Which food delivery apps are best for restaurants?

Just Eat, Uber Eats, Deliveroo – which is best for restaurants?
August 15, 2019 Adam Stead
In Thoughts, Hospitality, Marketing read
Just Eat, Uber Eats, Deliveroo logos

UK restaurant delivery is worth £8.1 billion this year, which is a 13.4% growth since 2017. If you’re a restaurant, and you want a piece of that sweet chang, you have a decision to make – should you be on Deliveroo, Just Eat, or Uber Eats? 

If you’re a restaurant, and you’re looking to choose between them, there’s a few ways to think about it. They might include: which apps are the most expensive to you; which unlock the biggest potential new market each new app; which app involves the most hassle; and whether the kind of person who likes your restaurant is the kind of person who uses each app. 

But the scale of Uber Eats, Deliveroo, and Just Eat is tremendous – and you can’t ignore them. (You can, technically, but if you do, it’s much better that you actively decide to ignore them rather than let them pass you by.)

This article should set out which of them are the best for restaurants to be on, and when you should say no to a delivery app.

 

What are the costs of each app? 

The first thing to look at when considering what platforms to use is their costs to merchants:

rates for you extra costs they charge your customers
Deliveroo around 30% admin £2.50 per order
Just Eat 14% (+VAT) and admin charge £699 up-front cost £0-4
Uber Eats capped at 30% admin £3.50 per order
Offer delivery yourself Cost of labour and perhaps cost of fuel Bikes start at £100 up to you

 

That’s… a lot. 

In fact, it’s such a lot, that some restaurants even lose money on meals they sell through these websites. Now, you probably won’t lose money – but before doing anything, it’s worth checking the unit economics to see whether selling via these platforms will still be profitable for you. 

 

Is it profitable for me to sell food when they’re taking 30% away? 

To understand this, you need to think about the marginal costs of your food. (That’s the cost you incur as a business by making one extra meal.) 

Think about the price of a plate of food at your restaurant. Let’s say your average meal costs £10. Next, deduct 30% from that £10 – that’s going to Deliveroo – which leaves us with £7. Then, deduct the costs associated with the meal. That’s the cost of your ingredients, and also the cost of the labour time it took to create the meal at the salary of the chef. For the sake of the example, let’s they cost £4 and £2 respectively – leaving us with £1 profit.

You don’t have to deduct the cost of things like cost of a kitchen, license, and other start-up costs – those aren’t included in a marginal cost, because you would have had to buy those things anyway at the outset of your restaurant. If you’re setting up a business from scratch which will be delivery-only, you’ll need to build a business plan from scratch and think a little more about this. 

In the above example, that would leave us with £1 profit, which isn’t a lot. Before Deliveroo, we were selling a £10 meal at a much healthier £4 profit. 

Do this sum for your business. Look at the profits you make after Deliveroo or Uber Eats has taken their cut, and then decide whether the remaining profit is worth it.

We would recommend not rationalising a decision to cook unprofitable food based on the idea that Deliveroo, Uber Eats, or Just Eat is some kind of marketing channel. It’s true that it will introduce some new customers to your restaurant, but these companies all make money on the basis that they own the relationships with that customer. The reason they are successful as companies in an industry where margins are so small is that they have created a marketplace where customers return to their website to find something to eat. When restaurants find a way to rationalise selling unprofitable meals, it reminds us of an old joke you get in technology businesses: “I’m losing money per unit but I’ll make up for it with scale”

Should I… tell them all to go to hell?

Maybe, but probably not. 

It’s true that they’re asking a lot of money from you, and it might feel good to tell them to go to hell. If you did the maths and you found that you didn’t make any money, it might be worth putting the cost of your online food up so that each meal you make is profitable. It will be tougher to compete on price; but at least you will be running a sustainable business that way. 

Once you have established you’re making a comfortable margin online, we can start to think about the potential benefits of each platform before assessing against their costs.

These companies are likely to get bigger. According to McKinsey, the total food delivery market has grown by around 4% year on year; but within that, calling and asking restaurants to deliver has collapsed as a proportion of market share. Online delivery via platforms like these is growing at about 15% year on year. Deliveroo achieved 100,000% revenue growth, four years in a row, which is unheard of. 

Here is the the user breakdown of the different systems: 

 

UK users (2018) Number of UK restaurants Audience tends to be
Uber Eats 50.6K DAU 10-20K restaurants Younger and more urban
Deliveroo 44.9K DAU 10-20K restaurants Younger and more urban
Just Eat 499K DAU 29K restaurants Comparatively older and suburban 

 

Data Source

 

Woah, that’s a lot of customers. Should I just… sign up to them all? 

Yes – in some circumstances.

In 2016, a survey suggested that 80% of customers in the UK have never or rarely switch food delivery platforms. That’s a high number. 

If that’s the case, then each new delivery market exposes you to 80% of the total market of that platform’s users. There’s still most of the benefit of signing up for delivery for the first time, every time you come across a new platform. 

There’s also quite a low cost to invest in setting up with each platform. Only Just Eat charges an up-front fee for platform use. That means there’s not a lot of downside of getting onto each platform new platform. 

Thirdly, the decision to use all the platforms, rather than just one, diversifies your customer acquisition channels, giving you more power with them. Deliveroo, for example, negotiates individual fees with restaurants. If you get 90% of your business through Deliveroo, they hold all the power in the relationship – you could not go elsewhere if they decided to double your rates. 

But the McKinsey ‘80%’ number also seems high. First, depending on where you live, it’s quite easy to run out of restaurants quite quickly. If you’re a mid-twenties professional, you live in zone 2 London, and you change addresses once per year; you’ll never run out of restaurants if you stay on one platform. 

If you’re forty and you live in Maidenhead, it makes more sense to invest more time in researching all the different food options closely. Investing in every single channel to reach more customers makes more sense in the city, where there’s lots of choice and lots of customers.

You don’t need to do much planning around production capacity, because you can simply reject orders and turn the apps off if you’re working at maximum capacity and you’re full.

Just Eats has the best rates and the most customers. Should I just sign up to Just Eat?

Yes – in some circumstances.

Just Eat has the best rates, the largest number of users, and the most favourable ratio of numbers of users to number of restaurants. Despite a larger up-front fee, Just Eat seems like it’s likely to be the best deal for a lot of different restaurant owners.

But this is partly a geographical question. The reason that Just Eat enjoys superior market share is that it’s live in more parts of the country. Deliveroo and Uber Eat specialise to a much greater extent in dense urban areas such as London. In the area in which you live, Uber Eats or Deliveroo may well unlock the key to a bigger market.

If you’re in a part of the country where Just Eat is the only platform available, you should absolutely sign up to Just Eat alone. 

That said, 44.9K users is a figure from 2018 reporting into Deliveroo, and their revenue growth has been huge. The same is true for Uber Eats. The growth of these platforms mean that in the next few years they are likely to pull closer to the numbers of patrons Just Eat.

The other downside to Just Eat is that with a larger upfront cost, you have to hope to sell a minimum number of dishes in order to justify the expense. You can understand what this is by doing the maths around what margin you’re going to make after Just Eat take their 15%, and what profit you’re left with. If you have that average profit per meal, you can know how many meals you would have to sell in order to justify the initial cost of the Just Eat license. You don’t need to do this calculation with the other two, which charge a fee per sold meal.

Our Overall Advice

(1) Only ever sell at a profit. If the fees of these delivery companies make you unprofitable, you should either stop selling online or you should put your online prices up.

(2) Figure out which is the most popular delivery platform in your area.

(3)  Experiment! It costs nothing to experiment with Deliveroo and Uber Eats, and you can always turn the apps off if you’re receiving more orders than you can process. That will enable you to know how much you’re likely to sell, and which channels make you the most money.

(4) If you live in an urban area, there will probably be greater upside to continuing to join multiple delivery companies.

(5) Remember that each new platform you join will probably introduce you to new customers.

(6) Bear in mind that Just Eat probably has the lowest fees and the largest number of users.

 

After Deciding

One thing which can be a hassle is that Deliveroo, Just Eats, and Uber Eats all use different interfaces – and each order you normally have to type into your POS system. The two bits of software can be integrated, but it depends on your provider. Get in touch if you’re interested in learning how to integrate your delivery platform with your POS.

Alternatively, we’re also Uber’s hardware partner. If you’re looking for one of the printers that works via Uber Eats, look here – and we’d recommend the middle one.

two men cycle backlit by the setting sun

Are you setting up your perfect pizzeria? Your dream dim sum? Whatever the food, you need to make sure you’re making the right software choices throughout. That’s why StoreKit is here. If you’re not sure what you need, give us a call.

 

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