0
Increase your conversion rate - learn how to sell inside the world's biggest apps!
Learn More
×
home I
home II
home III
home IV
home v
hot
Link
Features
Our ServicesSolutionsFeature Releases

Sales Channels

MessengerInstagramGLifeShopifyViber

Automated Delivery

Grab ExpressLalamovePandago

Flexible Payment Options

BPIGCashPayMongoRoadmap
Merchants
Partners
Sales Partner ProgramList of Sales Partner

Brand Partners

GrabLalamoveBPIPayMongoGCashMayaGlobe Business
Plans
Resources
Resources
BlogYoutube ChannelGuidesSuccess Stories
Log In
contact
new
Licensing
style guide
Sign Up For Free
sd
Information
January 15, 2022

Are Food Delivery Apps Eating Away Your Profit? Here's What You Should Do

Food businesses have their work cut out for them if they want to stand out in the market. This is especially true for new market entrants who face competitors that have long been in the game and have already established a throng of loyal customers. The same can be said for struggling businesses just trying to get by in the middle of a pandemic.

One way to get a head start and bring attention to your restaurant is by partnering with food delivery apps. However, doing so comes with risks that may endanger one’s business.

It is no secret that restaurants pay handsomely to stay on the catalog of food delivery platforms. And with businesses being built around the goal of gaining profit, paying additional costs may not seem like the best thing to do.

Extra Charges

In the Philippines, restaurants are more likely to partner with leading service providers FoodPanda and GrabFood. For each order placed by a customer, restaurants give these delivery apps commission fees. An article on financial comparison website iMoney estimates that GrabFood charges 10 to 25 percent of commission per order while FoodPanda’s is much higher at 25 to 30 percent.

This means that for an order of a burger priced at PHP 125, the store owner only gets to keep PHP 93.75 if he or she is under contract to deduct 25 percent for commission. The deducted PHP 31.75 is already one-fourth of the order value—money that restaurant owners could have kept for themselves otherwise.  

Where Do These Fees Go?

The reasoning behind commission fees is not unjustified.

Grab Singapore said in a blog post that the majority of the merchant commission collected by GrabFood is being given to delivery partners to ensure their riders earn enough money. This is only fair, the company explained, as riders travel from where they are to the merchant outlet, wait for the food to be prepared, and send it to the customer’s doorsteps.

The remainder covers GrabFood’s operating costs, including delivery partner insurance, cashless payment transaction costs, product and service improvements, and backend manpower.

Part of the money made by food delivery apps are also used to finance advertising efforts that increase the visibility of food joints and ultimately drive traffic to their stores.

Digital marketing is vital to a food delivery app’s strategy. FoodPanda, for instance, uses social media platforms to launch ads on Facebook, Twitter and YouTube to maintain visibility and brand value. Its promotional efforts also extend to television, radio, cinema, magazines, newspapers, train and bus stations, and shopping malls.

In Thailand, GrabFood launched a two-month campaign in 2020 titled “Free Your Hunger.” The initiative was aimed at doubling GrabFood customer numbers and sales by restaurant partners looking to rebound from the pandemic. It highlighted 100 signature dishes from 75 restaurants and offered free delivery service in a radius of three kilometers and 50 percent discounts through 30,000 deals.

‍

Grab Thailand launches mega campaign “Free Your Hunger.” Photo from: Grab Press Centre

‍

Offsetting Food Delivery App Costs

Given the additional costs that come with food delivery app partnerships, it is only normal to think twice before jumping on the bandwagon. But that indecision should not be based off the fact that these platforms take away from one’s revenue because they are not actually meant to serve as primary revenue channels.

Perhaps in the short term they can provide a sense of profitability. But as small businesses are learning, this is  not sustainable, with some even going as far as saying that food delivery apps are killing their business due to onerous fees being pocketed by the app owners.

Restauranteurs recently took to social media to air their grievances over additional charges set by food delivery apps on top of the commission that they have to pay as the pandemic continues to drag on. Calls for boycott and concerns about delayed invoices and payment remittances, unreasonable cancellation of orders and the high platform fee were also raised. These are just a few of the risks that they take with them being at the mercy of food delivery companies.

While there are obvious disadvantages, restaurant owners can still leverage their partnership with food delivery apps by viewing them as customer acquisition channels and not revenue drivers. It’s all about leveraging the visibility and reach provided by platforms like FoodPanda and GrabFood to introduce one’s brand and encourage customers to order directly from them or their physical stores.

This is the more sensible approach with there being only a limited number of offerings that can be displayed on food delivery apps. Restaurant owners should treat such apps as launchpads and operate within them as if they are on a trial period. They should be leveraged to give customers a taste of what they have to offer and tease them of what to expect should they visit in person. If it works out, businesses will have the confidence to stop relying on food delivery platforms and no longer be burdened by additional costs in the long run.

During a pandemic, this might just be the best way to acquire customers. Traffic analysis data provided by Similarweb shows that 3.2 million users logged in on FoodPanda in December 2021. In comparison, GrabFood registered 1.6 million users in the same month. These are big numbers and something restauranteurs need to take advantage of considering the reduced organic in-store traffic in these times.

To make the most of a restaurant’s exposure in food delivery apps, owners can include a thank you note or even a copy of their menu in their food packaging to highlight meals that are available for dine-in customers only. By converting customers acquired from food delivery apps, business owners are able to offset the investment they made in the first place. Accelerating this process makes it so that businesses are able to wholly capture profits and avoid losing money as they send out food.

ChatGenie, an emerging end-to-end online store platform, goes the extra mile to ensure its registered merchants are able to forge a relationship with new customers. Welcome kits provided by ChatGenie include a note encouraging customers to order directly from the company’s stores inside Messenger, Instagram or GCash. Customers can scan the QR code on the note to purchase items from the merchant’s online sales channels.

Back to Blog
latest news

Related Post

How Fitness First offers Gym Access Online with ChatGenie

The pandemic has awakened an urge for fitness and now that gyms, workout studios, and the like have finally reopened, interest in fitness is at an all-time high. Take advantage of that trend and make subscriptions available right inside the world’s biggest apps with ChatGenie.

February 2, 2023
Case Studies

In-Store Commerce Best Practices

Now that physical stores have opened and consumers are heading out to resume their lives pre-pandemic, eCommerce has taken quite a hit in its rapid growth. However, just because in-store shopping is possible doesn’t mean online selling is going anywhere. Digitizing your business is still a must to ease transactions and offer the best possible shopping experience for your customers.

January 30, 2023
In-Store Commerce

In-App to In-Store: How ChatGenie is Merging Online and Offline Commerce

ChatGenie’s In-App Commerce enabled businesses of all sizes to transition their offline operations online.

January 23, 2023
View Blog

Sell inside the biggest apps now - it’s fast, free, and easy.

SIgn Up For FREE, No Credit Card Required!

products

HomeFeaturesMerchantsPlansGrab Express IntegrationBPI IntegrationGCash IntegrationLalamove Integration

Company

About UsPressTeamCareers

Support

ResourcesOur CommunityBlogChatGenie Expert AssistanceBecome A Sales PartnerFAQ

COntact Us

Unit 20 I-Park Center, Amang Rodriguez Ave. Manggahan, Pasig City

Copyright @ 2022 Chatgenie. All rights reserved.

Terms Of UsePrivacy Policy