Q. Dear Zenagos, is my online delivery partner ripping me off? They take 30% of my restaurant sales.
You’re only getting ripped off if you are missing out on a better alternative. If you invest a little bit of time researching your alternatives, you will either find a better deal or come to appreciate the deal that you have. Here are some steps that we suggest:
Do the Math
Since cost is your primary concern, it helps to start with a financial analysis:
Calculate the cost of hiring your own delivery team
What would it cost you to handle delivery yourself? It won’t take you a long time to make a quick (or “back of the envelope”) calculation to add up what it would cost you to hire your own delivery people. Fair warning: Managing a delivery staff is a big hassle, which is why your delivery partner exists and can charge such a high price. Most management gurus will advise you to spend your time on what you are great at (presumably, preparing awesome food) and outsource the tasks (like delivery) that don’t need to be special in order for you to succeed. So, do think carefully before committing yourself to hiring a delivery team.
In terms of the math, you need to decide whether your delivery people will be employees or contractors. (In some states, they must be employees, so make sure you get some legal advice on that. . .so, be sure to add at least $500-$1,000 for a legal consultation to your list.) Then, you need to decide what you will pay them. You should validate this pay rate by talking to some potential delivery people. If you offered them $X per hour (or day or delivery), would they be excited to take the job? Also, if they are going to be employees, add another 20% to your expected salary to cover the cost of insurance and benefits.
Add the cost of any services you would need to replace
Don’t forget to consider the cost of any non-delivery services that the current partner offers that you would need to replace. For example, does the delivery service’s page for your restaurant serve as your website? If you don’t have a separate website, then you will need to include the cost of building and maintaining one if you drop the partner.
Add the value of any new customers that you acquire through the partner
If you ever get new customers as a result of your delivery partner, then that needs to be considered as a marketing benefit, since it has a great deal of value. If you don’t know your Customer Acquisition Cost for your other marketing efforts, then you should calculate it. Choose a period of time (such as the previous month) and calculate your Customer Acquisition Cost (or “CAC”). Here is the formula for CAC for your business:
CAC = Total $ Spent in a Particular Period / Total Customers Acquired in that Period
For example, if you spent $1,000 in advertising last month, and you acquired two new customers, then your CAC for last month was $1,000 / 2 = $500. (Read more about CAC here.) If you know your overall CAC, then you can assign a value to any customers acquired through your delivery partner. If your CAC is $500, then add $500 to your calculation for each new customer acquired through that partner. If new customers discover your restaurant via your delivery partner, you may be getting a much better deal than you think.
Do Some Research
If you conclude that you should stick with a partner (rather than create a delivery team yourself), then do some research to see if your local options have improved. The competitive landscape changes very quickly, so there may be new options that provide a better value that weren’t available at the time that you selected the current partner.
The best approach to researching a service solution is to write down your requirements, including services that you currently receive from your delivery partner and services that you would like to receive, but do not currently have. Prioritize the list, making sure to make a distinction between “must have” and “nice-to-have.” This will help you to remain dispassionate when you are evaluating the options. To arrive at the best decision, be disciplined and compare each vendor against your list of requirements.
Let’s acknowledge that it feels bad to look at that monthly statement, showing that 30% of the money that you earned with your own sweat went into your delivery partner’s pocket. It’s similar to the feeling when you see the fees that you pay to your payment processor or the amount that you have to pay in taxes each year. Even if the amount is large, it doesn’t necessarily mean that you are getting a bad deal. Put a little time on your calendar once every few months to review your options and reassure yourself that you are getting the best deal possible.