Is running your own delivery system actually cheaper?
I can see it being the case if you already have scale, but assuming deliveroo collects 1 billion in fees from 100 thousand restaurants, for an average restaurant, it's 10 thousand per year, that is not a lot of money for setting up a delivery system.
Provided, delivery being expensive is probably the reason most restaurants didn't offer that option before. And those who started off as delivery-first probably optimized their business to have the delivery cost in mind, like picking a cheaper location to save on rent (one of my favorite pizza place is in a shady back alley), reduce menu size to optimize kitchen efficiency, increase price to ensure profitability, etc.
For a dine-in focused restaurant to offer delivery option profitably, their incremental revenue needs to be greater than the incremental costs. If a restaurant is not operating at capacity, their incremental cost of more orders is low; if a restaurant needs to expand capacity to fulfill new online orders, then the math becomes more muddy, is it just hiring more kitchen staff? does it require more equipment? does it require more kitchen space or even a completely separate kitchen?
> Is running your own delivery system actually cheaper?
For two reasons: really not. Deliveroo barely promisses to make a profit and that’s with a lot of things for them.
1. It’s surprisingly complicated to run that kind of service. They key issue is schedule: sure, if you have a couple of cousins of yours on mopeds, that’s simple enough but that has no economies of scale. If you want to have 15 people, your sanity will be challenged whether you try to use pen, paper & text messages or dedicated scheduling tools.
2. Scale is everything. More specifically, if you deliver from one restaurant, half of the time, your riders are coming back empty. That really lowers your effectiveness. Deliveroo works by having many restaurants and many customers spread out so that a bike can pick up from a restaurant that is closer.
> If a restaurant is not operating at capacity, their incremental cost of more orders is low; if a restaurant needs to expand capacity to fulfill new online orders
Most restaurants can easily increase how many meals they serve if they know about it days ahead. The market for fast-order cooks and front-of-house personal is fairly liquid (shockingly so); tables not expandable especially at peak shift. A way you can see that is how enthusiastically restaurants expand their terrasse as soon as it’s possible — there’s never a second kitchen that opens in the back alley to match. Deliveries were leveraging existing capacity most of the time. “Dark kitchen” or delivery-only kitchens were suggested exclusively to be closer to customers.
I got to question this. For at least 30 years before these apps, pizza places and Chinese restaurants had figured out how to handle their own driver service. I think the apps want people to think that it’s. Or possible to handle your own delivery.
I'm not questioning that some restaurants do it. I’m not sure how it can be cheaper for a single-address restaurant to do it, compared to a pooled service. If half of your workforce is just driving back, that can’t be efficient.
I can see it being the case if you already have scale, but assuming deliveroo collects 1 billion in fees from 100 thousand restaurants, for an average restaurant, it's 10 thousand per year, that is not a lot of money for setting up a delivery system.
Provided, delivery being expensive is probably the reason most restaurants didn't offer that option before. And those who started off as delivery-first probably optimized their business to have the delivery cost in mind, like picking a cheaper location to save on rent (one of my favorite pizza place is in a shady back alley), reduce menu size to optimize kitchen efficiency, increase price to ensure profitability, etc.
For a dine-in focused restaurant to offer delivery option profitably, their incremental revenue needs to be greater than the incremental costs. If a restaurant is not operating at capacity, their incremental cost of more orders is low; if a restaurant needs to expand capacity to fulfill new online orders, then the math becomes more muddy, is it just hiring more kitchen staff? does it require more equipment? does it require more kitchen space or even a completely separate kitchen?