Third-party delivery can cut into profit margins. So what's the solution?

Third-party delivery isn’t optimal for every restaurant operator or franchisee. That’s what many restaurant leaders found out when the pandemic led to an explosion of off-premises ordering. 

There are a few pivotal drawbacks when it comes to third-party delivery. For one, the additional transaction fees can be a turn off for some customers. Equally important, restaurant operators cannot control the customer experience when diners order from a third-party app. Finally, third-party deliveries are a missed opportunity to market a brand—every time a Papa John’s delivery driver passes a consumer, for example, is another time a consumer is exposed to the brand. 

For these reasons, many operators have explored adding a first-party delivery program. Bringing the operation in house gives the restaurant more control over its deliveries and an opportunity to create a more profitable program. But implementing first-party delivery comes with its own set of challenges. Here’s a look at some of the challenges and how to overcome them. 

Finding and Retaining Drivers

Fewer young people are driving. According to the Federal Highway Commission, in 1980, about 80 percent of 18 year olds were active drivers. Forty years later, that figure had dropped to 60 percent. That, combined with the fact that new and used car prices have skyrocketed of late, means it’s harder than ever before to find and retain delivery drivers who will positively represent a restaurant brand. 

Larry Warshaw, director of risk management at Intrepid Direct Insurance, a direct-to-consumer insurance company, says that one of the best ways to find and retain good drivers is to train each driver thoroughly, and keep up ongoing education. He says that operators should add protocols and best practices that make drivers feel comfortable and safe at all times. 

“Many of the successful franchisees we work with say, ‘look, we want to get food to our customers quickly, but any time we have to make up, we’ll make it up inside of the store,’” Warshaw says. “You can’t try and make that time up by sending drivers out and asking them to hurry. The culture of safety starts with training and it continues with what gets rewarded—you have to reward the drivers who continually exhibit safe and efficient driving behaviors.”  

Expanding the culture of safety

But how do restaurant managers know how safe their drivers are once they leave the parking lot? That’s where telematics comes in: technology can now measure how fast delivery drivers are moving, or how hard they are braking, for example. The data can show which drivers are safe and which ones might be accident prone. In a word, telematics provides visibility to the restaurant operator. 

“Telematics has become ubiquitous in the delivery space,” says Steve Nash, sales director at Intrepid Direct Insurance. “Not just in food delivery, but Amazon and other delivery companies are making sure their drivers are living the safety culture that the enterprise wants them to.” 

Warshaw relays that some restaurant operators worry telematics will be yet another hurdle they have to overcome when hiring delivery drivers. Will it feel too invasive to the average team member? Warshaw believes telematics often has the opposite effect, especially if operators can communicate that it’s for the driver’s safety rather than a surveillance tactic. 

“The truth of the matter is, once the safety culture is implemented, drivers begin to appreciate that their employer cares about their safety,” Warshaw says. “It becomes a positive rather than a negative. Plus, the drivers for whom telematics is a dealbreaker? You may not want them driving for you in the first place if they feel like they have something to hide.” 

Partnering with experts 

For many of the above reasons—and because delivering food is a complicated process that involves restaurant ownership taking on risks—those running a first-party delivery program have unique insurance needs. Because Intrepid Direct Insurance has spent years offering its operator clients subject matter expertise regarding delivery driver insurance policies, it believes it holds an edge over competitors. That, and the fact that Intrepid Direct Insurance bypasses the broker model, which can often be more cost efficient for the end user. 

“We are typically 10 to 20 percent cheaper than the average broker,” Nash says. “Our service model has a lot of built in efficiencies that end up helping out restaurant operators.”

“The other advantage we have is a bit more intangible, but no less important,” Warshaw says. “We live in this delivery restaurant space every single day. We understand the value and power of telematics. We live and breathe this stuff in a way that other carriers do not. We can help restaurant delivery programs be consistently safe and effective in a way that others simply cannot.” 

For more on first-party delivery insurance, visit the Intrepid Direct Insurance page

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