The food service sector has undergone dramatic changes in recent years, primarily due to the growth of online ordering and delivery platforms such as e-food, Wolt, and Box. Data from Business Interval shows that the high commissions charged by these platforms, combined with rising energy costs and staff shortages, are the main factors driving many small food businesses to shut down. Despite offering greater accessibility to consumers and helping businesses reach a broader audience, these platforms impose commissions that can range from 30% to 55% of the store’s revenue.
Business owners in this sector must find strategic solutions to survive and grow in this challenging environment. Below, we analyze the main challenges and propose solutions for small restaurants to face the current situation.
Challenges for Small Food Service Businesses
Excessive Fees from Delivery Platforms:
Food ordering and delivery platforms charge commissions that range from 30% to 55% of a business’s revenue. This makes it extremely difficult for any business to survive, especially when factoring in increased operating costs (e.g., electricity) and staff shortages.
In addition to high commissions, the platforms maintain control of the customer base, limiting the business’s direct contact with its customers and reducing the potential for building customer loyalty.
Competition and Monopoly of Platforms:
Platforms have captured a significant share of the market, and in the future, they may use their power to impose even stricter conditions or create their own food service outlets. This would create even more pressure on small businesses.
How Can Small Restaurants Cope?
There are several strategies that small restaurants can adopt to reduce their dependence on delivery platforms and improve their competitiveness:
- Independent Delivery: Restaurants can reduce their reliance on platforms by organizing their own delivery, either through hiring staff or partnering with local couriers.
A key advantage is direct contact with customers, which enhances the ability to build loyalty and offer special incentives, such as discounts for direct orders. - Develop a Hybrid Model (Dine-In and Delivery): Creating restaurants that combine dine-in services with delivery can reduce dependence on take-away and platforms. This way, businesses can attract customers for both dine-in and delivery.
Attracting customers to the physical location through special offers (e.g., happy hours or “third order free”) can also increase customer loyalty. Additionally, businesses can invite customers to participate in activities like cooking workshops or healthy eating classes for children. Furthermore, preparing homemade meals at attractive prices or offering meals for local business staff can help increase local foot traffic.
- Strategic Partnerships and Collaborations: Small businesses can form local partnerships or cooperatives that provide comprehensive order management and delivery solutions. A local delivery cooperative could serve multiple businesses and offer more affordable services.
Collaborations with local delivery companies or postal services can create an alternative and more cost-effective solution compared to large platforms. - Investment in Technology and Marketing: Creating modern e-shops and accepting direct orders through digital tools can help small businesses avoid middlemen and reduce their reliance on platforms.
Using social media (e.g., Facebook, Instagram, TikTok) to communicate directly with customers can increase the business’s visibility and reduce advertising costs. - Developing a Business Plan with Delivery Capability: Developing a well-structured business plan that includes delivery, staff training, and marketing strategies is crucial for survival in the food service industry.
Working with business consultants can help optimize operations and ensure long-term business growth. - Incentives for In-Store Pickup: Businesses can offer incentives for customers to pick up their orders from the store, reducing delivery costs and strengthening personal relationships with customers.
- Focus on Quality and Customer Service: The quality of products and service can serve as a differentiating factor from competitors. Providing a unique experience can attract new customers and foster loyalty.
- Adapting to New Technologies: Utilizing innovative solutions, such as automated ordering systems or robotic delivery systems, can help reduce operating costs and increase efficiency.
Conclusion
The high commissions charged by delivery platforms present a significant challenge for small restaurants. However, there are strategies they can adopt to enhance their competitiveness and survive in a difficult business environment. Developing comprehensive business plans, training staff, keeping up with and integrating new technologies, and collaborating with other local businesses are essential steps for tackling existing challenges.
Additionally, focusing on creating a unique customer experience, which could involve engaging customers in the food preparation process or organizing special activities like cooking workshops and healthy eating lessons for children, can attract more customers to the physical location. Offering meals at attractive prices or even providing meals for local business staff are also effective ways to enhance local foot traffic.
Ultimately, differentiation through quality, personalized service, and connection with the local community will be critical to the survival and growth of small restaurants in an increasingly competitive industry driven by delivery platforms.
