With in-house delivery, restaurants follow the traditional pizza delivery model in which they hire and manage their own fleet of drivers. “The pros,” Lybeer says, “are that you can manage the drivers, control the customer experience with your brand and avoid third-party fees. And, if you have high enough volume, this is probably the most cost-effective option.”
Restaurants can also keep orders in-house without paying third-party delivery fees while gathering their own data for guest loyalty and marketing through their own websites.
Yet, there are also cons to this approach. For brands without high delivery volume, maintaining a fleet of drivers and insurance may be prohibitively expensive, Lybeer says. It can also be an inefficient use of labor if a restaurant’s volume is somewhat unpredictable.
“This can be a real challenge, because not a lot of restaurants have constant volume, especially on weekdays,” Lybeer says. “This model works best for restaurants with a steady high volume of delivery orders.”
2. Third-Party Delivery
The well-known alternative to managing a delivery team in-house is third-party delivery. Not only does it relieve the burden of hiring and managing staff, but it’s also a good option for low-volume restaurants, since paying third-party delivery fees can be less expensive than maintaining a fleet of drivers.
“The downside is that your drivers don’t represent your brand—they are neutral at best, since you have no control over that person or that experience,” Lybeer says. “It can also be significantly more expensive per order, since delivery partners charge fees, which can hurt more on smaller orders, but it’s often cheaper than hiring employees if you only have three–four delivery orders per night.”
3. Hybrid Delivery
Contrary to popular belief, there is an alternative to the first two methods: a hybrid model. This method allows operators to hire their own staff for the bulk of their deliveries, but to also use third parties for some orders. By taking orders on their own websites and fulfilling the bulk of orders themselves, restaurants can reduce fees and better manage the experience while maintaining flexibility when they need it, such as if a driver calls in sick. Meanwhile, if a restaurant is overwhelmed with in-house and first-party orders, third-party delivery can be throttled to allow for additional time for the kitchen staff to catch up. Another angle here is to use in-house delivery on busy nights, perhaps Thursday through Sunday, and use third parties on slow nights.
Brad Eaton, president of franchise operations and development at the St. Louis-based hand-crafted calzone chain Sauce on the Side says the brand uses this model at all ten of its restaurants. Though Sauce on the Side has maintained its own delivery team since it was founded in 2012, Eaton notes the brand and franchisees decided to accelerate delivery sales by implementing third-party delivery shortly before the pandemic began in 2020.
“Third-party delivery platforms have their own loyal subscriber bases, and we believe there is significant incrementality with each partner, meaning we’ll miss out on revenue if we don’t play on all of these platforms,” Eaton says. “I highly recommend a hybrid model to other operators, because while we still have our loyal fans that order through our site, third-party sites allow us to reach different customers who are ordering for different occasions. Instead of just catching dine-in at lunch, we’re also maximizing the capture rate of Friday evening diners who want to eat at home and have a phone in their hand.”
Another perk, Eaton says, will be the brand’s ability to offset labor challenges or capture elevated demand with delivery assistance from DoorDash and other delivery partners, using products such as DoorDash Drive.
“Many restaurants are unable to hire and train enough people in this environment, but these platforms will allow us to supplement our workforce, giving us a top-line revenue gain,” Eaton says. “We have also been able to use Revel Systems’ platform to integrate all of our native online ordering and third-party marketplace orders directly into the POS and seamlessly to the kitchen, while removing the complexity of order entry and delivery management from the restaurant. Our delivery drivers no longer have to print tickets and look for directions. It’s all there in the palm of their hands through Revel’s Delivery XT.”
Meanwhile, if the restaurant finds its dining room less busy than planned, Eaton says Sauce on the Side’s front-of-house team members can flex into delivery drivers so that the brand’s labor force is always deployed where it can be most effective.
“There are several misconceptions throughout the industry regarding delivery, which we’ve taken a counter approach to in order to grow the frequency of our customers’ visits,” Eaton says. “For example, many operators believe that third-party delivery is unprofitable, but fail to understand the value of growing sales to leverage fixed costs in the business or capitalizing on the growing demand for delivery and convenience. There is also a belief that self-delivery is too hard to manage, due to the complexities of logistics and staffing, or because of the cost of insurance, cars, and gas. I’d challenge operators to look at the break-even analysis to understand how many deliveries per day are required to create a profitable self-delivery model. If starting your own fleet, look for high mileage compact cars, or maybe even a gently used electric vehicle to offset gas prices. Foundationally speaking, Sauce on the Side attempts to navigate the labor inefficiencies or hiring challenges of other concepts by encouraging managers within the system to continually hire and train front of house team members, pay at or above market wages, and reward reliable team members with the opportunity to have the fun and fast-pace of delivering orders, and the extra tips. When delivery drivers aren’t delivering orders, they contribute equally inside the restaurant.”
Lybeer agrees with this assessment and has seen similar results while working with other restaurants.
“I believe the whole industry is moving toward a hybrid model,” Lybeer says. “The vast majority of restaurants are doing a bit of everything now anyway, from pickup and delivery to in-store dining and table service. Restaurants need as many revenue sources as possible post-pandemic, and we can help open those channels, because Revel is a full business management platform, not just a point of sale. We give restaurants the flexibility to do business in whatever ways work best for them, and each day of the week be optimized to drive revenue and profitability. The pandemic highlighted the fact that agility is business critical for restaurant operators. Platforms like Revel offer that agility, fully equipping operators to control their destinies.”
To learn more, visit the Revel Systems website.
By Peggy Carouthers