The Hidden Cost of the Third-Party Delivery Boom and How to Win
The rise of third-party delivery services reshapes QSR dynamics, challenging traditional customer loyalty.
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The article discusses the increasing reliance on third-party delivery services by QSR customers, significantly accelerated by the pandemic. With global online food delivery projected to reach $1.6 trillion by 2027, restaurants are urged to adapt to these changes amidst growing commission fees that can impact their margins. The dynamics of customer loyalty are shifting, with delivery platforms owning more of the customer relationship.
Why It Matters
This highlights potential pressures on franchisee unit economics due to high delivery commissions, signaling a need for strategic adaptations in service delivery. The competitive landscape is evolving, which may affect customer acquisition and retention strategies for franchisees.
The recent shift in consumer behavior regarding food purchases has led to a significant transformation in the Quick Service Restaurant (QSR) sector, particularly influenced by the rise of third-party delivery services such as DoorDash and Uber Eats. Previously, 30-40% of dining customers had moved to drive-thru options, a trend that accelerated during the COVID-19 pandemic. As a result, online food delivery has emerged as a substantial market, projected to reach $1.6 trillion globally by 2027, with nearly $500 billion coming from the U.S. alone and growing at an annual rate of 15%. This shift implies a pressing need for restaurant operators to engage in the delivery business to access a broader consumer base, as many customers now prefer delivery over traditional dining.
Nonetheless, this delivery boom comes at a cost. Restaurants face commission fees from delivery aggregators ranging from 20-30%, which can significantly impact their profitability. Customer loyalty is also a growing concern, as delivery platforms own the relationship with consumers, rather than individual restaurants. In response to increasing complaints about high fees, some cities have implemented commission caps during the pandemic, maintaining them at 15% per order.
