A Moe's Exec on 6 Common Off-Premises Pitfalls to Avoid

While the off-premises business is lucrative, it comes with a host of challenges. Restaurant operators have recently risen to the challenge of meeting changing consumer demands, keeping up with the competition, and adapting new technology—all while keeping business running smoothly within their four walls.

Here are six common pitfalls restaurant operators face when it comes to off-premise and how to avoid them.

Understanding your revenue channels

The key to being successful in off-premises is to understand how that segment of your business impacts and contributes to your bottom line. In fact, understanding all of your business’ revenue channels allows operators to make the best decisions, investments, etc. for your company. At Moe’s, aside from our in-store orders, we currently have three off-premises revenue channels: online ordering, catering and third-party delivery. Of those channels, we know that catering offers our largest profit margin; knowledge which has allowed for us to efficiently prioritize and scale that revenue stream so it could continue to positively impact our bottom line. It’s essential to understand which channels will make money in the long run and which will not. In contrast, third party delivery, while profitable, brings in our lowest profitability stream due to increased COGs, packaging and delivery fees associated with delivery. Understanding this has allowed us to prioritize our most popular items on our third-party menus, eliminating higher cost items to optimize profitability.

The fact is, off-premises dining isn’t going anywhere, so you should be allocating resources toward it. It’s important to note that this revenue stream may require upfront investment in infrastructure, labor and technology, but understanding the greater role it plays in your business’ bottom line will give you the upper hand, and over time, can bring in significant dollars.

Moe's Southwest Grill

Customizing menus

The number-one complaint among off-premise dining customers is that their order is incorrect. It’s perfectly acceptable—and oftentimes recommended—to pare down menus for catering, online ordering and third-party delivery. Having differentiated, simplified menus for each off-premises channel minimizes the margin for error and most of the time off-premises customers are actually looking for you to sell them the peace of mind that their order will be accurate versus the food itself. Understanding this, customers typically don’t mind the limited offerings and your restaurant will reap the rewards of repeat business if customers’ orders are accurate each and every time.

Cost-benefit analysis

With DoorDash now valued at $12.6 billion, and several others that are high-profile IPO prospects, third-party delivery is here to stay—and restaurants need to start looking at vendor partners if they haven’t already. While many operators claim commissions paid to third-party delivery partners are expensive and unnecessary, the cost of handling delivery in-house can be even more expensive when you consider the liability of drivers and vehicles. At Moe’s, we believe executing delivery using third-party is much more profitable and we’re sticking to it.

Fulfillment and execution

Off-premises customers are looking for convenience, and most are willing to pay higher prices in delivery fees for that convenience. The trend is now shifting to where restaurants are getting less and less advanced notice for fulfillment orders, which can end up disrupting the in-store experience. (Think of online ordering where customers can pick up an order within 15 minutes of placing it.) While some online orders are small and will be quick to fill, other large orders—like those made for catering, which is, on average, for groups of 10 or more—can take much more time. From an operational perspective, many concepts are now integrating a designated space for online and third-party delivery orders into their restaurant designs, as well as having dedicated staff to work that part of the business.

Another thing to consider is owning the delivery experience through your own channels. Online vendors like OLO offer “dispatch” services where customers can come through one of the brand’s channels, like Moe’s mobile app, to place their order. From there, we can dispatch one of our third-party delivery vendors that is either most cost-effective for us or will be the quickest for our customers. Typically, our core customers use our mobile app, so utilizing a dispatch process for delivery allows us to more closely maintain that relationship. This is key to self-sustainability and long-term profitability.

It’s in a restaurant’s best interest to do as much as they can to streamline operations. At the end of the day, third-party delivery vendors own the business, but the restaurant owns the customer relationship and experience.

Streamlining integration

Operators should look to find ways to further streamline off-premises with their existing operations and improve crew member ergonomics. For example, if you utilize tablets for off-premises orders, the dinging notification of new orders, and more importantly the interruption that could be caused to an in-store guest if they have to wait for that online order to be prepared, could be disruptive to that in-store guest’s experience. You want to make sure that in the midst of integrating off-premises channels into your current business model, you’re being mindful of your existing customer base. To combat the issues we were having, we’ve been working to integrate our third-party delivery partners into our POS system, so we can remove the tablets and not take our focus away from our in-store guests. We’re also looking at expanding the number of locations that have a second line designated for online and third-party delivery orders to separate them from in-store orders, as well as installing a KDS screen above our second line to improve throughput and order accuracy

Working with the right partners

Customers typically have 1.2 delivery apps on their phones, meaning they usually have their go-to app that they always use and might have one or two others. Having more delivery partners allows restaurants to reach more people, so operators should find as many verified partners to work with as they can. Having one partner is good, two is great, and three is best. Brands that have exclusive contracts are beginning to reconsider. And, remember, commission fees can be negotiated down while menu pricing can be increased. Find partners willing to work with you and that will positively impact your off-premises business.

Tad Low is Senior Director of Marketing, Field and Off-Premise, for Moe’s Southwest Grill, a fast casual restaurant franchise serving high quality and fresh Southwestern food. Moe’s has more than 700 franchised locations across the U.S.