1st June, 2020
Having an understanding of the various delivery models and service providers available to you as a hospitality business owner may help you get ahead of the competition.
In late 2015, a shift began to appear in Australia’s hospitality scene. November 2015 heralded the arrival of global home-delivery giant Deliveroo, followed by the introduction of UberEats in early 2016. With the launch of these two platforms, now estimated to be worth over $690 million worldwide, the dining scene of Australia (and much of the world) would never look the same again.
Since 2016, not too much has changed when it comes to home-delivery.
Deliveroo and UberEats have dominated the game, with smaller companies such as Menulog securing just a fraction of the market in Australia.
In early 2020, the COVID-19 pandemic reached Australia and the dining scene shifted again. With diners now unable to physically dine out, many venues felt they had no other option but to switch on a home delivery service. This increase in demand encouraged immediate innovation, meaning that Australia has now seen a new wave of delivery services competing for a slice of the Deliveroo and UberEats pie.
For many restaurant owners, the size and reach of companies like UberEats and Deliveroo justify the 30 percent or more commission fee. Several restaurant owners expressed that they felt the higher turnover was worth the additional commission and that they view the extra costs the same as they would marketing expenses.
In addition, these larger companies often offer a range of included add-on items that companies want. For example, Deliveroo’s ‘onboarding services’ include a smart tablet, existing point of sale integration, food photography, regular menu updates and an account manager to assist with optimisation, marketing and industry best practices.
There are some mid-sized delivery companies who, thanks to COVID-19, are gaining more traction in the market.
Menulog is 100 percent Australian owned and has actually been around since 2006. Menulog began operations by offering ‘self delivery’, but in 2018 they launched a secondary business stream that included Menulog drivers.
Today, the company claims to service a whopping 92 percent of Australian delivery addresses.
DoorDash is America’s biggest food delivery service, which launched in Melbourne in late 2019 and expanded to Sydney shortly thereafter. Their model is a little different from the big players and Business Insider reports that, ‘As a restaurant owner you don’t need a signed contract with DoorDash for them to deliver your food. DoorDash will still work as a courier service and unless a restaurant explicitly asks DoorDash not to deliver their food, they will do so.’
As well as the bigger players, there’s been an influx of smaller, localised companies that offer a similar type of service, at around half the rate.
Love Local was launched in Sydney on 26 March 2020. Founder, Hamilton Kings, initially created the concept to help his Potts Point restaurant, Honkas, get food out to its customers. At the time of their launch, Kings had managed to sign two other restaurants to his app, and in less than two months, increased that count to over 20 restaurants.
Love Local charges 12 percent commission, including GST. Customers place with the restaurant via an app, after which a delivery driver employed by Love Local will collect the orders on an e-bike, and deliver those direct to the customer.
Due to the hyper-local nature of the service and others like it across Australia, this setup is only suitable for a small number of venues in specific areas and not always beneficial for companies in more regional areas.
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To combat this issue, some businesses have found success in a delivery service that controls the ordering process but has venues manage the deliveries themselves. This can be helpful for restaurants who have concerns about losing control of the product once it leaves their restaurant or, with COVID-19 turndowns, use their own ‘already employed’ staff.
HungryHungry is a platform which supports venues with the technological side of online ordering, whilst keeping the delivery logistics the owner’s responsibility. They offer a range of options for restaurants, designed to best suit their individual setup. These include online orders for customer pickup (in-store), drive up or contactless home delivery by the venue.
Milan Strbac, owner of Sugarcane restaurant in Coogee explained: “After COVID-19, I quickly realised we needed to do something to keep trading, so we started our own takeaway and delivery using the technology platform, HungryHungry. They had us up and running in 48 hours, which meant we didn’t have to use food delivery apps that were charging 35 percent commissions.”
Jamie Fleming of Alba Bar & Grill in Brisbane decided to use Bopple, a Brisbane based ordering program. Like HungryHungry, Bopple allowed the Alba team to deliver the products themselves, taking a flat 5.9 percent commission to manage the ordering process.
Emrys Jones of No. 5 Restaurant & Bar in Sydney felt that using two platforms and hiring a dedicated driver was the most beneficial option for their venue. They set up the self-delivery option on Menulog, which charges lower commissions but has a substantial customer base, as well as the cheaper option of Bopple.
Another similar ‘self-managed’ home delivery app, ParkCollect, avoids charging commission costs and instead, charges a flat monthly fee of just $19, with no limits on transactions or collective value. Owners set their own delivery charges, zones and times to ensure they protect their product, quality and bottom line.
“Restaurants generally run on very low margins so using a food delivery service that takes 30-35 percent commission would mean we would be better off keeping the doors shut,” said Strbac, reflecting the sentiment of many of restaurant owners.
“We control the delivery process and can ensure the highest quality of food arrival,” he said.
“I was already sceptical of delivery and takeaway so at least I know the food is arriving in the best possible way if it is me or my staff not an outsourced bike rider.”
It is interesting to note though, when asked whether opening up delivery had been beneficial to his company, Fleming of Alba Bar & Deli explained: “In hindsight, I do wonder if shutting down would have been better than trying to pivot to a delivery system, but only time will tell.”
One venue, confident in their choice not to offer delivery, is Dead Ringer in Sydney. Owner Rob Sloan explained that in Sydney’s saturated dining environment, their team did not want to erode their brand equity by offering a delivered product that they believed would be sub-par.
“We’ve never considered partnering with a delivery platform for our existing businesses, [even before COVID-19]. The service fees quoted by the big companies are simply unfeasible, and we refuse to compromise on the quality of our products to reduce food costs.”
Sloan, and many other ‘experience based’ or ‘fine dining’ venues share the same views and despite having to close down during the pandemic, have backed their decision to avoided offering home delivery all together.
Ultimately, the choice of whether to offer home delivery, and then which service to use comes down to the individual venue setup and what works for them.
Unfortunately, there is no singular success guide for venues when it comes to delivery. Each venue must consider their product offering, the style of customer they have and the facilities available to them.
Whatever the outcome, the inflated demand does work in the venue’s favour and it’s worth shopping around and understanding all of your options before signing on any dotted lines.