Tapping into the pros and cons of food aggregators and own platforms
Back in 2019, only 8% of all food service sales were made through delivery. Online food ordering was too casual, while dining out in a pleasant restaurant felt special and more like a festive occasion.
Self-isolation and the shutdowns of dine-in services made eating out impossible. Consumers were left with fewer options for managing their meals: either cooking themselves, or ordering food and groceries online. Reserving a table for a cozy get-together with friends or family was out of the question. Restaurants, cafes, small grocery stores, and other food locations that made money mainly from in-store purchases almost instantly lost their regular income and customers. On the other hand, those who relied on online food delivery started earning more.
The only way for traditional restaurants to stay afloat was online ordering. And the major challenge here was choosing, designing, and developing a food delivery platform to attract new customers and take online orders.
As of today, 61% of consumers get food takeout or delivery at least once a week, generating a total of $26.5 billion for the online food delivery industry. They do not plan to return to their pre-pandemic habits of dining in restaurants, which stresses the importance of an online presence for a restaurant. Be it a casual pizza takeout for a movie night, or a healthy dinner delivered to the doorstep, almost half of Americans rely on food delivery apps to provide meals for themselves or their households. And if your business is not in, it’s probably losing money.
There are different approaches to online ordering. You can follow the OhMyMilk dairy produce manufacturer model and launch a custom food delivery application to grow online sales by 150%, or do as the Foodeliny ghost kitchen chain did and create a kitchen management software that will speed up your workflow by 10%. Another option is to use retail software, like Pizzateca 9/8, who launched online orders with the Starter online ordering system and saw a 3x sales growth and a 19% decrease in delivery expenses in 3 months. Finally, a restaurant can sign up with a food aggregator to benefit from their vast user base and promotion tools and reach new customers.
Although all the options are great in reaching the end goal, they build on different strategies, and the trick lies in choosing the one that will promote maximum growth and pay-off at the restaurant’s current stage of development. Let us walk you through the pros and cons of working with food aggregators, and your own platform.
The biggest food aggregator apps in the U.S. are DoorDash, Uber Eats, and Grubhub with 59%, 24% and 13% of sales shares respectively. Food aggregators partner up with various restaurants and display them on their digital platforms for the hungry clients to choose and order from.
They also provide delivery staff that picks up the order from the restaurant and delivers it to the customer’s doorstep. For every completed order, the aggregator charges the restaurant a commission, so it is in its best interests to provide a rapid delivery and attract as many orders to their partner restaurant as possible.
All food aggregators already have a substantial base of diners who use their platforms to order food and beverages and discover new places. According to Statista, the number of such users will reach 80.6 million people in 2022 and grow to 110.8 million users by the year 2027.
Aggregators offer different plans and pricing. The restaurant can appear right on the home page to be the first thing the user sees when they open the mobile app or access the website, or just be one option in the search results. The more expensive the plan, the better degree of exposure and promotion the restaurant receives from its partner aggregator.
For instance, Señor G’s, a homemade Mexican food restaurant based in LA, used the DoorDash Storefront to boost online sales. During the pandemic, they ran 70% of business through the DoorDash app, and in February 2021, the restaurant received and completed 2,000 online orders.
Being present in an aggregator alone equals to promoting and advertising a restaurant, since it connects a business with a vast audience of interested clients. Restaurant owners can adjust their plans to receive assistance from a pro account advisor and get a better position in the search results. They can also run special promotions with an aggregator, which is easier and faster than setting up a campaign on one’s own.
Carolina Ale House received 57% of redemptions by new customers during a recent free-item promotion that they ran through Uber Eats. And an Uber Eats Loyalty Program that they recently launched secured 7,000 loyal customers in 3 months.
Food aggregators are very flexible in terms of delivery options. Depending on the needs and resources, a partner restaurant can employ its own delivery people and use the aggregator just for accepting orders, or vice versa, use an aggregator’s delivery staff while taking orders from its own platform.
Partnership with a food aggregator is a perfect opportunity to learn the ins and outs of managing deliveries and online orders. Restaurateurs and their staff can then use the skills and knowledge they gained from an aggregator to launch their own delivery service at a further growth stage.
For businesses that operate in a ghost kitchen format, working with a food aggregator will be a perfect option to connect more clients, grow orders, and not find oneself at a financial disadvantage at the end of the day. Food aggregators can charge up to 30% commission from one completed delivery. Given that a ghost kitchen does not spend money on waiters and front of house, it can very well invest into a good position on an aggregator’s platform.
Food aggregators make a profit by charging a restaurant and its customers a commission on each order they take and deliver. The prices and plans differ in terms of the visibility and marketing support provided by the aggregator. Lower-priced plans will include a higher delivery fee paid by the customer.
Regardless of the plan the restaurant chooses, it will have to pay a fixed fee for both delivery and pickup. The delivery fees range from 15 to 30%, the pickup—from 6 to 10%. It stops paying off in the number of new orders or attracted clients once the business has grown a loyal customer base and reached a sales plateau. To overcome this plateau and reach new heights, the restaurant eventually will have to consider launching their own platform.
Let’s imagine some restaurant partners up with Uber Eats and chooses a Plus Plan, which conditions it to pay a 25% fee for each delivery order made through its Uber Eats profile. According to the Toast data, the average restaurant revenue from digital orders in 2020 was $15,000 per month. Supposing that all online orders were delivery orders, the restaurant will have to pay a total of $3,750 commission fee to the aggregator alone just for being represented online.
Delivery service profit calculators, like this one from Grubhub, provide more custom estimations. They take into account specific figures and help outline how much a restaurant can potentially earn and spend while partnering with a food aggregator.
Food aggregators do not aim to wrap their partners’ businesses in eye-catching packaging or build on the brand’s signature style for better promotion. They help one restaurant as much as they help another, and in this race, one won’t be able to use a unique visual presentation as a competitive advantage.
Let’s look at Miss Lily’s, a lively and vibrant restaurant, offering a modern approach to classic Jamaican cuisine. Their website stresses the vivid Caribbean gist of the place with a bright color palette and original designs, while its bland Uber Profile completely omits this important visual constituent and shows only the menu items.
However, food aggregators can go beyond plain displays of menus and opening hours. On their app and website, Ginza Delivery houses about 50 different restaurants that belong to their holding.
The restaurants there are represented through an unconventional grid of different-sized product photos that bring focus to the food. Such creative freedom is not an option when one deals with regular food aggregators, as their regulations will limit all the ingenious design and marketing initiatives.
Food aggregators want to benefit from all their partners, that’s why they will not help one restaurant to outshine its competitors. Moreover, they actually place competing businesses right next to each other.
There is, of course, an option to choose a more expensive plan with better placement and higher search listing, but other players still will be dangerously close to one’s “Order” button. In such circumstances, one click can cost a restaurant a whole order.
The most detrimental thing that an aggregator does to a business is not sharing their customers’ data. At an earlier stage, a restaurant might not need to know the exact demographics of its client base, their personal preferences, and work schedules, but when one starts to think of running special promotions, targeted ads, or optimizing the restaurant’s overall business processes, this data becomes pivotal.
Not knowing the audience means being unable to bond with them through personalized offers. The aggregator keeps all this valuable information to itself, robbing the restaurant of the most potent and powerful instrument of growth.
Having its own platform allows the restaurant to keep its customer data and thus run more targeted and efficient marketing campaigns. If a restaurant knows that most of its online orders come from families with kids, it can tailor the menu and services to cater to this particular category, thus ensuring a stronger customer loyalty and more orders. Or, if a restaurant knows what other stores or businesses its clients support, it can partner up with them to run a joint promo campaign.
User data and direct communication channels with customers which come with having an own platform are an absolute must for any business that aims to scale and expand. Knowing the audience will ensure that one comes up with relevant offers, and having a direct communication channel will guarantee that these offers reach the target.
The development of one’s own digital platform is a long-term investment into the success of the business. Unlike with food aggregators, money spent on a custom app or website pays off in assets such as:
Owning a digital platform can draw not only new customers, but also new partners and business offers. A neat and efficient app or website is another signpost of a prospective business that is worth investing into. That is exactly the case of ZakaZaka, a food delivery startup. They developed a platform for taking online orders from multiple restaurants, and raised $1 million in a seed funding round.
In the end, having an own digital channel gives rise to limitless opportunities for growth and development, something that restaurants cannot obtain from third-party services.
Within their own platform, business owners are free to try out any creative ideas they come up with. This can range from using dazzling designs and animations to distinguish oneself from competitors, to implementing eccentric ideas and gauging unconventional marketing hypotheses.
The Urban Belly Website features a dynamic video background that tells the brand’s story and conveys its identity.
The Fat Choy Website implements original graphic illustrations to mark its distinct aesthetic and make it recognizable for its target audience.
The app or website in this case works as a safe playground where one can easily experiment with features and functionalities, and adjust them to satisfy specific business needs.
Sporting goods retailer Sportmaster went for a flexible website design. They implemented a block constructor that allows transforming the homepage design for sales and holiday seasons, and changing the layout to test new hypotheses and find patterns that result in most conversions.
Restaurant owners might be worried that the aggregators’ huge user base has gotten too comfy on their platforms and will not be willing to leave for another website or app. However, recent findings prove otherwise. A 2021 Statista report shows that 67% of consumers prefer using a restaurant’s own app or website when they order food delivery.
Whether it is due to a high delivery fee from the aggregators, the speed and quality of delivery, or a simple desire to support a restaurant directly, the number of Americans who prefer restaurants’ own delivery platforms in 2022 has grown to an estimated 117.7 million, and by the year 2027, it is predicted to increase to 157 million consumers.
In order to develop a food delivery app or website, one will have to invest from $200K to $400K and wait from 6 to 12 months before the new platform is ready to see the light of day. A restaurant will also have to think about launching a stable delivery service, be it its own team, which will require extra efforts, or a third-party staff.
“This time and money is a long-term investment that pays off in up to 3 years. Unlike the resources spent on aggregators, it will not trap your growth after some time, rather yield new opportunities for expanding and improving your business.”
Once a restaurant has released its app or website, it will have to inform its clientele, and encourage them to migrate to the new platform. That might require some extra advertising and promotion efforts on the restaurant’s side, for example, showing ads, or giving out leaflets or coupons with special offers leading to the new app or website.
This task gets easier if a restaurant has already established itself as a household name with a solid client base that will follow its brand to a new space and consciously seek contact.
In order to ensure that the new platform runs smoothly and accepts orders without interruptions, one will have to have some sort of maintenance for it. The costs of that vary depending on the platform’s complexity and the restaurant’s enthusiasm to keep it up-to-date. The restaurant can have either a whole in-house IT-department, or a single backup specialist keeping it in check.
Both aggregators and custom platforms have their advantages, the key difference lies in at what stage of growth you turn to them.
In the beginning, aggregators are great for attracting new customers and increasing visibility. They can be of much help to a restaurant that aims to start growing online and reaching new customers. However, they charge a significant fee, and at some point start hampering your growth by limiting your creativity. They also don’t share your user data with you, making it impossible to personalize the customer’s experience.
A custom platform is a better option for those who want to implement creative solutions and collect customer data for targeted marketing campaigns. This will require an investment of time and money. If you are not entirely sure which option to choose or would like to discuss the specifics of your case, drop us a line. We will help you find the best strategy for growing your business and support you throughout this journey.