Chaskify | New food delivery app keeps restaurant owners from driving away
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New food delivery app keeps restaurant owners from driving away

New food delivery app keeps restaurant owners from driving away

On-demand food delivery is exploding. With it comes pressures on small restaurant owners to dash into deals with big names like UberEATS.

No wonder food delivery app technopreneurs are pushing adoption. Nearly 40 start-ups received funding since 2011, according to CB Insights. Over 12 months ending in June 2017, U.S. restaurants did a whopping $16.5 billion in delivery sales. Non-pizza delivery increased 33 percent, according to NPD Group/CREST. So, it is a gold rush for those peddling their apps to local pizza joints.

But statistics are so much hype if the restaurant owners report they are losing margins. The commission’s restaurateurs pay can be 30 percent per order—plus the need to add staff to keep track of multiple devices on their counters.

Brian Reccow, the partner at San Francisco-based Presidio Pizza Company, told Reuters his company will “cull the herd” of delivery tablets at the restaurants. The costs per sale continue rising despite volume. So, while the online visibility is great, it has become a race to the bottom, profits-wise.

Look under the hood: Real costs of food delivery apps

In understandable haste to get with the program, restaurant owners partner with food delivery app providers assuming volume will make up the difference. But they soon learn that a delivery customer does not equate to a future dining room patron. Once that reality sets in, it is time to do a cost-benefits analysis of your on-demand food delivery app. It must stand on its own two feet in terms of profits per order, day in and day out.

Traditional apps try to keep it simple, charging the restaurant 15, 20 or even 30 percent per order. Our goal is to disrupt the model with a more pragmatic approach. But it takes a little napkin math to illustrate the difference.

Let’s look at three different apps and pretend they are for the same restaurant, Zamboni’s. This quaint Italian place has an average bill of $30 and, within a couple weeks of using food delivery apps, is doing 20 deliveries a day from its one location.

Let’s look how it adds up from the owner of Zamboni’s, open 365 days a year…

Food Delivery App DeliveryDudes.com UberEATS.com Chaskify.com
20 deliveries at $30 $600 $600 $600
App’s percentage 20% 30% 0%
App’s charges/day ($120) ($180) ($2) Flat fee
Profits/day $480 $420 $598
Profits/year $175,200 $153,300 $218,270

With our flat-fee model, we’re basically saying to Zamboni’s, “Our app is like a utility. Cover my costs to run the app and everyone is happy—and you’re still competitive with the standard $5 delivery charge to hungry consumers.”

How do we deliver such goodness?

Our co-founder Dmytri Byk looked at what has been a fundamentally flawed—but profitable—business model for app providers. Riding on the backs of restaurant owners, taking 30 percent of each bill, definitely fulfilled the software folks’ appetites.

Looking from the restaurant owner’s perspective, as well as the real costs of a driver, we saw an opportunity to flip the model. Knowing the restaurant industry and a day in the life of a driver, we makes sure drivers get paid while the restaurants get more margin on food delivery.

Plus, our free downloadable app offers fleet management options, so that owners can use different ways to track and pay drivers to keep everyone on the road and smiling.

Certainly, it’s a brave new world in food delivery applications. And as the world turns, have your calculator handy next time a food delivery app provider comes knocking! With our flat-fee model, we’re basically saying to Zamboni’s, “Our app is like a utility. Cover my costs to run the app and everyone is happy—and you’re still competitive with the standard $5 delivery charge to hungry consumers.”

 

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