In-House vs Third-Party Delivery: What’s Better?

OrderOut

May 20, 2020

For some restaurants, it makes sense to do both. With delivery exploding, what’s really the best strategy for getting food to customers quickly– and without ripping off your restaurant?

Driven by consumers’ growing appetites for convenience and the rise of third-party players like Uber Eats, Postmates, and Grubhub, foodservice delivery has become a ubiquitous element of modern life — and one that shows no signs of slowing.

That hard-charging surge has prompted quick serves of all shapes and sizes across the US, from McDonald’s and Jimmy John’s to up-and-coming fast casuals and single-unit independents, to prioritize, strengthen, and solidify their delivery offerings. It’s also spurred rich debate on the best way to approach delivery, whether that means running an in-house delivery team or outsourcing delivery to any number of third-party providers. (And if it’s the latter, then which ones?)

In an era of convenience, online ordering systems, self-service kiosks and mobile platforms have become key to give the customers what they crave the most: a fast, personalized and convenient food experience through delivery and/or takeaway. With allegedly 70% of all orders being off-premise by 2020, restaurants should dig into what their options are when it comes to off-premise dining, in particular delivery.

We’ve highlighted the top pros and cons of each route for you below:

In-house Delivery

Pros

  • A whopping 78% of US delivery orders are placed through the restaurant itself, while only 22% of orders are made through third-party delivery services. That means that if your restaurant was to set up a delivery operation of its own, you could potentially reach a vast audience of customers looking to order directly from your restaurant.
  • By not outsourcing delivery, your restaurant can take back control over the entire delivery experience. Today, creating a top-notch experience for the customer is crucial for getting them to order again, so keeping the delivery process in house may be a wise decision. Not only do you get to train your delivery staff, you’ll also be able to choose your own business model and product offering.
  • Choosing in-house delivery removes the communication barriers that come with third-party delivery. You’ll be able to stay in touch with your customer throughout their order, which makes it easier to obtain feedback and implement changes where needed. Don’t forget that a personal communication style can also positively affect the customer’s experience, resulting in repeat business.

Cons

  • Whenever something goes wrong, you cannot pass the buck onto a third-party delivery company. Running your delivery in house is all about full accountability. Whereas delivery platforms can offer vouchers relatively easily to make up for wrong, cold or messy orders, restaurants need to ask themselves how they will handle bad delivery experiences.
  • In spite of the high number of orders through restaurant apps or websites, not signing up with delivery partners may result in less visibility and potential customers. Your existing clientele may well order directly from your app, but how will you expand your reach? Marketing in-house delivery may require a higher investment than joining third-party platforms, which will bring you a new pool of customers.
  • Setting up delivery services requires capital and expertise. You need to purchase a fleet of delivery vehicles (or pay the couriers you’re working with to use their own), you need to choose a reliable payment system, take out insurance for your drivers, figure out how to track deliveries and how to store and transport food.

Third-party Services

For those without established in-house delivery programs or the stomach to build one, third-party delivery has presented a gateway to gain customers and bolster brand recognition.

Pros

  • Hiring a third party for your deliveries can bring you new business, as each platform comes with its own loyal users and target audiences, some of which you may not be able to reach on your own. This increased discoverability can be especially handy for small-size businesses and startups. Moreover, you can work with as many delivery partners as needed, so you can expand your reach considerably.
  • Outsourcing delivery allows you to focus on your core business: preparing delicious food and creating an unforgettable customer experience. While offering in-house delivery comes with many benefits, it may take away focus from your end product- which, ultimately, is what your customers will remember you by.
  • Partnering with online ordering platforms certainly isn’t free, but it does give you the opportunity to avoid investments on a number of fronts. In exchange for commission fees, you’ll be able to benefit from a ready-made infrastructure, including a network of couriers and riders, a range of packaging materials, delivery tracking, secure payment methods, and so on.

Cons

  • Third-party delivery companies are known to often charge hefty commission fees. Depending on the business you are running and your margins, these fees may not be feasible, even considering the infrastructure and experience you’ll get in return.
  • Many restaurant owners fear the loss of control over the delivery experience. Your business has nothing to say about delivery staff training or the way your food will be delivered to your customer. In case of a bad delivery experience, your business can be impacted even though you weren’t responsible for it. And with 80% of customers saying they’ll blame the restaurant, not the delivery service if anything goes wrong, that’s an important consideration.
  • Feeding off of our second point, hiring an external delivery service can result in a loss of communication with your end customer as well. Maintaining a positive brand awareness and delivering the customer experience that you want becomes more difficult, as you have no direct line of communication with your diners.

Both third-party and in-house delivery come with advantages and drawbacks. Before making a decision, make sure you balance the options to determine which type of delivery is the best fit for your business. And whatever you decide, it’s crucial to have as much data on your delivery operation as possible.