The Hidden Cost of Food Delivery Services–Why You Need Your Own App

The advent of the high-speed and accessible internet and, more recently, the pandemic-enforced lockdowns around the world have changed the way people get their food—in particular, they turn to food delivery services. The benefits of food delivery services are evident from a consumer perspective—not only are they fast, but they’re also convenient and simple and let shoppers enjoy their meals in the comfort and safety of their own homes. From a restaurant point of view, food delivery services in an ideal economy open up new revenue streams and provide the business with exposure in different markets. Overall, this mutual benefit has made this type of service so popular today that it has become commonplace.

The food delivery market size is expected to grow up to $1.20 trillion USD by the end of 2024 and, according to Precedence Research, the market is projected to surpass around $637.46 billion USD by 2034, expanding at a CAGR of 10.6%. That’s why, from a business perspective, restaurants need to either use existing delivery services or build their own. Failing to do this will lead to a loss of business to competitors. Below, we’ll answer the questions, “What is a delivery fee and how can you reduce it?” from a custom app development point of view.

The Cost of Food Delivery

In the US food delivery space, four primary players control 95% of the food delivery marketplace. As for a more precise understanding of the answer to the question, “How much does food delivery cost?”, let’s consider the most well-known industry representatives. For instance, PostMates has the highest markup (92% higher than the menu price) of any platform, followed by DoorDash (83%) and GrubHub (80%). UberEats has the lowest markups (69% over the regular menu price).

So, how much do delivery apps charge restaurants? The fee charged by the leading organizations generally comprises the following:

1. Commission Fee: Typically a flat percentage of the order cost regardless of the order amount.
2. Delivery Fee: Paid directly by the consumer and is a flat amount. Typically in the $5 USD range.
3. Setup Fee: Additional fee on top of the commission fee.

How much do food delivery services charge restaurants? Let’s check a few examples of food delivery service estimations for four market leaders: Postmates, Doordash, GrubHub, and UberEats.

Now, let’s analyze the quality of these services based on Kiplinger and order analytics.

Postmates

This service delivers orders from restaurants, stores, and even pharmacies. It has a fairly large regional coverage and delivers fast. On the other hand, the commissions (especially for ready-made food delivery) are high. There are also often problems with complaints processing by the support service.

DoorDash

This is another service with a wide delivery range, which boasts free delivery from a number of restaurants. Customers also love it for its contactless delivery and group order options. At the same time, it’s worth noting that the commissions for small orders are quite high. Also, there are often delays in delivery due to increased demand.

Grubhub

Grubhub is well known in large cities and has integration with Yelp. This service also supports restaurant loyalty programs and offers affordable delivery options. As for disadvantages, Grubhub has rather limited delivery options in some regions and frequent problems with order tracking.

UberEats

UberEats is a service with excellent logistics that is available 24/7 in major cities. It offers one of the richest selections of restaurants and provides regular users with a lot of privileges. On the other hand, the fees here can hardly be called democratic. Moreover, to communicate with live support service representatives, you’ll need nerves and time.

Why You Need Your Own Food Delivery App

Food delivery apps fulfill a vital niche between the restaurant and its customers. With the current and growing demand for these types of services, many opportunities exist for new players to make their own mark. Currently, many of the larger chains like McDonald’s, Subway, and Domino’s already have their own apps. This provides them with a greater level of control and lets them contact their customers in a more efficient and timely manner.

Who Can Benefit From a Food Delivery App?

While some businesses already have an app, there are many reasons why other companies should consider building one, too:

• Restaurants and food chains that want to increase brand awareness, improve communication with consumers, expand their reach, and avoid aggregator fees (thereby making delivery more accessible)
• Cafes, canteens, and food courts that seek to gain comprehensive control over delivery and sales processes to improve the quality of service
• Food aggregators and marketplaces that are interested in creating a centralized digital platform for managing orders from different catering establishments
• Food suppliers and manufacturers who want to communicate with customers digitally
• Store chains and supermarkets looking for a personalized approach to their visitors and want to remain relevant and competitive
• FoodTech companies that need custom applications for quick market entry and fast scaling

Restaurant Benefits of Food Delivery Apps

For a restaurant, there are many financial benefits that a privately-owned food delivery app provides.

Control Over Delivery Quality and Time

With your own food delivery app, you can set your own service standards to ensure your customers receive their orders hot, fresh, and generally in perfect condition. Plus, you’ll have direct communication with couriers (you’ll know who’s delivering the orders), which means you can minimize delays and respond quickly to any issues.

No Platform Fees

Unlike third-party platforms that charge up to 20-30% of the order amount, your own delivery allows you to avoid such costs. This gives you the opportunity to reduce the delivery fee for your customers, increase margins, and generally not strive to meet the standards and restrictions of these aggregators.

Direct Sales and Increased Profits

Your own food delivery app allows you to earn on the full cost of the order, excluding third-party intermediaries’ fees from this service. This is especially beneficial with high markups on orders, as well as in catering establishments with an extremely affordable pricing policy.

Access to Customer Data and Behavior Analysis

With your own food delivery app, you can get data about your customers and use it to better understand their preferences. In the long term, this will have a positive impact on the frequency and average check of your orders, as you’ll be able to develop personalized offers and loyalty programs.

Brand Support

With your own brand on the packaging and couriers’ uniforms, you can provide customers with a unique experience and make them feel involved in your business. Thus, this can have a positive impact on their loyalty and also allow your brand to be promoted by word of mouth.

Comprehensive Price and Promotion Management

Your own delivery service implemented in a custom application will allow you to set your own pricing policy, as well as offer discounts and promotions without the restrictions of third-party platforms, including cross-promotion between online and offline orders.

Flexibility

Finally, with a food delivery app for your restaurant, you can adapt your delivery schedule and routes to instantly respond to changes in demand and your customers’ needs. This way, you’ll get less negative feedback during peak hours.

How NIX Can Help Create an Online Food Delivery Service

At NIX, our team of business analysts, developers, and UI/UX designers can help you build a solution that will be of benefit to you and your customers. We understand business and have been working with customers to implement solutions that help them succeed.

We had the pleasure of working with one of the largest online food ordering marketplaces in Europe. This organization offers mobile and web applications that let consumers place orders with local restaurants and businesses in cities around the region. They also saw problems with high load that impacted the performance of their mobile application.

The NIX team worked closely with their internal developers and came up with a solution that ensured the process was working efficiently. This helped improve the overall customer experience, letting customers interact with restaurants and cafes more effectively.

What Now?

Restaurants and cafes need to ensure that they’re attracting customers and servicing them as efficiently and effectively as possible. The mobile food ordering business is one of these solutions that absolutely needs to be considered. As a service, it’s continuing to grow in popularity, and the strategic value of this type of service is only going to rise even higher.

At NIX, we can help you understand what you need to know to build a successful business in this space. We have many years of experience in building on-demand delivery applications and can help you understand what you need to know.

If you still have doubts about the feasibility and profitability of your decision to develop a custom food delivery service and, in general, have no idea on how to make your own food delivery app, don’t waste a minute—contact us, and together we’ll evaluate the prospects for its implementation in the context of your business. Also, we can discuss MVP development to save your budget and reduce all possible risks.

FAQ

01/

How can restaurants reduce delivery fees?

If your goal is to reduce delivery fees, creating your own app is a great option. Such an app will help you reduce delivery fees and avoid the high service fees that third-party delivery platforms charge. Specifically, when you resort to third-party delivery services, you’ll inevitably face an increase in delivery costs since a significant part of the payments goes to delivery drivers. Also, they require the operating costs of the platform you partner with. So, if you create your own solution, it will allow you to reduce restaurant delivery app fees and attract customers directly, reducing your dependence on third-party delivery apps.

02/

Why should my restaurant consider creating a custom food delivery app?

When you launch your own app, you eliminate the food delivery fees your partners charge. Actually, that’s why using an in-company solution minimizes the service fee and increases your control over your business expenses. For restaurants that often face restaurant delivery app fees, this is a great opportunity to create a unique experience for customers without the participation of third-party deliveries. At the same time, you should remember that using your own app helps increase loyalty, reducing dependence on delivery fees imposed by partner platforms.

03/

What are the benefits of having a custom-branded delivery app for my restaurant?

Having your own app for your business will allow you to reduce food delivery fees and eliminate high third-party delivery platform app fees. It will also help you minimize your dependence on delivery drivers and manage delivery fees yourself, which, in turn, will ensure you greater profits. In addition, your own app enables strengthening your brand and improving customer perception. Finally, refusing third-party delivery will help you avoid increased service fees and maintain control over every detail, which is important for restaurant owners.

04/

How can a custom delivery app improve customer loyalty and retention?

A custom app will help your restaurant establish reliable connections with your customers and reduce delivery fees. Indeed, unlike third-party delivery platforms, a personalized app gives you the opportunity to accumulate delivery fees in favor of your business and develop loyalty programs. Therefore, reducing delivery fees will allow you to save on operating costs and invest in attracting customers directly.

05/

What cost savings can I expect from using a custom delivery app instead of third-party services?

Creating your own application will allow you to minimize the delivery fee and get rid of the commission charged by the partner platform. This will enable you to independently manage delivery fees and reduce overall costs. In this way, you’ll be able to optimize the costs of delivery and distribution of your business resources. At the same time, excluding dependence on third-party services leads to savings, as well as more stable control over your business and benefits.

06/

How does a custom delivery app enhance my restaurant’s control over the customer experience?

When you create your own custom application, it ensures a significant reduction of delivery fees and eliminates the expenses of the service provided by your potential partner. This way, you’ll receive full control over food delivery fees and the service for your customers. Therefore, by reducing the participation of third-party platforms, you’ll be able to improve customer interactions and provide better conditions while offering them the cheapest food delivery service.

07/

Can a custom delivery app help my restaurant gather valuable customer data?

If you launch your own application, you’ll be able to collect first-hand information about your customers and their preferences—this is an option that third-party delivery platforms usually do not provide. This way, you’ll be able to reduce your operating costs and obtain 24/7 access to user data online. This data on customer preferences will help you optimize delivery fees and reduce service costs. Moreover, by using your own application, you’ll gain control over this data and will be able to better understand customer behavior.

08/

What features should I include in a custom food delivery app to make it successful?

You can add features like order tracking or convenient payment methods to your custom app. Your customers will also appreciate loyalty programs and the ability to provide feedback. Thus, these features will allow you to attract new customers (specifically, from regions located quite far from your physical restaurant) and gain their favor. At the same time, you’ll get rid of delivery fees from third-party delivery platforms. Finally, along with providing the cheapest food delivery service, you can add personalized discounts and exclusive offers to maintain people’s interest in your restaurant.