January 1, 2017 |

Three’s a Crowd … or is it?

By Denise Greer


Third-party delivery hits main street America

delivery

Amazon and Uber have become big players in food delivery. In fact, the market is being flooded with third-party delivery startups. Do your due diligence to be sure a company delivering your product is representing your brand accurately.

Last fall, Technomic, Inc. released a study, “On Demand Delivery: Disrupting the Future of Foodservice,” and found that 76 percent of customers hold the restaurant partially responsible for errors, even if restaurants have formal agreements with third-party online and delivery companies.

“This puts operators’ brand reputation at risk each time a customer orders delivery through these services,” Melissa Wilson, a principal at Technomic Inc. says in the study release. “Even if delivery is not a current strategic initiative, operators should educate themselves about and understand the dynamics of the third-party delivery market so they can put guardrails in place to maintain quality and brand reputation.”

Third-party delivery has brought elation to some pizzeria operators and disdain to others. Tony Gemignani dedicated one of his Respecting the Craft columns in 2016 to detailing his admiration. He predicted that food-delivery services will replace in-house delivery altogether.

Ray VanMerrienboer of Red Zeppelin Pizza in Baton Rouge, Louisiana, and Domenick Montanile of Venezia’s New York Style Pizzeria in Phoenix, Arizona, have also found value in partnering with multiple third-party ordering and delivery services. On the other hand, Debbie Taranto, of Taranto’s Pizzeria in Lewis Center, Ohio, has encountered issues with unauthorized providers selling her product.

 

The Marketing Power of Third-party Delivery

Delivery service apps know search engine optimization (SEO). In some cases, they return higher in a Google search for a restaurant than the actual establishment’s Web site. Online giants like Google Maps and Facebook have even integrated third-party apps into their sites.

VanMerrienboer has capitalized on third-party’s online marketing savvy. He considers fees associated as marketing. (The commissions vary from company to company, he says, ranging from six percent to 35 percent.)

Red Zeppelin does not offer delivery, but it has a streamlined carryout operation that includes a drive-thru window. Partnering with Waitr, Takeout Express and Mr. Delivery has allowed VanMerrienboer to tap into a market the pizzeria is not currently serving. “If you are on the Waitr app and you are looking for seafood and you are scrolling on restaurants, you come across my restaurant. It helps actually market my brand to the customer who was not even looking for pizza.”

Outsourcing delivery is paying off for VanMerrienboer. “I will probably do about $120,000 just with Waitr in this first nine months of my business,” he says. “I don’t pay labor. I don’t have to deal with the customer being aggravated, calling me and asking ‘where is my pizza?’, because you get that through Waitr. All that and my liability and insurance, all of that is taken away. I couldn’t even pay six percent to handle all of that.”

If there is a delivery issue, customers work directly with the service provider to correct it. “It deflects a lot of the pressure off the restaurant in complaints because they really can’t be mad if they get a cold pizza now — because it’s not my fault,” VanMerrienboen says. “There is a buffer there that I really like.”

VanMerrienboer says calls from angry delivery customers are few. The challenge lies in tracking the sales coming from the service companies. Third-party orders come in via a tablet or phone and Red Zeppelin staff manually key orders into a POS system.

VanMerrienboer’s end-of-day reports only distinguish to-go from dine in. He must go into his client access of Waitr to view those sales.

Montanile feels VanMerrienboer’s pain as five-unit Venezia’s juggles orders from Eat24, GrubHub, DoorDash, EZ Cater and PostMates. He found a technical solution that bridges the gap between third-party orders and Venezia’s POS system.

“When you start doing any type of volume with any aggregators you must have a way for the orders to flow through your POS system to avoid errors and increased labor costs of having to manually enter all of these orders in,” Montanile says. “Instead of staffing an employee, we hired a company called Chowly, who takes the third-party order and codes it through our POS system seamlessly for a small fee.”

 

If you can’t beat them, join them.

Venezia’s leverages the efficiency and accuracy of its in-house delivery program by delivering orders from the third-party ordering apps, as well as allowing third parties like Door Dash to deliver Venezia’s pizza.

“Many people are finding third-party Web sites for delivery when they search on Google,” Montanile says. “If we don’t partner with some of these aggregator companies then we are losing out on revenue that may go to our competition. I feel it is a necessity for restaurants in order to stay with the times.”

Montanile advise to be selective when choosing partnerships. “My main considerations were how reputable the company was in business, assuring we would receive our weekly deposits consistently and the third party having a responsive call center for support when any challenges arise,” he says. “The only decision is commission as third-party sites are all over the board — 13- to 18-percent commission should be the break-even point for most restaurants.”

 

Operator beware

The new segment comes with its fair share of growing pains.

Last year, Taranto received a customer complaint only to find that the order came through a third-party provider on Yahoo that she did not authorize to sell her food. “I did a search of my restaurant via Yahoo and went to their page for my restaurant,” she says. “You see reviews, store hours, etc. There was also a link that said ‘order online’. I clicked it and it went to a site that was my menu but not my prices.”

She says that working with the

service to refund the customer and remove Taranto’s from the site was frustrating. Months later, her restaurant was back on the site. Her attorney sent the company a cease and desist to no avail.

“The customer thinks they are ordering from me, not a third party. (They think) that my restaurant has a contract or consent with this third party,” Taranto says. “It is my restaurant who is responsible for the food quality, correctness, and timeliness. And yet, these third-party companies and drivers are delivering for many different area restaurants. All control has been taken out of my hands.”

Taranto isn’t the only operator dealing with vendors selling products without consent. Some restaurants have resorted to posting disclaimers in their shops and on their Web sites warning customers that if they choose to order from a third party, the restaurant cannot guarantee the product quality, pricing or delivery timing will meet the standards of the restaurant.

Some companies have simple opt-out clauses while other required substantial steps and even legal action. In the past year, several restaurants have sued various third-party companies for trademark infringement and selling product without consent.

There are efforts within the restaurant industry to establish standards for third-party delivery services regarding food transport safety, liability, intellectual property and opt-out opportunities.

Denise Greer is associate editor of Pizza Today.

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