With the growing reliance on takeout and delivery, restaurants faced two options: third-party delivery services or in-house delivery services. Many business owners opted for in-house delivery (first-party services) to cut costs and gain more control over their customer experience.
How the world eats has undergone a significant transformation in recent years, particularly in the realm of food delivery. The global food delivery market experienced tremendous growth since the pandemic, with its value exceeding $150 billion, marking a three-fold increase since 2017. This surge in food delivery can be attributed to the measures taken to curb the spread of the virus, such as the closure of in-house dining, which prompted a shift towards delivery and carry-out services. Consequently, restaurants found opportunities to optimize their operations by utilizing empty storefronts more efficiently and adapting to customers' preferred methods, including online ordering, delivery, and carry-out services. By embracing this transformation, restaurants aimed to enhance productivity and meet the changing demands of customers.
While third-party delivery services may bring new business and have established expertise, they often charge significant commission fees, and their rise to power hasn't been smooth. Several local governments, such as those in NYC and Chicago, have adopted fee caps that limit delivery fees of up to 30%, a decision Grubhub, DoorDash, and Uber have contested in court. Post-pandemic, third-party delivery giants have been charged with everything from violating anti-trust regulations to deception and unethical business practices.
In contrast, handling delivery in-house requires substantial initial investments yet offers the potential for higher profit margins in the long run. Moreover, restaurant owners largely fear losing control over the delivery experience, as negative delivery experiences reflect on the brand more often than the delivery service. The main challenges associated with in-house include the need for increased management and operational resources. Nevertheless, the benefits of control, personalized customer service, higher profit margins, and enhanced brand loyalty make in-house delivery an attractive option for restaurants seeking to deliver excellent customer service.
The emergence of attractive and user-friendly apps, along with tech-enabled driver networks and evolving consumer expectations, has led to the rapid growth of the ready-to-eat food delivery category in recent years. In this context, in-house delivery has become an appealing option for restaurants, offering more control, cost-effectiveness, and an improved customer experience. As the food delivery ecosystem continues to evolve, in-house delivery is expected to remain a prominent strategy for restaurants aiming to thrive in the competitive food delivery landscape.
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