming services such as Netflix proving so popular, people are becoming quite happy to stay indoors on a Friday night and many diners want their food to come to them. The advancement of technology has made life about convenience, and there is nothing more convenient than a cooked meal delivered to your door.

The traditional takeaway meals since the delivery boom in the 90s varied from pizza, curry, a Chinese or an Indian. Restaurants were viewed as above this because the exclusivity of an in-house service allowed them to best provide a first-class dining experience.

However, times have changed. Restaurants, and even fast food outlets, have caught on to the advantages home delivery has to offer.

How food delivery works

You have two options. You can hire delivery staff, purchase vehicles, take out insurance and invest in the necessary equipment to store food and keep it hot during travel. Alternatively, you outsource to one of the many companies vying for the opportunity to connect your food to hungry customers.

There are numerous apps available where food can be ordered at a few clicks of a button, where an order can be placed via a third-party delivery service which will notify you, collect the order and deliver it on your behalf.

They may take a cut of the overall payment or charge a delivery fee, which can be passed on entirely to the customer if you wish.

What benefits are there to home delivery?

The obvious answer is a question of simple mathematics. If your restaurant serves 30 tables, you're limiting your reach to those 30 parties at any given time – assuming all tables are full, of course. Bad weather, a broken-down vehicle, illness, tiredness after a long working day – there are countless reasons why a would-be customer might not even make it to the table.

On the flip side, perhaps you're having your busiest night of the year – you are still limited to those 30 tables. How many extra would-be patrons are you missing out on? If people stick around enjoying the atmosphere once they've finished their meal, the business is losing out on new customers being seated. Time is money, after all.

This is where the benefits of home delivery really shine through. Your potential for orders is essentially limited only by your own capacity to meet the demand – and with the necessary resources in place your food can be enjoyed by far more people than if you only serve your seated customers. It can also give you the jump on other businesses which are yet to catch on to offering home delivery, giving you exposure to a wider market.

As people are creatures of habit, they may choose to only order from restaurants listed on their home delivery service's app. You may consider growing with the times and being part of this, ensuring you are one of the options the next time a hungry couple picks up their smartphone to place an order.

The more apps you're available on, the wider your social media profile will reach as more people enjoy your food and inevitably share the experience online. Word of mouth travels faster than ever before now via social media – and being central to online discussion keeps your brand in the public eye.

Tip: Society now is much more eco-friendly conscious, and businesses can capitalise on this by showing themselves to have a clear ‘green’ philosophy. Diners are increasingly looking to reduce their impact on the environment, which includes where they go to eat. Going green can drive your business and is great for marketing. Check out Vegware’s eco-friendly products and see how they can help your business.

Implementing home delivery services

Deliveroo is one such company that specialises in delivering your food to the customer, and also actively markets and promotes your business. They work with hundreds of local restaurants and pride themselves on only working with high-quality eateries.

In fact, their website states they don't work with low-quality takeaways. This can certainly help your reputation if Deliveroo agree to deliver your meals, as customers can trust the company will only vouch for top quality. To join some delivery services a business must have a high ranking on TripAdvisor and a five-star hygiene rating – these requirements can only enhance your restaurant's reputation should you be associated with delivery services that demand the best.

Deliveroo also offers a pre-ordering option, ensuring you secure a customer's business one day in advance. Other options in the Australian delivery market include UberEATS, Foodora and Menulog – it’s a growing industry and more firms competing for your business puts you in the driving seat.

Are delivery services profitable?

Yes. The industry is booming, worth $6 billion a year in Australia, and new start-up services are turning profit or being taken over by a larger company. Suppertime, launched in Sydney in 2013, was acquired a short time later by another newcomer, German start-up Foodora. Then Foodora was gobbled up by Delivery Hero, proving the potential businesses are seeing.

With so many companies entering this booming industry, there is doubtless profit – both for you as well as third-party deliverers. More competition for your business will drive up quality, ensuring customer satisfaction and repeat business.

Deliveroo growth

Deliveroo launched in Perth late last year, marking the 100th city it inhabits worldwide, and this month has extended its reach into both Canberra and Adelaide. It now runs in 130 cities and this is only set to grow as delivery services become the norm and demand increases.

Delivery drones

In 2016 popular restaurant delivery service Foodora combined with innovation firm IE Digital in Melbourne to deliver food out from restaurants via drones. The more technology grows, the more it can be used to your advantage in delivering quicker and more efficiently. Drone delivery is in its infancy, so getting in early can give you the jump on your competitors.

There can surely be no better way to reach the masses than offering home delivery and allowing your food to reach customers who may have never even stepped foot in your establishment.

It might not be for you

As we all know, however, nothing is perfect. As with anything, home delivery does have its drawbacks.

When you outsource delivery to another company you surrender control of how long it takes the food to reach the customer, the condition the food arrives in, the quality of face-to-face customer service – and it can also become harder to receive respectful feedback.

A customer can go online and criticise your service anonymously for all to see, which may impact your reputation and future sales – regardless of whether the criticism is valid.

This is why an official social media channel can be so vital; an official forum to receive criticism gives you that right of reply to address feedback, whether it’s positive or negative.

You can also answer questions from prospective patrons, which can help entice them into placing an order (whether in-house or for delivery) and also shows your commitment to customer service.

With the customer seated in your restaurant you have every chance to address their concerns and ensure they leave satisfied. With delivery you have one chance to get it right – and if you outsource delivery you can't control the customer's experience.

A traffic jam holding up a driver by 10 minutes can be disastrous; delayed delivery and cold food will leave your customer furious and yet there was nothing you or the driver could do.

An independent restaurant owner may also value the traditional face-to-face interactions with customers, building rapport and feeling a sense of community.

Survey results

Interestingly, out of 350 restaurants and takeaways which took part in a Nisbets survey (pulse), only 57 said they use food delivery services (16.2%), while only 99 said they believe delivery will have a positive effect on the food industry (28.2%). 48 envisage a negative effect (13.7%), 49 believe there will be no effect (14%) and 107 said they were undecided (30.5%).

Clearly then this is an industry still growing and yet to convince everyone of its continued success; with the majority being undecided how the chips will fall. Trends come and go, but there is serious weight behind food delivery services being here to stay with millions invested in it.

The future

There will, of course, always be a place for the traditional dining experience, but times are changing and home delivery is finding its place for established restaurants as well as the original takeaway joints.