Since COVID-19 began, 44% of casual dining restaurants said they’ve added delivery. Of these, 31% added third-party delivery while 21% added in-house delivery.
While third-party apps’ business more than doubled during the pandemic, more than half of consumers in the U.S. order directly from restaurants. That number may continue to rise.
We uncovered several reasons why consumers prefer ordering takeaway directly from restaurants and how that’s shaping restaurant tech.
Third-party Apps Expected to Reach $42 Billion in Revenue by 2025
Third-party food delivery apps like Grubhub, Postmates, and Uber Eats were popular even before the pandemic, and the risk of exposure to the virus that dining in posed increased customers’ reliance on delivery from their favorite casual dining restaurants. In the five-year period of 2015-2020, the revenue for U.S. food delivery apps surged 204%. In 2015, revenue was at $8.7 billion, and by 2020, it had risen to $26.5 billion.
Revenue for third-party delivery apps in the U.S. is expected to reach $42 billion by 2025. This rise in revenue is attributed to the app becoming more prevalent in cities that did not previously have access to these aggregate platforms or had a limited selection of restaurants on the apps.
Early on, Grubhub, which had acquired Seamless, dominated the market, but now DoorDash has the largest market share. However, customers’ use of these third-party apps is changing.
4 Reasons Why Customers Choose Restaurant-branded Apps
About two-thirds of customers ordering delivery say that their preference is to order their food directly from their selected restaurant. There are several distinct reasons for this.
Justice
For many consumers, it’s a matter of justice. They believe third-party apps’ practices to be predatory to both delivery drivers and restaurants, and so they choose to order directly from restaurants.
Up until July 2019, DoorDash was using the money customers entered as a tip to subsidize the base pay for their delivery workers. And, back in 2015, delivery drivers sued Yelp, the owner of the now-shuttered Eat24, because of accusations of tip theft. Even though most apps today are reported to pay drivers fairly, customers don’t trust that the tips they give through third-party apps will reach the right people.
Restaurant owners, meanwhile, are still hit with hefty fees from the apps. In 2020, one restaurant that said it lost money during the pandemic yet still paid $35,000 in delivery fees. The owners explained how these costs added up: 20% fee per order goes to Uber Eats, 20% to Postmates, 18% to Doordash, 18% to Caviar, 3% to Tock, and a flat fee of $119 per month for ChowNow. Another report indicated that the commission from restaurants is even higher at 30%.
Economics
Since some customers overlook restaurants they cannot find on aggregate apps, casual dining restaurants have found a way to stay on the apps without losing money: put the money back on the customer. Orders placed through third-party apps are significantly higher.
A study in 2020 found that Postmates charged 40.5% more than the restaurant list price, Doordash charged 32.8% more, Caviar charged 32.2% more, and Uber Eats charged 29.7% more.
Consequently, savvy shoppers are going straight to the source: the restaurants themselves.
Personalization
Part of the enjoyment of eating at a restaurant is the social experience, which includes being served by friendly hosts and wait staff instead of simply grabbing your food from an Automat. Although third-party apps offer convenience, they are highly depersonalized.
Upwards of 70% of customers of casual dining and quick-service restaurants (QSR) are willing to give their email addresses in return for personalized offers.
Experts say there are a few ways restaurants can create more personalized experiences for their customers. One such way is by delivering unique marketing content instead of the same ad sent multiple times. Another way is by sending messages that offer context, such as an organic call to action at the time of day a customer typically orders, instead of simply mentioning a dish without context and at a random time of day.
Brand Loyalty
While variety is the spice of life, deep down many people want to be Norm Peterson from Cheers. It’s not just that they want to go where everyone knows their name (personalization). They also want the comfort that comes from familiarity and investing their dining money in a restaurant (or bar) they genuinely enjoy and want to succeed.
Reliability in service and the cleanliness of the food is important. According to a recent study, 64% of customers are willing to pay a higher price at a restaurant they trust.
Restaurant Tech Trends to Watch
As customers turn back toward ordering directly from restaurants, technology aimed at the restaurant industry is on the rise.
Integrated Online Ordering
Restaurants that offer online ordering have 32% more sales than those that only take orders via telephone. Even before the pandemic, restaurants were reconsidering their point of sale (POS) architecture. Integrating the POS directly with an online ordering system simplifies processes.
Text Chatbots
Chatbots, a computer program that simulates conversation through text or text-to-speech, offers restaurants a level of personalization between human telephone conversation and clicking buttons on an app. Restaurants can use chatbots to keep their customers better engaged with their website or app.
Chatbots offer an extra layer of customer service. They can offer a friendly greeting to customers. As well, they can help customers select their meals and upsell them.
Restaurants can integrate chatbots with their social media pages as well, as Burger King has done.
Recommendation Engines
A study found that 73% of customers want to receive product recommendations based on their previous purchases.
Machine learning trains computer systems to analyze data patterns and anticipate users’ needs. AI helps to tailor recommendations to customers’ preferences.
Target uses AI to suggest similar products to what you’re searching for, Hulu uses AI to suggest other shows you may enjoy, and social media uses it to connect you with friends. Now, the restaurant industry is using recommendation engines to help you select your next meal.
Voice-enabled Technology
There will always be people who prefer to pick up their phones to place their orders for pickup or delivery. AI-enabled virtual assistants can help customers who place orders via telephone. This technology is helpful for busy restaurants that are short-staffed.
Today, many people are accustomed to asking Alexa, Siri, and other smart home voice assistants to pull up third-party delivery apps, restaurant websites, and restaurant telephone numbers. It’s only natural to extend this to the ordering process.
Voice-enabled devices offer hands-free ordering. This is helpful for multitaskers who do their ordering while driving or folding laundry. It also provides a hygienic solution to touchscreens. The quick-service restaurant industry is already using voice assistants for drive-thrus, but integrating it with mobile apps for food delivery has not yet been fully tapped.
More Restaurant Insights
- The Technology Pumping Out 50 Dumplings a Minute at Chinatown’s Oldest Restaurant
- After COVID-19, We Need to Bring Back the Automat
- Restaurants Innovate Amid COVID-19, Worker Shortages
