Battle of the Third-Party Food Delivery Services: Who Wins?

Battle of the Third-Party Food Delivery Services: Who Wins?

Major third-party food delivery services are waging an epic battle in our post-pandemic restaurant industry.

Some are gobbling up resources, as Uber Technologies did to its rival Postmates in 2020, spending 2.65 billion dollars in order to do so.

Others, like Grubhub, are willing to put almost a quarter of their annual revenue on the line ($580 million in 2022) to cut through the advertising clutter.

Still, others are playing offense and defense simultaneously. For instance, it’s no shocker that DoorDash is working to protect and improve its estimated 67% market share of American food delivery sales in 2024.

These are impressive numbers. But what does this battle of third-party food delivery services mean for restaurant owners?

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For sure, they have their advantages, some of which we’ll talk about below. But they also have some downsides worth being aware of, as you’ll soon find out. 

5 reasons many restaurant owners use third-party food delivery services

If you’re a small or independent business owner especially, third-party delivery apps can be appealing for several reasons:

1. Wider reach and restaurant visibility: Food delivery apps connect you to a broad (and hungry!) audience of people from day one, including people who may not have found your restaurant otherwise.
2. An easy breezy ordering experience: Online food delivery platforms make it easy for customers to place orders. This levels the playing field for small, local restaurants competing against larger chains that have more budget to spend on their restaurant’s website and such. Real-time order tracking also means a transparent delivery experience for customers.
3. An operational efficiency boost: With third parties handling the to-and-fro of deliveries, you’ll have more time and energy to spend on managing staff, inventory, and the in-house dining experience.
4. Delivery drivers at the ready: As part of their service offerings, popular third-party delivery companies have large networks of delivery drivers. This allows them to provide restaurant owners (and their customers) with timely and professional delivery service.
5. Access to helpful data and customer insights: Delivery platforms provide valuable data about customer preferences and ordering patterns. Depending on the platform, you can then use this info to build customer profiles and spice up your menu, offerings, and marketing strategies.

With these pros in mind, let’s take a closer look at the three most popular food delivery services. 

Third-party apps for food delivery: The good, the bad, and the ugly

The most well-known third-party food delivery services—DoorDash, Uber Eats, and Grubhub—are hard to ignore. But just because they get a lot of airtime doesn't necessarily mean they're a good fit for restaurant owners across the board. That’s why it’s worth comparing them to one another (and to other delivery enablement solutions) to see which is right for you. 

DoorDash

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DoorDash positions itself as a partner that helps restaurants reach a wide audience, with over 32 million monthly active consumers according to the 2022 DoorDash, Inc. ESG Update.

It offers several partnership plans to fit different business needs, including options for delivery and pickup through the DoorDash Marketplace, and commission-free ordering via Storefront.

Pros:

• DoorDash can provide extensive reach and exposure to new customers.
• There are no payment processing fees for orders through the DoorDash app or website.
• You get access to DashPass customers, who tend to have higher order frequencies and ticket sizes.

Cons:

• DoorDash has comparatively high commission fees that can cut into your profit margins.
• Long wait times are a complaint of several DoorDash users, especially since its drivers often pick up more than one order at a time. 

Pricing: DoorDash commission rates vary based on the partnership plan, with options for different levels of marketing support.

Uber Eats

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Uber Eats leverages its extensive network and technology from its ride-sharing business to offer a reliable and efficient food delivery service.

It provides a user-friendly platform for managing orders and integrates with existing POS systems.

Pros:

• Uber Eats has a large market presence, available in over 6,000 cities.
• There are no credit card processing fees for restaurant owners.
• Its large fleet of drivers means low average delivery times.

Cons:

• There are high fees that can range from 15% to 30% per order (depending on whether you use your own delivery drivers or Uber Eats’ drivers).
• Uber Eats holds customer data hostage, meaning that you can’t use it to market directly to your past customers.

Pricing: A 25% fee for delivery orders and a 6% fee for pickup orders.

Grubhub

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Grubhub offers flexible pricing plans and emphasizes marketing support to help restaurants reach more customers.

It provides options for self-delivery and white-label services, along with various marketing features.

Pros:

• Grubhub offers strong marketing capabilities and promotional tools.
• There are no platform or maintenance fees for listing on Grubhub.
• You get access to diners who are part of the Grubhub+ customer loyalty program and are high-frequency customers.

Cons:

• Delivery costs can add up quickly with high commission fees that tend to be around 30%.
• Online reviews from customers feature many complaints of incorrect or late orders, along with lackluster customer service.  

Pricing: Marketing rates start at 5% for the Basic plan, with higher rates for more exposure and delivery services.

While these three major players are dominating the delivery market, you need a strategic approach to using these services. In particular, it’s essential to balance the potential for increased exposure and sales with the impact of fees on profit margins.

How to balance delivery costs and protect your profit margins

If you’re like a lot of restaurant owners today, you see the value in using one of these bigger third-party vendors. Especially as an alternative to the typical way of managing in-house delivery, which can quickly drain your time, energy, and wallet if you’re not careful.

However, remember that you’re not limited only to the typical third-party options. Solutions like Tarro Delivery can essentially take in-house delivery operations off your hands for a fraction of the price of what some third-party platforms charge.

Not only would you save money on delivery costs, but your customers would also pay an average of $10 less per order, making people more likely to keep ordering from you again and again. And what do lower costs and more delivery sales add up to? More profit, of course.

When considering a delivery service provider, think about this

Whether you’re looking into your first third-party delivery platform or one to supplement other services you use, consider the following:

1. Customer base specifics: Different delivery options attract different diners—based on demographic info like age, income, and location, pick one that attracts your ideal customer base. Or go with an option like Tarro Delivery that allows people to order directly from your restaurant since 61% of consumers prefer direct ordering anyway.
2. Total costs: Commission fees for the average third-party delivery system range from 15% to 30% of each order, and there may also be other charges like setup, marketing, and service fees. Crunch the numbers carefully to make sure you can maintain healthy profit margins.
3. Delivery speed and network: No matter the reason, if expected delivery times are too long, you’re bound to have unhappy customers. Choose a reliable service with an extensive network of delivery drivers, and preferably, one that uses smart routes to cut down on time to delivery.
4. Marketing and promotional support: Ideally, a delivery service or platform will help with marketing to drum up more business for your restaurant. For instance, at no extra cost, Tarro customers get a year of free SMS marketing worth over $8,500, which has helped many restaurant operators increase revenue by as much as 20%.
5. Service quality and customer support: Review the quality of customer support these platforms provide for both restaurant owners and customers. Dig into how they handle disputes, complaints, and service issues to make sure they meet your standards.
6. Product fit: Whatever solution you choose should be flexible enough to meet your and your customers’ needs and preferences. That means the availability of features like detailed or multilingual menu customization or the ability to offer combos, special requests, and dietary restrictions.
7. Owner reviews and testimonials: Search for reviews and testimonials from like-minded restaurant owners to get a sense of overall customer satisfaction and potential issues. Outsourcing delivery shouldn’t be like taking a blind leap of faith; you should have reasons to be confident in the solution you choose from the start.

Fight the smarter battle by choosing a better partner

Finding and hiring in-house delivery drivers is hard enough without the added struggle of managing them day-to-day. And keeping delivery operations running smoothly if and when they call out sick or there’s a sudden flood of orders. However, the most common fix—using popular third-party delivery services like DoorDash—costs a pretty penny. 

You shouldn’t automatically discount these services since they do give you access to a wide range of customers and offer some level of convenience. But it’s smart not to rely totally on them.

Tarro Delivery is a much more cost-effective way to ensure a seamless, efficient delivery process. 

Plus, it can help you boost your order volume by up to 13%, which can do wonders for your bottom line. Just imagine what you could do with that extra revenue! Even better, take the first step toward actually earning it by learning more about our delivery service today.

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