Third-party platforms may have buoyed operators during the pandemic, but it’s no secret that it’s come at a cost. With fees that slash restaurant profits, platforms like DoorDash and Uber Eats have become a necessary headache for many restaurants.
According to a survey by the National Restaurant Association, 70 percent of operators say off-premises sales represent a higher proportion of their total business compared to pre-coronavirus levels. While some cities, like Philadelphia, New York, and Chicago, have capped commissions a third-party platform can take during the pandemic, most other restaurants have been left to figure out how to balance this crush of third-party business while still making money at the end of the day.
Now a wave of new tech solutions and entrepreneurs are stepping up with alternatives for the restaurant industry that could help them be less reliant on the major third-party services.
One such company is Lunchbox. Nabeel Alamgir, CEO and cofounder of the digital ordering startup, started the company in 2019 as an alternative to third-party platforms. The brand operates by working with restaurants to develop their own ordering platforms through software as a service (saas) software. Through Lunchbox, restaurants can develop first-party ordering products such as websites, apps, and phone ordering systems.
Originally, Alamgir created Lunchbox as a way for restaurants to tell their stories. The pricing structure was simple as a monthly fee for SaaS upkeep. But the efforts resulted in quantitative changes to clients’ sales. In the case of Bareburger, where Alamgir was formerly CMO, the veggie burger chain managed to go from controlling 14 percent of digital transactions in 2018 to over 50 percent two years later with the help of Lunchbox.
The problem with the relationship between third-party platforms and restaurants, Alamgir says, is the way those services facilitate repeat purchases on their own territory, rather than bringing restaurants direct customer engagement.
“They’re a necessary evil, and it’s not their fault. It’s our fault for not using them properly. They were supposed to be a Discovery Channel, a channel where we get customers to introduce our brand, and then we connect with those customers directly,” Alamgir says. “Where they did wrong by us is they did not share contacts of our customers, so we don’t know how to connect with them.”
Blizzfull is similarly trying to help restaurants reclaim their off-premises orders. CEO Adam Dougherty says that while Blizzfull creates first-party ordering channels for operators, he anticipates a future where first-party technology coexists alongside the third parties.
“Most restaurants are going to still be relying on Grubhub because they’re fighting a very hard battle. You’re fighting against billion-, trillion-dollar companies,” Dougherty says. “[Third-party platforms] will have their customer bases no matter what you do as a restaurant. And so it’s your decision as a restaurant: Do I want to take part in that customer base?”
Like Alamgir, Dougherty says third-party platforms are a valuable way to expose customers to restaurants. But for Dougherty, restaurants play an active role in driving consumers away from third-party platforms. A common mistake he sees among his clients are restaurant websites that lead to third-party ordering platforms. Not only does this take away revenue, but it also puts customers and their data in another company’s hands.
Retaining guests and their valuable data won’t be too difficult, he says, when customers realize they’re paying a significant amount more for a burger on a third-party platform than directly on a restaurant’s website. Operators should consider promoting their first-party platforms by doing something like dropping a flier into every delivery order with a coupon code that only works when ordering from the restaurant’s own platform. “The name of the game is to provide a high-end premium experience to your customers as a restaurant that is competitive with the experience that they would get through Grubhub or DoorDash or Postmates,” Dougherty says, “so that it’s not a hard sell at a restaurant to convince those new customers to order through your website directly.”
Whether restaurants should actively work alongside or against third-party companies may be up for debate, but both Alamgir and Dougherty believe these services have a role in foodservice’s future. In the meantime, their businesses are doing what they can to present alternatives to restaurants so that operators feel like they have some choices for their ordering platforms.
This year, Lunchbox will release a free version for restaurateurs as a way to respond to those who need it most. In the same way, Blizzfull is moving away from a flat monthly fee to a new pricing model that offers restaurants the tools to develop first-party online services at no cost. Dougherty points to Google Suite as an example of Blizzfull’s approach to this pricing model, in which Gmail is free but requires money for more premium services. Not all restaurants will be willing to navigate the complexities of setting up their own first-party platforms, even if the tools are available. That’s where services like Blizzfull can make revenue, by charging restaurants for additional services.
Whereas Google realized email’s potential in becoming a way of life, Dougherty says first-party ordering technologies will be going in the same direction.
“The third-party platforms are going to be doing their own thing and potentially cannibalizing each other with buying out each other, ghost kitchens, and high commissions or reduced commissions. That’s like a different world as far as we’re concerned,” he says. “We let those people do what they want to do. We’re here to service the restaurants.”