July 31, 2023

In-House Versus Third-Party Delivery Services for Restaurants

As the demand for food delivery continues to grow within the restaurant industry, many eateries face a crucial decision of whether to employ a third-party delivery service or operate their own in-house delivery. This choice can significantly impact their operation workflows, customer experience, and ultimately, their profit margin. In this article, we’ll dive deep into the world of in-house versus third-party delivery services to help you get a full picture before deciding the right delivery option for your restaurant. 

Advantages of third-party delivery services

Expand brand exposure

Choosing to partner with popular third-party delivery service platforms can significantly increase your restaurant’s visibility and foster business growth. These platforms have loyal users, and your connection with them helps introduce your culinary offerings to a broader audience. Being listed on these apps can work wonders for your reach without draining your marketing budget. Moreover, joining these platforms can be hassle-free and require little to no upfront investment while offering access to a ready-made infrastructure, including couriers, packaging materials, and secure payment methods. 

Automate the food delivery process

Third-party delivery services have simplified the delivery process for restaurateurs and customers alike. By simply signing up, you delegate the management of delivery logistics, from drivers to customer service, to the third-party platform. This strategy can free up your time and resources for daily restaurant operations.

Focus on central aspects of your business

Outsourcing delivery can allow you to concentrate on what truly matters – preparing delicious food. Instead of diverting resources and attention towards managing a delivery service, third-party platforms allow you to invest your energy in perfecting your culinary experience.

Disadvantages of third-party delivery services

Pay more commission fees

One major disadvantage of third-party delivery services are the huge commission fees, which can severely impact profits. Depending on the delivery service, you may end up paying 20-30% of each order value in fees. Although the service does provide an established infrastructure, it’s essential to carefully evaluate whether the increase in overall sales offsets costs.

Loss of customer control

When you outsource delivery, you lose direct communication with your customers. Maintaining a positive brand image and customer experience can become challenging as you have no control over the delivery process or any issues that may arise using it.

Fierce competition in the food delivery industry

Despite enhancing your restaurant’s visibility, third-party delivery service apps also introduce you to a larger pool of competitors. Your restaurant is listed alongside thousands of others, making it challenging for your business to stand out amidst the crowd.

Advantages of in-house delivery

Increase restaurant profit margin

Managing your own delivery service means keeping 100% of your delivery profits. This cost-saving aspect, particularly by avoiding commission fees, can be beneficial for smaller, local restaurants. Additionally, running your own delivery allows for quicker and easier updates of your online offerings, such as price and menu adjustments, as you don’t need to wait for platform approval.

More influence over the delivery experience

Taking charge of your delivery service can greatly enhance customer experience. You can hire your staff, set your business standards, and stay updated from order placement to delivery. With an in-house delivery system, you own complete control over menu changes, special promotions, and more. 

Leverage customer data to boost overall sales

Operating your delivery service means access to valuable customer data. This information can be used for retargeting and promoting loyalty with rewards programs to drive sales over time.

Disadvantages of in-house delivery

Extra costs of building in-house delivery infrastructure

Running your own delivery service means investing in the necessary infrastructure. This can include delivery vehicles, insurance, delivery personnel, and more, making it a significant initial and ongoing expense.

Management of delivery drivers & licences required

Managing your delivery service requires additional responsibilities, including obtaining the necessary licenses, training and overseeing staff, and ensuring seamless tech operations. Moreover, managing delivery drivers and tracking orders, especially during peak hours, can be a substantial undertaking.

Shrunk customer base

Choosing in-house delivery may limit your customer reach. While your existing clients might order directly from your app, expanding your reach may prove more difficult. The cost of marketing your in-house delivery service can potentially exceed the cost of joining a third-party platform.

Hybrid delivery approach – the best of both worlds

Many restaurants have started employing a hybrid model that combines both in-house and third-party delivery services. This approach can offer the broad reach and capacity of third-party platforms during busy times and the personal touch of in-house service for those who prefer to order directly. Choosing the most suitable delivery model for your restaurant should take into account your specific goals, size, and capital.

Choose the best for your restaurant

All in all, the choice between in-house and third-party delivery services is a significant decision that can greatly impact your restaurant’s operation and success. The best choice depends on your individual needs, resources, and the specific circumstances of your business. By understanding the pros and cons of each option, you can make an informed decision about the best way forward. Interested in launching your own cloud kitchen in Malaysia? Complete the form below or get in touch with us today.

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