One of the worst kept secrets in the restaurant industry is that operators aren’t happy with third-party delivery services, even if they became a necessary part of doing business during the pandemic.
“Operators don’t like the fact that they don’t have control of third-party delivery,” says Larry Warshaw, litigation director at Intrepid Direct Insurance. “They don’t control the customer experience, or the data associated with the transaction. And because the costs of third-party delivery are so high, oftentimes it simply ends up not being profitable.”
The question of what is the most effective delivery system comes at a time when operators have many factors working against them in the quest to achieve profitability. The minimum wage might soon increase. Workers are staying home due to extended stimulus packages. Meanwhile, PPP loans will soon run out. And because delivery is expected to remain a preferred way of doing business, restaurants must make sure it becomes a profitable channel rather than a liability. Whether that means sticking with third-party delivery or switching to first-party delivery—or perhaps some hybrid program between the two—there are many considerations to factor in.
Here are four things to explore in regard to a delivery program, handpicked by delivery risk-management experts Intrepid Direct Insurance, a company that insures over 5,000 franchise restaurant locations.
1. Execute a Cost-Benefit Analysis
Even though third-party delivery can limit a restaurant’s profit, it may seem worth it when considering the time, cost, and risk of hiring, managing, and insuring a first-party delivery operation. The truth is, both options have pros and cons—it really comes down to how much control an operator wants over their business.
One successful trend for brands executing first-party delivery has been keeping a tight delivery radius. While restaurants always want to serve as many people as possible, the cost-benefit analysis of serving delivery to faraway customers is fairly straightforward, says Bill Strout, President of Intrepid Direct Insurance.
“Small territories matter,” Strout says. “You can better serve your loyal customers, your drivers are going to make more money, and they’re going to enjoy their jobs more. And just as important, it’s safer.”
2. Inspect Your Current Contracts
Sometimes the question of third- versus first-party delivery is out of the franchisee’s hands and controlled by the franchisor. If that’s the case, Strout strongly recommends that franchisees inspect the contracts they hold with third-party delivery aggregators to see what, exactly, they are liable for, and what insurance is required. He says operators might be surprised to find out they could be on the hook if something were to ever happen during a third-party delivery.
3. Implement Telematics
Telematics is a relatively new technology that is making a first-party delivery program attainable, even if resources like time, people, or money are tight. Telematics measures how safely drivers are operating their automobiles, monitoring things like if a driver is speeding, or slamming on the brakes. Telematics can even determine whether someone on a delivery team is texting while driving, and all of this leads to a safer delivery program.
“Telematics is having a fascinating impact on the industry,” Warshaw says. “It gives a line of sight for managers into what their drivers are doing once they leave the parking lot. It’s amazing how much safer drivers are when they know it’s something that is being tracked. Employees appreciate the investment in their safety and owners can mitigate the risk of expensive lawsuits and insurance rate hikes as a result of crashes and claims.”
4. Team Up With Experts
Because Intrepid Direct Insurance works with thousands of stores that use both first- and third-party delivery, they can help store owners work through the pros and cons of each delivery option (or mix of options) for their business. They can then make sure your delivery program is properly insured, creating an asset rather than a liability.
“We offer insurance on both first- and third-party delivery,” Strout says. “But we also offer advice on best delivery practices and we have expertise in areas like telematics. We have a wealth of experience and knowledge about how to best protect yourself, because there’s a tremendous amount of risk if you aren’t properly protected.”
For more on which type of delivery is right for your brand or restaurant, call 877-249-7178 or visit info.intrepiddirect.com/4DeliveryTips.
By Charlie Pogacar