Is Delivery Costing Fast Casual Its Customers and Margins?

Is delivery costing fast casual its customers and margins

Food delivery is in high demand. Eighty-six percent of consumers are now using delivery services on a regular basis, according to research from Technomic.

Customers can order almost anything with just a few taps on their smartphones. It’s fast and convenient, but is it costing restaurants their customers? Delivery has a dark side. There are additional expenses and loss of margins, logistics, and customer service concerns that could all add up to lost customers.

In this post, we’ll explore the appealing nature of delivery, examine its dark side, and discuss an alternative option that gives restaurant owners the ability to increase incremental sales, boost loyalty, and control the customer experience.

Why delivery is so appealing to customers and restaurants

For customers, ordering takeout has never been easier. Thanks to easy ordering via delivery apps like GrubHub and UberEats, consumers can scroll menus, place an order, and have a meal on their table in 30 minutes. What could be more appealing than that?

For restaurants, delivery sales show promise. In the past five years, delivery sales surged 20% while restaurant traffic remained stagnant, according to research from NPD Group. More restaurants have hopped on the delivery bandwagon in hopes of generating more revenue, but some aren’t happy with the results.

The dark side of delivery

Restaurants are teaming up with online delivery platforms in hopes of driving more orders, but there’s more to it than that. There’s a dark side to delivery. Here are some of the downsides:

  •      Profit loss

You might see a bump in delivery orders, but most delivery services take 20 to 30 percent of the order total. To compensate for that loss, you’ll have to raise your rates, which could deter customers from ordering, or at the very least, cut into your margins and profits.

  •      Workflow chaos

If you offer delivery, even if you’re working with third-party delivery apps, you have to work out logistics. Do you have enough staff to prep and cook the food? Who’s in charge of packaging it and getting it to the delivery person? Do you need to bring in additional staff to cover both online orders and in-house customers?

If you have to bring in more staff, it affects your bottom line too. Are you making enough on the delivery orders to cover the staff time and still make a profit?

  •      Potential damage to your reputation

When you turn your order over to a delivery driver, the customer’s experience is out of your hands. You don’t know if Dave, who drives with UberEats, dropped the meal on the ground on his way to the car or if he’s rude to the customer upon delivery.

When the customer gets cold food, a lopsided burger or gets in a shouting match with Dave, it could damage your reputation. The customer could get upset and start ranting about the experience on Yelp. Before you know it, you have a handful of 2-star ratings because the delivery driver is worried about delivering food to make money, not your reputation.

  •      Losing customers to the competition

Delivery apps have a way of luring customers away from your business too. Let’s say Jane plans to order your famous chicken parmesan, but when she finds a coupon for $2 tacos as she scrolls through the ordering app, she opts for a Mexican night instead. Now, you’ve lost a sale.

Do you start offering blanket coupons in hopes of luring more customers in? What happens to your bottom line then?

How to drive repeat business

You don’t have to rely on delivery methods to drive sales – there’s another way. Rather than team up with third-party delivery services, utilize a service that engages your customers, encourages loyalty, and drives incremental sales.

With a customer engagement platform like Thanx, you can do all of that and more. With Thanx you can:

  •      Reward loyal customers

Rather than hunt for new customers who are looking for a discounted meal, reward your loyal customers and encourage them to come back again and again.

Thanx offers robust customer data that identifies your VIP customers and gives you a platform to communicate with them in a highly personalized and targeted way. By using data about a customer’s buying habits, you can offer him or her a targeted offer that he or she will want to redeem.

Thanx Campaigns Everyone

When you reward customers for their loyalty, they’ll return the favor. Customers want to feel appreciated. When they do, they don’t just come in again – they bring friends and family with them.

  •      Treat customers as unique individuals

When you’re delivering food to customers, you treat every customer the same. You prepare the food and hope he or she likes their meal enough to come back. That’s not a great marketing strategy.

Every customer is different. The lunch-loving crowd that works in the office building across the street isn’t interested in the same menu items as the college kids that live near the university.

By deploying an automated customer engagement platform, you can understand who your customers are. You can capture robust behavioral data about each customer, like how often they come in, what they typically spend, and what they love to eat.

Customer Attributes in Thanx

That data can be used to group like-minded customers together in segments (Thanx does it for you) and offer each group special messages and offers.

Thanx Customer Engagement Campaigns

The students living near the university, for example, receive a push notification for your pizza night while the lunch-lovers get a free appetizer with the purchase of an entrée.

Personalized offers are the best way to engage customers and encourage repeat business.

  •      Control your customer experience

Using the Thanx app, you can ask customers to rate their customer experience after every purchase. With just one tap, you’ll know how a customer feels about your business. If you get a so-so rating, you can reach out to that customer specifically to collect feedback, fix any problem necessary, and maintain the high customer satisfaction your restaurant is known for.

The experience isn’t dependent on David the UberEats driver anymore. You just took the control back and that’s powerful for your business.

  •      Spot customers who aren’t coming in as much

Wouldn’t it be great to identify lost customers before they stop coming in? Thanx does exactly that. The platform tracks customers’ behaviors and when it notices that Jane has gone from eating lunch at your restaurant every week to going MIA for 45 days, it can automatically send her a special promotion to come back for lunch.

A third-party delivery app can’t winback customers.

Wrap up

The growth of technology gives restaurants new ways to attract and retain customers. Offering delivery could be an option for your restaurant, but it will likely be a delicate balance between cost and profits.

Learn even more in this post from Fast Casual: How to respond to the third-party restaurant delivery challenge.