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Do Delivery Apps Hurt Restaurants?

Apr 26, 2021

food delivery app being used and hurting restaurants

Scrolling has become a part of our daily life. We scroll on social media and through the news. We scroll for takeout and delivery on food apps. But, what if scrolling for food hurts not only restaurants but also the consumer? What if food delivery apps, while very much a part of life now thanks to smartphones, actually do more harm to local restaurants than good? Well, the truth is starting to come out, and it’s not pretty. 

Not What You Think It Is

The quick answer to the question of “do delivery apps hurt restaurants” is straightforward. Yes, they do. While using a third-party delivery app may have been necessary for some restaurants to get their name out there and connect with new customers at one time, it’s becoming horribly obvious that restaurants pay more for the service than they get out of it. Therefore more and more restaurants are making their own deliveries.

Difficulty Connecting With Customers 

The restaurant industry is people-centric. Repeat customers come back not only for the food but for the dining experience. Taking away the dining room and replacing it with a delivery platform solely for food delivery makes it difficult to connect with customers. 

Independent restaurants become like any other store on Amazon or digital platform, chockfull of similar food and drink choices. Restaurants morphe into a bland commodity and are completely separated from their customer base. 

The worst part is that independent restaurants are unable to solve their customer’s issues fast. If the customer has problems with the food or wanted something different, there’s no way for the restaurant to fix it quickly. The middle man (food delivery app) is the communication device, not the restaurant itself. Building brand loyalty or connecting with the person making the food no longer exists. 

The customer could unsubscribe from the delivery app at any time. This lowers repeat business for the restaurant. The lack of interaction between the merchant and the consumer seriously hurts restaurants since the restaurant can’t reach out to their lost customers to find out what went wrong to lose their business. 

The Truth Behind the Fees

Delivery apps are in business to make money, and it’s important not to forget this fact. Delivery app fees vary but, on average, take a walloping 30% of your profits. When signing up, you agree to the following commission fees:

  • Service fees
  • Delivery fees
  • Regulation fees

When you add up all the fees, they leave only scraps for the restaurant. The net payout and how much restaurants actually made from the order may be nil or pennies over. But the customer pays too. Higher fees translate into higher menu prices. 

Plus, food delivery means a hefty tip. Food delivery apps suggest the same amount as expected with in-person dining (15-30% tip). Basically, for someone to deliver food and hand it to you, the customer pays the same tip amount they would for a 1-2 hour dining experience. The average $20 restaurant meal with tip now costs you $30 bucks or more. 

Sure, food delivery is a premium service that has convenience and safety wrapped up into one. But isn’t that what the delivery fee is for? Why a delivery fee and a service fee? Now, a regulation fee because they can’t charge you a higher service fee? 

Throw in a tip, and the charges restaurants and apps ask their customers to pay have become more than a premium service. Quite frankly, it’s a rip-off. Saving restaurants and protecting consumers means doing away with third-party delivery apps.

Giving Away Your Data

The delivery company is the direct messenger to your customers. Once the food leaves your hands, any customer data is lost. Well, not entirely; the delivery app has the information and can now use it any way they want. They can even use the data to compete for your customers. 

The third-party food app keeps your data and food trends. How are you supposed to offer special promotions, reward points, or any other incentive to encourage repeat business? Power is in information, and the restaurant owner now has none of it. The lack of data from using food apps is hurting restaurants. Sure you may have access to view the data, but what happens when you stop using the third party? You don’t retain that info. And based on the data they give you access to, what is it really worth if you aren’t able to utilize it?

The final straw to consider is that third-party apps are in the restaurant game themselves. A simple Google search will bring up all the virtual kitchen aspirations of third-party delivery apps. So, all this time your customer data has been harvested by these apps for them to use against you! They now have all the info they need to successfully open their own kitchens and become your competitors.

Losing Control One Order At a Time

Restaurants deserve control over their business, and food delivery apps are flipping the burgers. At any time, they can charge fees, not promote your restaurant, or make it hard for scrollers to find you. In effect, restaurants have become independent contractors with no union or say in how they operate off-premise dining. 

Hurting Small Businesses Most 

The big guys can afford to pay higher fees, have less control, and lack of connection. Larger restaurants have larger marketing budgets and can afford to find ways to reach new customers. Smaller restaurants struggle to keep the doors open during an average year, but keeping the stove lit brings further challenges during a pandemic. 

Delivery apps make money by charging high fees and small businesses need every single penny they can get to stay alive. If consumers understood how harmful food delivery apps could be for small businesses, they might change how they order food.

What the Future Holds

Senior Vice President of the National Restaurant Association, Hudson Riehle, said there’s a saying in the industry: “Demographics is destiny.” And the demographics certainly trend toward pickup and delivery now and in the near future. Before the coronavirus pandemic, third-party apps made up about 30% of a restaurant’s business. Throw in a pandemic, and that number soared to 80-90%. 

After the pandemic hit, relying on takeout became the only way for a restaurant to survive. But this trend is here to stay in the restaurant industry. J.D. Power & Associates did a survey that showed over 70% of consumers would continue to get food delivered from restaurants post-pandemic as much as they have during pandemic. 

In the National Restaurant’s 2021 Annual Report, only about 50% of all adults surveyed said they planned on dining at a restaurant post-pandemic. The remaining half will continue to rely on delivery, takeout, pickup, and food trucks. 

But the number is even higher if you look at specific age groups. 66% of Gen Z and 76% of Millennials planned on off-premise dining in the coming year. By 2030, the digital kitchen market may reach one trillion. When you look at all these statistics together, it’s clear that food delivery is here to stay, but restaurants don’t have to choose third-party delivery.

Join the Native Delivery Revolution

What is the answer. It’s already a stressful arena to navigate, imagine adding self-delivery to your business model? But what if there’s a way that combines technology while preserving your brand and local businesses.

ShiftPixy is the solution by offering native delivery for restaurants in all more minor and major cities around the country.

ShiftPixy native delivery takes out the middle man. By using your own in-house trained staff ShiftPixy facilitates the native delivery process. Offering restaurants food delivery with reduced fees, data protection, and brand preservation, the ShiftPixy Driver Management System creates a symbiotic relationship between you and the customer. It does this by fulfilling the food order with a uniformed team member, trained by you, and delivering the customer experience you intended. 

ShiftPixy helps you become more than just a scroll. Your restaurant has a face with the ability to connect with customers to solve problems when needed. All this with saving 30% of the moola that was going out to third-party delivery companies. So, don’t you think you deserve something better? ShiftPixy thinks so. Delivery apps are hurting restaurants, and now there’s a way to stop the burn.