Previously I wrote about the simple rule for determining whether or not a restaurant should add GrubHub like food ordering services as a sales channel. Restaurant owners seem to have indigestion from the 10-14% per order commission these sites charge. Restaurants may be tempted to recoup these charges from customers or may feel threatened by the power of such sites. Here are some Do’s and Don’ts to help your business put these channels to work for your business.
3 Things to Do
- Consider Creative Packaging for Price Realization. You can serve well the customers you acquire through GrubHub and get better price realization through portion sizing. This is not same as the first “Don’t” below. This is about recouping some of excess consumer surplus you give away.
- Consider separate menu with premium priced items. As a simple rule customers who come through such sites have higher willingness to pay, have higher disposable income and value variety and convenience. Offer them premium products at premium prices, let them self select if they wish.
- Rebalance Rebalance Rebalance – You need to determine what kind of restaurant are you and what is your core customer segment. What percentage of your revenue do you want to come from takeout? Are there other opportunities you are forgoing because takeout business is dominating? Revisit your customer mix and revenue mix every three months and adjust accordingly.
3 Things Not to Do
- There is a restaurant in Palo Alto that charges 10% extra on takeouts – all takeouts. Resist the temptation to do that to your GrubHub customers They do not know your cost to acquire them (the 10% you pay to these channels is your cost). Such an addition is passing on costs rather than a share of your value add.
- Do not sign exclusive contract with any one site. Although it is getting very difficult with their mergers you should not let any one channel partner be the source of your takeout sales.
- Do not pay any upfront or recurring charges however labeled they are. Just like you can’t pass on your costs to your customers these sites can’t pass on their customer acquisition costs to you.