Delivery represents a great business opportunity for restaurants. Customer visits to restaurants have been roughly flat over the past five years through May, but delivery has grown 17% over the same timeframe, according to David Portalatin, national food and beverage analyst for NPD Group.
And the supply has plenty of room to grow. Portal utin accounts for only 3% of all US restaurant orders.
The transition to delivery is "deep," said Noah Glass, founder and CEO of Olo, a business-facing food ordering platform that works with restaurant chains and delivery units such as Uber Eats. "It's happening incredibly fast and the stakes are incredibly high."
Third-party platform commissions can damage restaurants by eating into profits and eroding customer loyalty. By partnering with them, restaurants can eventually hurt themselves.
Going all in
To make money from the growing trend, restaurants are making great efforts on delivery.
Some only offer flashy promotions through
By monitoring operations to accommodate delivery and direct customers to third-party platforms, restaurants hope to reach new loyal customers e towards these services. Most restaurants also offer delivery via their own websites and apps, as well as collaboration with multiple platforms.
"Delivery is still an important driver of our digital growth," CEO Brian Niccol said during a recent earnings call. "We've seen very little guest overlap between our own in-app delivery and our third-party delivery partner apps," he added.
"There are still early days for food and beverage delivery in the United States," CEO Kevin Johnson said during a recent earnings interview with analysts. "While we don't yet see Starbucks Delivers making a meaningful contribution to our US business performance, we believe that Delivery is an important long-term growth opportunity. "
Not all restaurant chains believe delivery partnerships are the way to go. Domino's has specifically decided not to work with delivery sites.
For Domino's, delivery is a big deal.  Not only has the company delivered for many years, but it uses the service to showcase technological capabilities: It has tested self-driving delivery cars, looked at delivery with a drone and is now exploring using e-bikes for to skirt traffic.
The pizza chain's sales have suffered in part because of "aggressive third-party delivery activity," CEO Richard Allison said during a conversation with analysts discussing second-quarter earnings.
He added that Domino continues to "see significant pressure" from these services and that he does not "expect this activity to facilitate in the short term."
Despite the pressure, Domino's does not plan to partner with a delivery site.
Allison said that he does not believe that working with third-party platforms creates incremental sales, and that these platforms will end up damaging the restaurant's profits.
The question of whether third-party platforms drive new sales or just redirect customers is key.
What can go wrong
Step by step sales are good for restaurants. But if customers who want to order from the McDonald's app, for example, go through a partner like Uber Eats instead, McDonald's earns less profit because it has to pay Uber Eats a commission.
It can also lose these customers to competitors.
Someone using a restaurant app can only order from that restaurant. When they visit a delivery unit, they can sort by distance, delivery time, price or food and end up ordering from a different location based on these metrics.
"It has become clear to restaurant brands that they need to work hard to get their loyal customers to order directly from the brand, "Glass said.
And if something goes wrong with your order, customers are more likely to owe the restaurant than the delivery service. By outsourcing delivery, food companies also outsource their brand management.
However, restaurant brands should not avoid working with delivery services entirely, said Morningstar analyst R.J. Hottovy.
"I think at this point there is enough consumer demand that you have to do it," he said.
But "you have to be smart about who controls this data," Hottovy said. "That's the biggest thing."
Ultimately, Hottovy predicts that restaurants will come with a "hybrid" approach, relying on off-season delivery services and using their own drivers otherwise.