28th April 2020
With an abundance of food apps offering marketing and delivery services in Dubai and Abu Dhabi, its not surprising restaurants are questioning whether they are right for their business. The offerings appear too good to be true, generally offering an extended geographical reach that is not feasible for the restaurant without the app’s service. Restaurants are experiencing FOMO, Fear Of Missing Out, by not engaging with the apps. However, such apps come at a cost and its essential for each restaurant to calculate whether it is actually financially viable and whether their business will actually grow as a result.
How do food delivery apps work?
Online food-delivery apps are expanding the choice and convenience of home delivery, allowing customers to order from a wide choice of restaurants with a few taps on their mobile phones. The business of delivering restaurant meals to families at home is undergoing rapid change as new online platforms race and compete to capture restaurants that do not offer delivery and new customers.
There are two kinds of food delivery and these are known as Aggregators and New Delivery. Both options offer similar services which allow consumers to compare menus, post reviews, and place orders from a variety of restaurants with a scroll and a click.
The Aggregators, the old boys in the market, process the order and pass it on to the restaurant to handle the delivery themselves.
The New Delivery players process the order from start to finish, apart from the actual cooking and dishing of the food. They have their own logistics networks, providing delivery for restaurants that do not have their own drivers and are now building central kitchens in prime locations in the UAE to enable restaurants the opportunity to expand their reach.
Why are food delivery apps so good?
Food delivery apps are great for restaurants wanting to reach a wider audience and to avoid the responsibility of deliveries themselves. By engaging with apps, restaurants get marketed within the commissions paid to the app provider.
Convenient for consumers to place orders
Convenient for consumers to compare restaurants – quality of food, value for money and speed of delivery
Convenient for consumers to give feedback
Can recommend restaurants close to the consumer’s location, providing average delivery times
Exposure and marketing of restaurants to a winder geographical area
Online payment gateways enable credit cards payments, avoiding cash on delivery
Larger geographical delivery area
Manage deliveries on behalf of the restaurants, so their focus remains solely on the preparation of food
What are the downsides of food apps for restaurants?
The costs associated with restaurants engaging food apps can be huge. Commissions on menu items can be as high as 30%. This for many restaurant’s is too high and some just cannot afford to give away 30% of their revenue. Many more probably aren’t even aware of their actual overheads and costs per items and are likely losing money because they don’t have sufficient margins to cover the commissions. It is too easy to fall into the trap of a sale is better than not having one, but not knowing whether you are making money or losing money.
How can I calculate whether a food app is right for my restaurant?
How good is the back office of your restaurant? If your restaurant has established thorough processes for purchasing, menu design and costing, as well as calculating in the additional overheads costs, then the task is very straight forward for the management team. The management will need to review the cost of each of the dishes that you want to list on the app and check what your margins are.
In case your restaurant doesn’t have access to sufficient information to know its exact margins, then its essential to collate this information before committing to a food app. You may need to bring in experts, such as Gateway, to set this up for you, so that you have an exact cost for every item that your restaurant sells.
How can Gateway help your restaurant with its back office?
Gateway’s food and beverage specialists can organize your restaurant’s back of house to ensure you are getting the best possible margins to determine which apps are right for your business. Depending upon your restaurant’s situation, we can:
Review and evaluate any costings currently in place to measure their accuracy
Review preparation and dishing of menu items for accuracy and consistency
Review existing purchasing – are you buying from the most competitive suppliers and getting the best rates without affecting the quality of the product? In some cases we are likely to find better quality ingredients at more competitive rates.
Calculate the total costs for each menu item
Redesign menu items where necessary to improve margins
Identify your ‘HOT’ menu items - promote these to increase your revenues
We want to help your restaurant business make money so that you thrive. Often, its just a few tweaks here and there that can make all of the difference to a restaurant being profitable or not. We can set up the systems for you to be able to manage your restaurant back of house on your own moving forward, or we can continue to work with you each time you update your menu with new items and need to be confident of the exact costs and margins. To get Gateway’s help for your restaurant, email us: info@GatewayToUAE.com
Call Gateway Group: 600 567562
Written by Nathan Hunt, Senior Managing Partner
Gateway Group of Companies, Abu Dhabi & Dubai UAE
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