There could be an entire chest full of gold waiting for you to discover, however, you have to make sure you don’t go bust while seeking it out. To prove my point, as I write this, I am mentally running through the eateries in my area that will deliver lunch to my desk. Delivery is not a new concept, however, the growing number of third party service agencies that can battle this beast for you is.
As a restaurant owner I can tell that I have already run cash flow projection models, expensed the labor, insurance, gas, customer and employee impact and of course food transportation logistics. I can tell you that since we (restauranteurs) often stand on a very thin line of profitability this revenue stream needs to be well researched. I am going to hit the high points and leave the localized details to you.
4 Steps to help you decide.
- Is there a need?
All things that are successful are created to fill a need. First you want to identify your customer base and potential customer base. If you can’t tell me who your customer is then this is a great place to start and not just for delivery but for your entire business and brand. Who is your customer and are barriers that are keeping them from coming in to your restaurant for a meal? Are you surrounded by busy professionals, students, or retirees? Some great apps to help you find this data include;
- ESRI by BAO: Get demographic information for a 1 mile radius around your establishment. The information is based on the most recent Census and even gives you restaurant and retail annual spend.
- Demographix by Sea Star Software, Inc.: The information is based on the most recent Census that gives you data for an area larger than a mile radius.
- Does your location work?
If you establish a potential customer base, you will need to assess the geographical plausibility of delivering to them. You will most likely already have an idea of where the customers are and how they get to your location. Is there an obstacle, like a river, lake or ten lane highway? Do you have parking or does your team ride a bike or walk to work? Are the customers located in a high security area that you cannot access? If you are not sure, then it may be a good idea to lace up your tennis shoes and do some exploring.
- Competitive analysis.
Find out who is already delivering in your area and use their business to do some of your R&D. There is no need to reinvent the wheel if another business has already found out how to go market. I would caution you to take the findings with a grain of salt. You will want to adopt what is working well and try to find out what is not. I would work to get the following questions answered and then find a way to differentiate yourself.
- What are the other businesses offering a full or limited menu?
- What type of packaging are they using?
- Are they busy during breakfast, lunch, dinner or late night?
- What hours and days do they offer delivery?
- Do they offer large platters?
- Are they adding any delivery or packaging expenses?
- How much business are they doing?
- Has their delivery offering decreased the traffic to their location?
- How are they staffing their location or are they outsourcing the task to a third party?
- How are they promoting the delivery service?
- Should you hire a third party or keep it in house?
3rd party delivery questions:
- What is the expense?
- How many delivery companies are in the area? Can you use all of them or do they require an exclusive?
- Does the company do advertising for the businesses they deliver for?
- If yes, how are they advertising to their customers?
- What are their hours/days of operation?
- What is their level of accuracy and are there customer reviews they can provide you?
- What is their return or error policy?
- Do they deliver drinks, utensils, condiments?
- Do they have equipment to maintain your products integrity?
- How do they communicate the orders to your business and how do they handle accounts payable and receivable?
In house delivery questions:
- Do you have enough staff to lose a body during peak serving times?
- Do they have reliable transportation?
- Are they trustworthy?
- How will you track their deliveries?
- What is the minimum dollar amount of the order to stay profitable?
- How will you pay for gas and insurance?
- What will you need to buy to keep up the integrity of your product?
- How will you charge the customers?
- What is your error or return policy?
- How will you market your service?
This may seem like a lot of hoops to jump through but believe me it is worth the time to get this right. It can mean more top line sales but at the end of the day if you aren’t making bottom line dollars it is not worth your time and energy.