Restaurants looked for ways to significantly adjust their health and safety standards and began adopting merchant technology solutions faster than ever as the COVID-19 pandemic hit. This change to operations quickly became a two-pronged requirement, as a shift in consumer preference meant guests sought out restaurants that were visibly taking precautions to protect staff and patrons.
This ultimately led to two swift outcomes.
Not every relationship should last.
The first was the rapid emergence of contactless technology in restaurants. As a direct result of the need for increased safety precautions, we saw the adoption of digital menus, digital ordering, and tap payments all from the customer’s smartphone.
The second was the reinforcing and accelerating of third-party delivery marketplaces. Food delivery appsdoubled their business after the start of COVID-19 as the platforms attracted struggling restaurants that were seeking solutions to balance the loss of in-house dining while also relying on them for deliveries. As the pandemic continued, the challenges that these third-party delivery apps caused restaurants were becoming clear..
Restaurants, with dining rooms closed, depended on off-prem to survive and struggled to make a profit; they were often forced to pay upwards of 25% in service fees.
On top of the delivery services they provide, third-party platforms also capture customer data but do not pass this onto restaurants. This means that while third-party apps were experiencing immense growth, restaurants were missing a real opportunity to create and grow customer loyalty. Without access to this data, restaurants were without a lifeline when it came to loyalty programs and meaningful connections with their customers, both to keep them informed, and eventually returning to their venues.
With restaurants operating at half capacity at the most, and with already razor-thin profit margins even before the pandemic, the third-party delivery business model is economically and structurally unfair. Not only was this already an onerous economic model, but it was finally being shown for what it is, a parasitic model for merchants.