Every week I talk to small business owners who are either coming into business with a plan that relies on upscaling via a third-party online ordering platform; or coming out of business citing the added costs of a delivery platform as the tipping point of their insolvency.
The reality of today’s food and beverage hospitality industry is that profitability of 10% of revenue is often the best-case scenario for small businesses that are generating a turnover of below $1m per annum. This scenario also relies on an ever more elusive 10% rent to turnover benchmark being met.
“A lot of people don’t even realise their true margins on delivery,” Christopher Timm, Managing Director, Takeaway Solutions
So it is no wonder that when a similar business is now exposed to commissions of up to 35% for using a third-party online aggregator like Uber Eats, Menulog, Foodora and Deliveroo, that such a business is no longer sustainable.
For more information Ivan Brewer writes a compelling blog solving-online-ordering-dilemma Ivan Brewer, Managing Director, Restaurantology
Of course, each and every business is not one and the same; and there have been some successes where business owners have changed their business model to allow for an online ordering component to properly function. Innovators are:
Offering a specially designed takeaway menu that cannot be purchased on site which is quick to produce, can travel well and is priced accordingly to absorb added costs
Opening the kitchen outside of trading hours and operating as a takeaway/delivery only establishment when using the online ordering platforms
Setting up kitchens without a retail frontage so that they can absorb added costs and maximise takeaway, home delivery and even do functions (where the space permits)
If you are considering an online ordering platform it is essential that first you have an unequivocal understanding of your own business model and how utilising such a service will impact your business.
“when you do deliver food to people, include an offer so that if you order direct you save.” James Eling, Managing Director, Marketing 4 Restaurants
Relying on the performance of another platform will give a business owner no defence against potential price rises of said platform (such as muted courier price rises) so try to diversify where possible and include software that enables an in-house solution as well.