Should restaurants opt for their own delivery fleet

There is no denying that the third-party online ordering fees have been the bane for many restaurant businesses. In a world where everything is online, fast, and convenient, it looks like a necessary evil to have to use a third-party delivery site to get the food delivered to the masses. 

While the industry was quite numb for the last few years, the pandemic has caused the industry to make some noise against the food aggregators. Calling them digital landlords, owners across the country, they expressed their opinions that due to the aggregators they don’t have their individual space among the masses, and have to heavily rely on them for their own customer loyalty.

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National Restaurant Association of India (NRAI) in a statement clearly states that "(Aggregators have) distorted a vibrant marketplace by aggressive discounting and predatory pricing.” In the last five years, the commission charged by the aggregators has gone up from 6 to 25 percent. The industry associations are now in talks with the online food delivery platforms to change commission structure, reduce discounts and levy new fees for deliveries.

Chef Harangad Singh, Chef and Founder of Parat who has recently opened his cloud kitchen stated that one needs to create a model in which the business can fit in with both aggregators and self-delivery as both are now equally important to survive.

Currently, Parat’s 50 percent sale is from aggregators and 50 percent are from direct ordering. “The module of the aggregator is not much complicated as it is their responsibility to ensure delivery to the customer and in self-delivery, we have to ensure the whole experience,” he said. 

However, Singh strongly opines that margins in the direct delivery are better as the average order ticket size is good but with an aggregator, one cannot question the minimum guarantee of the size of the order ticket. 

To overcome the delivery cost, the restaurant association last year has nudged restaurants to work in tandem with delivery vendors to utilise their existing fleet. The apex body, during the Covid induced lockdown, had announced its plans for building its own online platform to take on food delivery services like Zomato and Swiggy. The new platform according to the restaurant association will enable online food ordering and delivery services along with loyalty programmes.

Not just getting away through high commissions, but having one’s own delivery fleet shall also ensure product qualities.

“For those who prefer home deliveries, we should have been able to use the services of aggregators who would know how to handle delicate products such as pastries or macarons and deliver them to our customers in a timely manner and in a temperature-controlled container at a cost which would be less or equal to what it would be if L’Opéra operated its own fleet. Unfortunately, this ideal world does not exist,” Kazem Samandari, Executive Chairman, L’Opéra commented. 

According to Samandari, the aggregators do not treat sensitive products with the necessary required care and their commissions are way too high, mainly due to an unquenchable thirst for offering discounts to attract new customers. The result is often a lose-lose situation.

Finding a solution, L’Opéra has adopted a hybrid model whereby the company rely on its own proprietary delivery fleet for all orders placed through the website, which represents the lion’s share of its online business.  

However, the company do not refuse orders placed directly through carefully selected aggregators who fulfil them through their logistical infrastructure. “Though not ideal, this provides a workable solution for as long as we are not able to satisfy the entire demand through our own infrastructure,” Samandari added. 

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So should restaurateurs now consider to invest in having an own delivery fleet? Answering the same, Amit Bagga, co-founder of Daryaganj said that it depends on the volume of delivery business that the restaurant has. According to him, if it’s more than 50 percent of their total sales and is a considerable value then it makes sense to have its own fleet.  

However, in a scenario where the delivery sales are less than 20 percent or so, it would not be viable to maintain one’s own fleet as it comes with a high cost. Explaining it further, Bagga stated, “during peak times there are sometimes up to 10 orders at one time and to deliver them on the time you need 10 riders but at all other times, the demand is much lesser so the 10 riders cost will never be viable, also apart from the costs of maintaining your own fleet a lot of bandwidth of the team goes into the logistics operations and maintenance of vehicles etc.”

He recommends that in order to save costs and ease of logistics operation, it is best to opt for aggregators if the core business is not delivery. “But at the same time, the downside is that the aggregators don’t share the valuable customer data with restaurants,” Bagga concluded.