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01/26/2021

Restaurants: Is It Time to Divorce Your Third-Party Delivery Platforms?

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 apps doubled 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.

 

New Year, New Freedom

Stepping into 2021, restaurants need to take control of their own businesses in order to survive. If restaurants want to make it through another unpredictable year, they need to own and control their customer experience.

In order to do this, restaurants need to implement technology that not only improves the customer experience, but also captures customer data that can be used to fuel the growth of the restaurant. In short, a direct connection to their guests, that brings them long-term value.

Being able to harness and own unique customer data allows restaurants to introduce their own rewards programs which not only strengthens customer loyalty but ties off-premise and on-premise interactions into one customer lens.

This doesn’t mean that restaurants are building technology from the ground up; technology like this already exists. And it is no longer a matter of introducing guests to the concept of contactless technology, as a direct result of the pandemic, they have now come to expect it in their dining experience. A significant advantage for venues looking to radically streamline operations with the use of technology. The modern dining experience is digital, and the adoption of 100% contactless technology is a critical tool on the road to transformation for the hospitality industry as a whole.

It's now time to think about a digital interface as key to the guest experience.

We’re already seeing a demand among restaurants for tech solutions that minimize customer touchpoints and maximize customer experience. As vaccines are rolled out and restaurants return to normal, there are many unknowns on how guests and staff will adapt. It’s important to have flexible, multiple-use technology to support multiple restaurant service models as restrictions and mandates continue to be in flux.

Having this technology in place, restaurants can finally establish their own e-commerce channels that own the customer experience. Once in place, they can then use the logistics of third-party delivery applications to continue to provide delivery services, but not rely on them solely.

In 2021 we will see more restaurants focused on the digital overlay of their dining experience and using it as another tool to engage with customers. Having a robust strategy in place, restaurants can finally remove the dependency on third-party platforms while capturing and owning their customer data to control customer loyalty.

About the Author

Laurent May is Head of Ready.