Third-Party Delivery Apps: Are They Helping or Hurting Your Restaurant's Bottom Line?
The rise of third-party delivery apps like DoorDash, GrubHub, and UberEats has been transformative for the restaurant industry. While these platforms can boost visibility and sales, they come with financial and operational considerations that every restaurant owner should weigh carefully. As accountants specializing in the restaurant industry, we at ACE’d Accounting Solutions understand the financial intricacies of these partnerships. Here’s a breakdown of the pros, cons, and key financial factors to consider.
The Pros: Revenue Opportunities
1. Expanded Customer Reach
Third-party apps bring your restaurant to customers who might not have discovered you otherwise. For restaurants in competitive areas, this increased visibility can drive sales, especially during off-peak hours.
2. Incremental Revenue
These platforms provide a low-barrier way to generate additional income, particularly for restaurants without the resources to develop their own delivery infrastructure.
3. Marketing and Data Insights
Delivery platforms offer built-in marketing tools and valuable analytics. You can use this data to identify popular menu items, peak ordering times, and customer demographics to inform broader business strategies.
The Cons: Financial and Operational Challenges
1. High Commission Fees
Delivery apps charge commissions ranging from 15% to 30% per order. This can significantly impact your profit margins, particularly if your pricing strategy doesn’t account for these costs. Understanding how these fees affect your bottom line is essential before signing up.
2. Loss of Control Over Customer Experience
The delivery process is in the hands of the app, not your team. Issues like delayed deliveries or incorrect orders could harm your restaurant’s reputation, even though they are beyond your control.
3. Reduced Customer Loyalty
When customers order through a third-party app, the platform—not your restaurant—owns the relationship. This limits your ability to build a loyal customer base and market directly to your patrons.
4. Operational Strain
Managing a surge in delivery orders, especially during peak dining hours, can stretch kitchen staff and compromise service quality for in-house guests.
Financial Considerations for Restaurant Owners
As accountants for the restaurant industry, we see the financial impact of third-party apps firsthand. Before deciding to partner with a platform, ask yourself:
Can my restaurant absorb the fees? Calculate whether your current profit margins can sustain commission fees without creating financial strain.
Should I adjust my pricing? Many restaurants increase menu prices on delivery platforms to offset costs. While this is a common practice, it requires careful pricing analysis to avoid alienating customers.
Will this improve my cash flow? Delivery apps often have payment delays or processing fees. Consider how this will affect your cash flow management.
Strategic Tips for Success
If you decide to partner with a delivery platform, these strategies can help maximize the benefits while minimizing the drawbacks:
Track Key Metrics: Monitor the revenue generated from delivery orders versus the associated costs. Tools like profit and loss statements, tailored for restaurant operations, can provide clarity.
Leverage Branding Opportunities: Use branded packaging and inserts to encourage direct orders through your website or phone. This reduces reliance on third-party apps over time.
Start Small: Begin with a limited menu or specific delivery hours to test demand and assess the financial impact without overcommitting.
How ACE’d Accounting Solutions Can Help
Navigating the complexities of third-party delivery apps requires more than a quick decision—it requires strategic financial planning. At ACE’d Accounting Solutions, we specialize in helping restaurants like yours understand the true costs and benefits of delivery platforms. We can:
Conduct a profitability analysis to determine whether delivery apps make sense for your business.
Provide cash flow management strategies to handle payment delays.
Offer advice on pricing adjustments and cost-saving opportunities.
By partnering with us, you’ll have a clear financial picture, allowing you to focus on what you do best—serving great food.
Conclusion
Third-party delivery apps can be a valuable tool for growth, but they aren’t a guaranteed win for every restaurant. Taking a strategic approach—one that includes a thorough financial analysis—ensures you’re making a decision that aligns with your restaurant’s goals.
Ready to dive deeper into the numbers? Contact us at ACE’d Accounting Solutions for expert accounting services tailored to the restaurant industry.
