3RD-PARTY DELIVERY DATA
How 3rd-Party Delivery Data Issues Impact QSR Franchise Operations
The OneDataSource Editorial Team
August 12, 2022
Food delivered to a consumer’s doorstep is a convenience that has and continues to be on the rise. Food delivery services like Uber Eats, Doordash, and Grubhub are expanding, merging, and investing in more growth. But the rise of delivery services has created new burdens for QSR franchise operators and their back-office teams.
Below, we put some context behind delivery services, their implications on QSR franchise operations, and how owners can smooth third-party delivery data issues to operate more efficiently.
The Rise of 3rd-party Delivery Services
Franchises operate under the tightest of margins. Before the pandemic shutdowns arrived, owners had more leeway when it came to 3rd-party delivery. They could weigh the costs of using 3rd-party delivery against benefits to their business. In some cases, they opted against it.
While owners had more power to decide if or how much they leaned into delivery, the truth is that delivery was edging into the quick-service restaurant market more and more each year. Then, the pandemic hit and that threw delivery’s growth into overdrive. McKinsey estimates the market more than doubled during the pandemic, following healthy historical growth of 8 percent.
And it’s clear why. Third-party delivery services offered a lifeline during one of the most difficult periods for operators simply trying to survive. Now that the world has reopened, we find ourselves in yet another new era for the industry. It’s one where convenience reigns, spurred by millennials and Gen Zers and solidified over the course of the pandemic. In fact, nearly a quarter of consumers say that ordering food for carryout or delivery is more a part of their routine than it was two years ago, according to Technomic.
That’s seen clearly in the growth numbers from industry tracker Black Box Intelligence. Overall, quick-service restaurants outperformed the rest of the industry, reporting same-store sales growth of 10.15 percent through the beginning of the fourth quarter 2021. That’s compared to just 2.83 percent in the rest of the foodservice world. It’s even more interesting when you drill a bit deeper. Delivery sales were roughly 85 percent higher than last year, while drive-thru sales were up 47 percent.
Delivery sales were roughly 85 percent higher than last year, while drive-thru sales were up 47 percent.
Third-Party Delivery and the Problem It Presents Franchise Operations
Delivery isn’t going anywhere. It’s a channel that has staying power. Whereas operators used to have more control over whether to lean into delivery as a channel, that isn’t the case any longer.
Here’s the truth of the matter for today’s operators: “a typical restaurant would have to increase its total sales significantly to stay at the same profit margin it enjoyed without delivery,” a statement perfectly summarized by McKinsey. Plus, the more consumers get used to convenience, the higher the expectations to deliver on it.
And that’s where part of the problem lies for QSR operators. Delivery requires a lot from restaurants. It places an added burden on the entire operation. Kitchens may need to be setup differently to accommodate delivery orders. You may need dedicated staff to manage moving orders from delivery service tablets to your point-of-sale (POS) system, depending on integrations. You must also worry about the actual packaging and how well food will stay during transit.
That’s not even mentioning the cost. Restaurant commission fees typically charge restaurants anywhere from 15 to 30 percent the price of the meal. Some U.S. cities put caps on delivery fees at the height of the pandemic, but only two went so far as to make those caps permanent. It’s a tough spot to be in, which is why McKinsey recommends “restaurants should thoughtfully balance delivery against other parts of the business to ensure that the net impact is positive.”
So, while delivery isn’t going anywhere, it doesn’t mean operators have to live with an imbalance of power. There’s opportunity to use data around delivery volume and fees as leverage, especially when it comes time to renew services or discuss fee negotiation.
With that in mind, let’s first look at the issues surrounding third-party delivery data and then what you can do about it.
Managing the data from 3rd-party delivery platforms is immensely time-consuming and challenging for most restaurant operators.
Current Challenges with 3rd-Party Delivery Data
Restaurants have rerouted resources to delivery as the channel has grown, but the strain on resources doesn’t stop within the four walls of each store location. It trickles down to every aspect of operations including back-office areas like accounting. Because along with third-party delivery services comes various online ordering platforms and third-party delivery systems.
Managing these platforms and the data that comes with it is immensely time-consuming and challenging for most restaurants. The reasons why are threefold.
Data Practices Vary by Vendor
Simply put, the way data is collected from delivery vendors varies. Some automate data, but most require hours of labor to collect and create journal entries to account for the variance between your POS data and what vendors report.
Consider how overwhelming that is for reconciliation across multiple 3rd-party delivery systems and multiple line items – delivery fees, marketing fees, sales tax commissions, error charges, and more.
Even accessing that information is difficult. For example, one third-party vendor may require you to login to their system and download a file, which you can then upload to your own system. One may have a website you can access with credentials, but then you’ll find that information cannot be exported easily. And you may even find one that delivers the data; however, it’s in a format that does not easily reconcile with your POS data.
Altogether, it ends up being incredibly cumbersome and manual to gather the data, reconcile it against your POS data, and ensure your accounting/general ledger entries are accurate.
Labor Issues Hinder EfficiencyTurnover and retention have always been issues for the restaurant industry. But over the past few years there’s been even greater strain on getting people hired and staying on staff. Seventy-eight percent of restaurant operators do not have enough employees to support customer demand, according to a 2022 report from the National Restaurant Association. Further, nearly all these operators say their establishment is more than 10 percent understaffed, which is holding them back from rolling out new digital solutions and improving employer and customer experience. The retention situation shows no sign of slowing either, unfortunately. The research shows three out of four employees plan to leave their job in the next year. Of course, this all has implications on efficiently running the business, including compounding the already cumbersome process around delivery data.
Difficulty Reconciling 3rd-Party Delivery Data
QSR operators need to have the full picture of revenue by channel to make the best decisions for the business. The difficulty in reconciling 3rd-party delivery data makes it difficult to see if that channel is helping or hurting the business.
Partly, it’s because third-party vendor discounts and refunds often do not go through your POS system. With the data unable to be directly reconciled, the variance must be manually accounted for – tying up valuable resources on mundane, time-consuming tasks.
The publication Hospitality Technology points out two additional burdens. One is the “issue of chargebacks or third parties shorting the restaurant if the customer demands their money back and that is not known by the restaurant until a deposit is light. Another issue is reconciling pricing should a restaurant charge higher prices for third-party orders to offset the perception of the delivery fee and some of the margin erosion.”
Ultimately, it becomes incredibly difficult to correctly report your delivery-related expenses on your P&L.
Operators face a whole host of challenges in this new era. Using your data to make financial and operational decisions for the business shouldn’t be one of them.
Overcoming 3rd-Party Delivery Data Challenges
Operators face a whole host of challenges in this new era for our industry. Using your data to make financial and operational decisions for the business shouldn’t be one of them.
Now, you have an outsourced service to help with this process. The power of OneDataSource’s outsourced service for 3rd-party delivery data is that it helps franchisees solve the time-consuming tasks of collecting, assembling, and booking data from third-party delivery providers. No matter if it’s stored in POS, BOH, or from a website/platform, we can complement your in-house resource by collecting data from 3rd-party delivery platforms and create the appropriate journal entries needed to perform accurate reconciliations – eliminating strain on your resources and accounting process.
Your accounting team will save hours each week and gain back time to focus on more meaningful tasks, while operators feel assured they have the real-time financial data to make the best decisions for their business.
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