The Threat of Third-Party: Why Restaurants Should Think Twice Before Outsourcing Delivery

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The Threat of Third-Party: Why Restaurants Should Think Twice Before Outsourcing Delivery

By Scott Absher, CEO of ShiftPixy - 01/02/2019

With the rise of Uber, Amazon, and other companies ushering in a new economy built on instant gratification, consumers today don’t just want on-demand convenience – they expect it. This has resulted in the growth of off-premise food sales in the U.S., which are projected to increase by 12 percent a year, to $76 billion in the next four years.

As food delivery becomes an increasingly integral part of the restaurant industry, operators are choosing to collaborate with third-party gig economy partners like Grubhub and Doordash to facilitate their off-premise services. While this approach may seem like an easy solution since delivery vendors seemingly remove the administrative and logistical burdens associated with managing a delivery workforce, these partnerships come with downsides, and there are key reasons why operators should embrace employer status and use their own workforce instead.

By directly hiring delivery drivers rather than enlisting contractors, restaurants can avoid the repercussions of misclassification tribulations, the loss of brand control, and surrendering their valuable customer data to direct competitors.

Misclassification

In recent years, there has been an ongoing stream of litigation around the future of the gig economy as third-party delivery companies fight to maintain their business model and continue to classify their on-demand workforce as contractors, not employees. With this employment structure, delivery drivers claim they’re being drastically underpaid as companies like Grubhub don’t have to offer health insurance, workers compensation and other protections that traditional employers provide their workers.

Because of this, there is a risk a restaurant will unknowingly work with an unmotivated delivery driver. For example, one company that partnered with UberEats reported that drivers would sometimes send their children to pick up delivery orders for them. There’s also been multiple cases reported of third-party delivery drivers picking up an order and never actually delivering it to the customer, instead keeping the food for themselves and blaming the missed delivery on them mistakenly dropping the food, getting a flat tire or even being mugged. For this reason, when restaurants use delivery contractors instead of managing and trusting their own workers directly, they sacrifice reliability, accuracy, delivery timing and food presentation.

Brand Control/Customer Relationship

The risks mentioned above can ultimately affect and damage the restaurant’s brand and relationship with the end consumer. 80 percent of consumers blame a restaurant directly for problems with their delivery orders, even if a third-party brought them their food, and 55 percent of consumers admit that a previous experience with a restaurant influences where they dine moving forward. By outsourcing delivery, restaurants lose control of their brand from the moment the food leaves their location, increasing the risk of issues like poor food quality or an unpleasant interaction between the driver and customer, which will leave a lasting impact on the business itself.

Further, third-party delivery services ultimately sever the connection between restaurant and customer, a relationship that many consumers actually value. A whopping 82 percent of off-premise diners prefer to order food directly from a restaurant to maintain contact with their favorite brands. This indicates that only offering delivery through a third-party’s app could potentially deter sales and nudge a restaurant’s customers towards its competitors.

Valuable Customer Data

As the restaurant industry becomes increasingly competitive, brands must tailor their offerings to meet consumer preferences, but third parties roadblock a restaurant’s ability to do so by owning the valuable delivery data. The most dangerous thing a restaurant can do is surrender their valuable customer data to a third-party deliverer.

When restaurants partner with third-party vendors, they often get to access and control that data, and on top of that, it’s often sold or shared with other contracted partners (and usually, direct competitors of the restaurant itself) for marketing purposes, as one Grubhub representative admitted.

On top of these factors, third-party apps charge upwards of 30 percent per delivery, and for the restaurant industry which suffers a notoriously low profit margin, this can drastically impact their bottom line. While these services may reduce the logistical headaches accompanied with hiring and managing a delivery workforce, the broader issues of misclassification, brand control, customer data and increased costs must be taken into consideration.

Ultimately, there’s a strong argument to keep delivery in-house and maintain full control over the process. There are some technology platforms that ease the burden of managing a workforce, as well as other industry partners that take care of employment-related administrative burdens and allow restaurants easily self-deliver. Surrendering your brand and data are two critical missteps any establishment should avoid at all costs.

About the author

Scott Absher is the co-founder and CEO of ShiftPixy, a disruptive workforce engagement platform focused in the restaurant and hospitality space that matches employers seeking part-time employees with qualified workers. ShiftPixy provides a tech-driven platform that helps businesses manage their workforce and remain compliant with part-time employee mandates, while allowing them to self-deliver a better customer experience.