Restaurant Industry Insights

State of Third-Party Restaurant Delivery Services in 2024

Third-party delivery services are undoubtedly one of the greatest disruptors in the restaurant industry. What started in the 19th century with the first pizza delivery in Italy has transformed how and where people enjoy their meals and the restaurant industry’s landscape. In the 1950s, with the popularity of televisions rising and the use of cars surging, restaurants developed the delivery of the “television dinner.”

In the 1960s, Domino’s Pizza began offering pizzas to your door within 30 minutes or less. Then, in 1995, World Wide Waiter was born. This online restaurant delivery service worked with San Francisco Bay Area restaurants, delivering their food to homes and offices. As smartphones became more widely used in the 2000s, the concept of restaurant food delivery service took off.

The Challenges

Restaurant third-party food delivery is, undoubtedly, an in-demand service. But it’s proven a tough platform to make money on. Even DoorDash, the leader in the industry with a $48 billion market cap, posted a loss of $1.4 billion in its more recent financial year. 

A review by 34 hospitality analysts suggests the company may, however, be close to breaking even. To achieve this, they’re anticipating that DoorDash will grow 59% year-on-year and turn a profit of $441 million in 2025. Time will tell.

The challenge to the restaurant industry has always been the high commissions and the lack of control. When customers complain of an inaccurate order or a late delivery, they often place the blame on the restaurant, ultimately affecting the brand’s reputation.

A Delivery Service Going Under

The Street made a good point when it stated that food delivery is not proprietary. And, as more companies enter the fold, it becomes harder for all of them to make money. They refer to it as the self-serve-frozen yogurt phenomenon. It’s a concept that results in the first businesses seeing tremendous interest and profits until more people see the demand and open more of the same companies, ultimately overflowing the market.

Waitr started at McNeese State University in 2013 and became ASAP, a Lafayette-based food delivery service. The company listed on Nasdaq in 2018 and offered delivery in 22 states and 500 cities. On March 29, 2024, it ceased operations, and on April1, it filed an 8-K with the Securities and Exchange Commission, providing details on its shutdown.

Regulations Affecting the Industry

The Florida Senate passed a bill in early March regulating third-party delivery apps in an effort to protect consumers and businesses. This new bill would mandate that these delivery platforms receive consent from restaurants to arrange for food pickup. Should they want to be removed from their platform, they must comply within 10 days.

Additionally, it enhances transparency, requiring the services to disclose pricing, including the delivery fee, tax, and gratuity. It must also provide an estimated time of delivery before placing the order. 

Added transparency extends to the restaurant and food service, requiring the company to include upfront fees and commissions, platform policies, and insurance requirements in their partnership agreements. They must also open up access between customers and restaurants, enabling them to speak with each other during preparation and delivery. 

In New York, the minimum pay rate for app-based delivery workers rose to $19.56, effective immediately. This included the 2024 phased-in rate with an adjustment for inflation. Since the minimum pay rate increases for these delivery workers began in 2023, delivery service apps have paid $16.3 million more per week, an increase of 165%. Uber Eats, DoorDash, and Grubhub make up 95% of the market. 

Restaurants and Third-Party Apps

Third-party delivery services bring some significant benefits to the restaurant operator. These pros include a low barrier to entry, enabling them to accept orders quickly and efficiently. They also extend their reach with a built-in network. The meal delivery segment is estimated to reach over 192.6 million by 2028. These services may include menu development and, of course, the massive delivery driver pool. 

The disadvantage is the high fees, which can cut deeply into profits. These fees may range from 15 to 30%. Restaurants also lose control over the end-to-end customer experience and may find it more difficult to promote brand loyalty when integrating a third-party company.

As these challenges continue, so does the technology designed to support restaurants. These include online ordering platforms and delivery management systems that help streamline the process and integrate into your POS system. A Kitchen Display system can send orders directly to the kitchen, no matter their source, helping organize the system even further.

It’s clear that delivery will play a major role moving forward. To remain competitive, ensure your guests have the best experience possible, whether dining at home or in your restaurant.

FAQS

What percentage of people order food online?

In the U.S., almost 45% of restaurant customers used a food delivery app two to four times in September 2023. During this same period, about 77% of consumers reported ordering delivery.

Who is more likely to order meals online?

Millennials and those in the Gen Z crowd are most likely to order meals online. Over 60% of people 18 to 29 have used a restaurant delivery website or app service. That number trends down to 51% for those in the 30- to 44-year-old range.

 

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