Dealing with the 'D' Word: How Independent Restaurants Navigate Third-party Delivery

Online and app-based delivery services are on every restaurateur's radar today, but are they impacting the bottom line as well? Consumer demand for delivery has created an intensely competitive field for third-party services like Doordash, Grubhub, Uber Eats, and others--plus regional services like Favor in Texas, or 919Dine in North Carolina, for example--vying for delivery dollars.

What does a restaurant owner have to gain by getting into the delivery game? For answers, we turned to Brooks Bassler, founder and owner of BB's, a "Tex-Orleans" concept with ten locations in the Houston area, and Christopher Saleh, VP of retail and marketing for Neomonde, a fast-casual Mediterranean restaurant and bakery with three locations in the Raleigh-Durham area. Both Bassler and Saleh are currently partnering with delivery services, but neither are reaping robust revenues from it yet.

Restaurateurs may feel compelled to participate or risk the foodservice equivalent of FOMO (Fear of Missing Out) on the supposed delivery dividends, but a third-party service takes, on average, about 25% to 30% of each delivery sale. Restaurants already operate on the thinnest of margins, with a 10% profit considered a financial home run, and the day-to-day reality is often less than that.

Given those slim parameters, what does a restaurant owner have to gain by getting into the delivery game?

Says Brooks Bassler, founder and owner of BB's "As a restaurant owner, the first question to ask is, can you negotiate that percentage taken by the third party for each delivery sale? Then, ask if delivery is truly incremental revenue. Delivery might make sense if your restaurant is busy every day, and you arrive at a breakeven point midway through the month, so you have financial leeway to participate. But if you're a startup restaurant struggling to get by, and breaking even is a best-case scenario, then delivery doesn't make any economic sense--the margins are too thin," says Bassler.