- Ohio-based Rascal House has integrated in-house and third-party pizza delivery to offset high-volume demand and target different types of customers.
- Customers who are just visiting your town are more likely to order pizza through a third-party app, notes Rascal House president Niko Frangos.
By Caitlin Thompson
Pizzerias have been offering delivery for decades. With the rise of third-party delivery apps, restaurants in other segments have joined the delivery game, leaving some pizzerias wondering if they need to compete on those apps while also offering in-house delivery.
In some cases, it may be beneficial to offer both in-house and third-party delivery, especially when you are targeting different customers.
Rascal House, a five-unit pizza chain based in Cleveland, Ohio, has offered in-house delivery since its founding in 1980. Delivery has traditionally been about 40 to 60 percent of Rascal House’s sales, depending on location, and that has risen to 50 to 65 percent since the pandemic started.
While the chain has always offered delivery via in-house drivers, it started exploring third-party options about three years ago. Rascal House started with a test pilot program in one restaurant and then adopted it at other units.
“We primarily tried it to stay in sync with evolving technologies and to see how the platforms worked,” said Niko Frangos, president of Rascal House. “We realized there may be some advantage to working with the third-party delivery companies to offset some of our deliveries since we have such large volume.”
Rascal House has worked with all of the big third-party delivery companies, but the brand is currently primarily using DoorDash and UberEats. As the landscape evolves, Frangos said it can be worth trying new companies to see how they operate—as long as costs and operational issues are manageable.
“Once you have tried a few companies, you can boil it down to just a couple that bring the most traffic,” Frangos said. “When you work with more than about two companies, it becomes a hassle managing, reconciling and juggling the various platforms. There are layers to it, so you have to work out the cost-benefit ratio of having multiple options to find the sweet spot for the most value to your restaurant.”
Adding third-party delivery does require some setup at the beginning. You must install the equipment, train team members on how to use it and update operations to account for third-party orders and pickup.
“It’s more than just plugging in and getting orders,” Frangos said. “Whenever you add something new to the equation, it has its operations-side challenges for training and getting the orders coordinated with your existing systems.”
Frangos recommended putting processes in place to make sure you capture orders correctly and account for potential user error if your employees are manually inputting the orders into your POS system. There is also reconciliation on the accounting side to make sure the numbers are lining up in both places. Third-party services aren’t free, so it’s important to figure out how you are going to reconcile your sales and look at the fee structure closely.
Owners also need to consider their priorities after they add third-party delivery as it adds more moving parts.
“Sometimes a third-party driver will show up at the restaurant right after you accept the order, so you have to think about the priority of the business,” Frangos said. “Is it to hurry for the DoorDash order because he is already there? Is it to take care of orders in the order they were received? It’s best to figure out those priorities ahead of time instead of through trial by fire.”
The advantage of third-party delivery depends on the brand. If a pizzeria doesn’t offer delivery, it’s a new way to reach your customers and adds incremental sales. It can also offer cash flow if you need it. But it does come at a higher price. Before any restaurant adds third-party delivery, Frangos said they should understand their numbers and cost. The sales are less profitable, so it is possible to make little to no money.
“For Rascal House, it boils down to customers that are transient,” Frangos said. “For customers that aren’t regularly in your area, they’re looking at third-party apps. If you aren’t on the app and that’s the only way they are going to order, you have 100 percent chance of losing that sale. If you are on the app, you have an opportunity.”
Frangos recommends watching your orders and understanding if and when the third-party delivery platforms are actually taking away customers that previously ordered from you and are now using the third party.
“If you are a delivery business and you are doing a lot of DoorDash orders to people that live down the street, you’re doing something wrong,” Frangos said. “It’s much more profitable for the restaurant—and more reasonable for the customer—to order directly through your restaurant and forgo the third-party app.”
Adding third-party delivery takes away some of the restaurant’s control over how their product gets to the customer. Frangos advised making sure bags are sealed so customers know that drivers didn’t tamper with the food. It’s important to put some controls around your image, too, including messaging to customers on how to reach you directly if they have an issue from a third-party service.
With the rise of third-party delivery apps, the process of hiring reliable drivers has also become more of a challenge. The apps add deliveries and sales to restaurants, but they also drain a lot of the potential driver pool. Frangos said marketing to potential drivers is important.
“We have high-volume operations, high hourly pay and tips, so we focus on communicating that to find good drivers and create awareness around our opportunity in the delivery space,” Frangos said. “Some of our drivers are making $30,000 to $50,000 a year, so our model offers better driver retention. With the larger-sized catering orders that we receive, drivers are getting a lot bigger tips than with the smaller orders.”
Frangos recommends investing in your own employees, drivers and marketing first.
“You have to weigh adding third-party delivery for what you are going after,” Frangos said. “If you are going after a customer you don’t normally have, then you should seriously consider it. But if you are using it to go after a customer you can serve anyway, think long and hard about why you can’t serve them without a third-party app.”