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Driving Profitability in the Third-Party Delivery Space

November 4, 2019

Original content c/o: National Restaurant Association

Beverages present an untapped, incremental revenue opportunity for restaurants leveraging third-party delivery. 

Everyone’s talking about the disruptive effect third-party delivery has on traditional restaurant operations – but not much has been written about how beverages fit into the equation.

According to the marketing team at The Coca-Cola Company, 70% to 80% of on-premises restaurant transactions include a beverage in the order, compared to only a small fraction of third-party delivery orders. “When it comes to beverages and delivery, restaurants are facing a largely untapped opportunity – which they can unlock by successfully competing with the home refrigerator,” says Melissa Fahs, vice president, foodservice digital commerce, Coca-Cola North America. 

Third-party delivery offers many benefits to restaurants, including incremental sales, access to new diners and new markets, and the creation of new consumer occasions and need states – but it also brings increased costs in the form of commission fees. Beverages are a critical profit engine for restaurants that can help offset these fees. 

Last year The Coca-Cola Company set out to uncover strategies that could drive beverage sales in the delivery space. Working with 10 national restaurant brands and about 50 regional players (representing hundreds of locations), the company conducted a series of experiments over about eight months to increase the frequency with which beverages are included in delivery orders, and to raise check averages through effective upselling. Working with its internal data analytics team, the company made sure each experiment was carried out at no fewer than 25 test locations and that each test also included control sites. 

“This is an industry-wide challenge,” says Kristin Bitter, the company’s vice president, industry affairs. “Everybody wins if we can increase beverage orders in the delivery space.” With results gathered and analyzed, the company developed strategies to help restaurants optimize the third-party delivery occasion, captured in an easy-to-remember “ABCDE” format. 

“Each strategy is effective on its own, but they work best together,” Bitter says. Without question, the success of these strategies hinges on a healthy partnership with third-party delivery providers, she adds. The strategies are also applicable to restaurant-owned digital platforms.  

Here are the ABCs … 

Assortment: This means featuring the right assortment of beverages for your location’s clientele. Highlight unique beverages that you won’t typically find in the fridge at home. Feature them prominently, with images and descriptions.

Bundle: Pair each entree with a beverage to make it simple for customers to order the combination with one click rather than having to click through to the drinks section and order a la carte. Put bundles first in your online menu lineup.

Capture the upsell: Activate suggestive selling within delivery platforms. All third-party delivery platforms have different ways of playing up special orders. Work with them to add beverage recommendations to the order flow or serve up a beverage reminder at checkout. “It’s the classic ‘would you like fries with that?’ approach,” says Fahs, “or the impulse buys at the grocery checkout. Timing and placement are everything.”

Data: Partner with the third-party delivery provider to mine ordering data for insights, such as which items are most popular or how products perform in different dayparts. Use what you learn to tailor online menus to grow transaction size while delighting the guest.  

Execute marketing: Again, a good relationship with the third-party delivery provider is key for effective marketing. Once menus are optimized, consider promotions to drive consumer awareness and engagement. “Remember, this is an occasion anchored in consumer convenience, so keep it simple,” says Billy Koehler, digital director.   

Koehler adds that the biggest challenge restaurant companies will face in implementing these strategies is figuring out what real estate each delivery platform has to offer and the technical challenges of meeting different platform architectures. “These providers are technology companies,” he says. “Although most don’t come from the restaurant industry, they are eager to learn and adapt.”

This article brought to you in partnership with The Coca-Cola Company.