From deliveries and discounts to ratings and reservations, restaurants have fully embraced technology to acquire new customers and drive profits online. Perhaps that’s why Foodtech is now a $50 billion industry world-wide. However, it’s also a competitive, fast-paced environment, one that can make it difficult for restaurant owners and consumers alike to discern which tech companies do what at what cost. That’s why we’ve written up this helpful breakdown!
Orders & Deliveries Made Simple or Startling?
Perhaps the busiest corner of the Foodtech industry is the facilitation of deliveries from local restaurants online, often using third-party drivers. Chicago-based Grubhub and San Francisco-based Postmates are the industry leaders in this sector with scrappy start-ups like DoorDash providing consumers with cheaper delivery fees. Now, UberEats, Yelp’s Eat24, and Amazon Prime now have all entered the order/delivery space in a big way.
Regarding the cost to the consumer, DoorDash may appear to be the cheapest option with delivery fees as low as one dollar, but there are claims that DoorDash has increased prices. So a $10 entree at a restaurant may appear on the restaurant’s DoorDash menu for $15 without any note acknowledging the mark-up. This has left many of its’ users feeling deceived, which has led to poor DoorDash customer reviews. Users of Yelp’s Eat24 have reported similar menu price inflation issues.
Are Restaurants Paying More Than They Have To?
Grubhub and Postmates commission the restaurants per order; Postmates restaurant fee is roughly 10% while Grubhub’s baseline fee is 13.5%. Grubhub in particular has been known to increase their commission rate once a restaurant reaches a certain sales number, so restaurant owners should factor this into their decision when considering which service to use. GrubHub is the industry leader regarding market share, while Postmates facilitates the delivery of non-food items as well.
So what about the big boys, the iconoclasts of technology? If restaurants want access to their enormous customer base (Amazon Prime has 20 million members alone), they’ll have to pay and pay dearly. Amazon Prime’s delivery fee is eight dollars with a $20 minimum order, making them the most expensive delivery service for consumers by a considerable margin. They also charge restaurants a whopping 27% commission. UberEats is even more expensive for restaurants, taking a thirty percent commission on every order! Given their exorbitant commission fees, the profit margins for restaurants will be razor thin when using these services despite the increased order/delivery volume online.
Discounts Should Help Restaurants, Not Cost Them
The discount space for restaurants was dominated by services like Groupon and Living Social for years, but their pricing models ultimately proved to be a horrendous deal for business owners. On average, a restaurant loses anywhere from 50 cents to six dollars per customer on Groupon while seeing little quantifiable return business. The discounts offered by restaurants on Groupon are also contractually locked-in, meaning a restaurant can’t pull out of a deal once the Groupon sale commences despite any number of mitigating circumstances. Consumers who fail to redeem their Groupon vouchers are also unable to get a refund.
How Restaurants Are Getting Smarter Now
Several companies have sought to fill this gap in the discount space, led by Forkspot. Forkspot’s discounts are entirely percentage-based (most in the 10–15% range) with the discounts represented by color-coded flags on the app’s proximity map. Forkspot then uses a beacon installed within the restaurant to ping the users’ phones with the discount once they enter the premises. Restaurants can add, remove or amend discounts in real-time and see up-to-the-minute analytics, while the app is free for users.