Business Columns & Blogs

In food delivery, do the rewards for your restaurant outweigh the risks?

“In 2019, companies like UberEats, GrubHub, Postmates, and DoorDash bring our favorite cuisines right to our doorstep through the simple click of a button. Today, it’s estimated that the average person has two food delivery apps on their phone and uses them three times a month.”
“In 2019, companies like UberEats, GrubHub, Postmates, and DoorDash bring our favorite cuisines right to our doorstep through the simple click of a button. Today, it’s estimated that the average person has two food delivery apps on their phone and uses them three times a month.”

We’ve come a long way from the days when your choices for delivery on a Sunday evening were either Chinese Food or Pizza. In 2019, companies like UberEats, GrubHub, Postmates, and DoorDash bring our favorite cuisines right to our doorstep through the simple click of a button.

Today, it’s estimated that the average person has two food delivery apps on their phone and uses them three times a month. It’s clear that today’s customer is comfortable paying a premium to have someone else sit in traffic for 45 minutes, and perhaps in line for another 20 minutes, while they opt to use that time for something else. Chores around the house, a Netflix binge? Choice and efficiency — welcome to 2019.

For those unfamiliar with the standard delivery model, by a restaurant agreeing to pay these companies a portion of the transaction with the customer (gulp — as high as 30%), the restaurants in turn get listed on their website/app as a delivery option for the customer. Effectively, these restaurants are paying a premium for access to the delivery company’s growing market share.

Introducing a new revenue stream to your restaurant, having access to new customers and more information about them than ever before seems like a no-brainer, right? The reward is clear, but does is truly outweigh the risk?

An undeniable lack of control enters the equation when your food exits the restaurant, especially in the hands of a complete stranger. This individual likely isn’t even an employee of the delivery company, but rather an independent contractor. These folks are now the de-facto ambassadors of your restaurant on both the road and on your customer’s doorstep. How comfortable are you putting the integrity of your food, or better yet, the goodwill and reputation of your restaurant in the hands of a complete stranger?

CROMER
Andrew Cromer is a partner with AXS Law Group in Wynwood.

Let’s hope the food makes it on time, a high-level food quality standard is maintained, the order details are accurate, and the “guest-experience” at the front door is positive. Those are quite a few variables entrusted on someone you know little about, let alone has no affiliation with your restaurant.

Those concerns don’t even take into account the legal exposure that might arise from the delivery. What if a customer gets sick from the food? How sure are we that the issue didn’t arise from the delivery driver? (The kind of self-control needed to not take a McDonald’s french-fry while in the car! After all, we’re all only human!) What if the delivery driver gets into an accident while delivering your restaurant’s food? Is the restaurant liable?

Likely these issues are contemplated in a partnership agreement between the restaurant and the delivery company. Since the restaurant holds a small amount of bargaining power, the answers to the above typically fall in the favor of the delivery company. With that said, it’s important to understand the following in order to truly evaluate the risk vs. reward:

Economics: How much am I paying the delivery company? Who is responsible for refunds to the customer or “chargebacks” from the credit card company?

Liability: What’s the extent of the delivery company’s liability? Is there a “cap”? How much insurance do they maintain?

Operations: What “pick-up and delivery” standards are in place to ensure consistency and quality control on the food?

Does this all mean that restaurants shouldn’t utilize delivery services? That depends on a lot of factors, but what I can tell you is the same way Uber and Lyft changed how we move around, Netflix changed how we watch TV and Spotify changed how we listen to music, these delivery companies are changing how we consume our food and the message from today’s customer is clear. They want their food delivered.

Corporate and transactional attorney Andrew Cromer is a partner with the full-service boutique law firm of AXS Law Group in Wynwood. He may be reached at: andrew@axslawgroup.com.

▪ This opinion piece was written for Business Monday of the Miami Herald. It does not necessarily reflect the view of the newspaper.

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