Friend or Foe: Third-Party Delivery Systems

A host of new ordering platforms and food options are now available to consumers at the tap of a button. As UberEats, GrubHub, Caviar, DoorDash, PostMates, Amazon and others lookat getting their piece of the market, pizzeria operators are battling with a dilemma. Are these delivery services friend, foe or somewhere in between?

According to Jim Winship, Director of the UK’s Pizza and Pasta Association, the presence of third-party platforms (aggregators) has been both afriend and foe to the independents. “Although some independents resent the aggregators for the percentages they are charged, realistically they have given [independents]the means to compete in marketing terms with the big brands.There is, however, a concern that the aggregators are overtaking local reputations – although there are arguments both ways,” says Winship.

Members of the U.S. Pizza Team and Think Tank brought their opinions to the table on the pros and cons of using third-party delivery services.

Pro: Convenience

Having a way to scale delivery instantly based on how busy you are is a plus.

"[I had a] great experience with [DoorDash] when I was with Pizza My Heart. We were one of the first companies to pilot their fulfillment program where we could call them to pick up our in-house delivery orders when our delivery time got too long or when someone called from out of our range. It also allowed us to still have a “driver” when someone called in sick or no-showed." – Leah Scurto, San Francisco, CA, U.S. Pizza Team member and former Chef at Pizza My Heart

Con: Driver professionalism is out of your hands

Some pizza operatorshave been stung with negative experiences. The professionalism of the drivers is a huge concern, from how they dress to how they handle food.

“I had wanted to cancel with [a third-party service] for a whilebut was afraid of losing $500 a week in sales. Their drivers show up with curlers in their hair and wearing pajamas and flip flops, no hot bag … If you have a decent sit-down pizza place, you don't want these third-party drivers coming in with "JUICY" stamped on their butt.”– sparrowspizza,Think Tank member

“The drivers had no sense of food quality or customer service.On multiple occasions the driver showed up to the customer's house looking rough and in a van full of people.We would always ask to keep pizzas level, and one of the drivers went as far as to carrying it like a briefcase, causing the pizza to be destroyed! – Dan Uccello, Rockford, MI, U.S. Pizza Team member and Owner at Flo’s Pizza

Think Tank member d9phoenix points out that DoorDash[ers] wear a company shirt, and some even have heat bags. Uccello concedes some third-party companies are better than others. "We use a local company for the same services and have better luck with them as it’s mostly owner-operated.”

Pro: A replacement for expensive hourly drivers

Using third-party services, you could significantly reduce oreliminate your fleet of drivers.Certain states allow customer tips to offset the cost of delivery personnel;however, otherstatesrequire delivery drivers to get fullminimum wage. Labor cost is a concern for pizza operators.

"Connecticut only considers tipped employees [to be] servers andbartenders, period! Domino's took the case all the way to the Supreme Court and lost, so we are S.O.O.L. and will eventually be paying drivers $15 an hour.I suspect delivery charges willstart at $5 to offset some of these increases." -famousperry, Think Tank member

"I have to pay drivers $11.10 an hour, and that will be going up to $12 an hour next year." – Peneufeld, Think Tank member

Con: Cutting into profit margins

Some Think Tank members are fiercely opposed tothird-party services, concerned that pizza operators' profits willget eaten up.

"These companies are nothing but vampires. The rationale for a sit-down to go with them is that they produce incremental sales. If they were taking 5% for order referrals, that would be one thing, but 20-30% is just sucking the blood right out of you. If you are a DELCOand already set up to deliver, just up your marketing, focus on quality and service and move on." – bodegahwy, Think Tank moderator & member

"I had no idea, after almost 20 years of being one of the top 3 DELCOsin a major market (200,000-plus) that I would lose 60% of my business to third party delivery sites. We just need to do a better job and market more!" – Rtwpizza,Think Tank member

Some pizza makers offset the lossesby making their menu items more expensive when ordered through thirdparties. But they havemixed feelings about passing on the price increase to their customers.

Pro: Increases your pizzeria's visibility

Many third-party sites will help you create your own branded presence within their platform. Some even assist with professional photography.

"If your store doesn’t really have an online presence (online ordering,website), then it’s a good fit for you." – RobT, Think Tank member

Con: They could impact your digital presence

However, RobtT goes on to state: “Also, keep in mind, once you sign up with these companies, they take over your “place order” button on Facebook and Google. If you have your own online ordering site, I would stay away. “

Pro: They have made food delivery more popular with some customers

With so many types of restaurants now available by delivery, the delivery market as a whole has gotten larger. Pizzapiratesapp points out that this has lowered the cost of non-owned delivery insurance.Additionally, consumers are getting used to delivery fees.

“I guess the silver lining is that they condition the customer to accept the cost of delivery." – bodegahwy, Think Tank moderator & member

Conclusion

Third party delivery services can offer a lot in terms of convenience, visibility, incremental sales and labor costs for in-house drivers. Some tradeoffs includeless control of your drivers' appearance and performance,higher prices for your menu items, and costs to compensate thecompanies providing the services.

So much depends on your type of operation and the particular service you go with. Derrick Tung, U.S. Pizza Team member andowner of Paulie Gee’s Logan Square in Chicagogives this advice: "Knowing who has market dominance in your area helps your ability to negotiate, and you also need to knowtheir customer base stats to make sure you're targeting the right crowd."