It’s probably safe to say that third-party delivery is here to stay. After all, it’s been four-plus years since a global pandemic necessitated the service, and demand hasn’t wavered much since. Indeed, third-party delivery providers’ sales continue to grow, registering an 8% increase from 2022 to 2023, according to Bloomberg Second Measure.
This means restaurants need to prioritize delivery customers’ experience, just as they’ve done for centuries for dine-in guests. It means ensuring food is delivered fresh, and orders arrive quickly and accurately. Plenty of restaurant brands have certainly been trying to do just that. Take Carvel, for example. The ice cream company has found a way to translate its in-store experience by holding its products in freezers at -10 to -20 degrees before they’re picked up by a delivery driver, so the temperature keeps in transit.
Freddy’s Frozen Custard & Steakburgers, which generates nearly 70% of its business off-premises, has reimagined its restaurant designs to incorporate features that optimize the delivery channel. Its new prototype features a dedicated mobile pickup station, complete with a custard freezer, ensuring that product quality isn’t sacrificed for delivery orders. Operational changes have also been made to streamline off-premises business, including a revamped bagging station and shared expo counter. Executives have said these changes create more accuracy and speed for delivery orders. Meanwhile, Chick-fil-A’s newest prototype includes two lanes dedicated to mobile-order-ahead customers, with significant wayfinding features for third-party delivery drivers.
Technology has also become a bigger part of the equation to improve the delivery experience. Pizza Hut’s Dragontail Systems, for example, uses artificial intelligence to sequence the timing of each order, plan optimal delivery routes, and combine delivery orders by location. According to David Gibbs, CEO of parent company Yum Brands, the technology has driven a 7% increase in overall consumer satisfaction “due to hotter and fresher pizzas leading to improved consumer frequency.”
Of course, updated restaurant prototypes and shiny new technologies require a significant amount of capital. Yet, for some reason, independent restaurants with smaller capital structures are more than holding their own when it comes to the third-party delivery experience.
Independent restaurants are more than holding their own when it comes to third-party delivery experience.
Data shows high delivery satisfaction for indies
New research from Intouch Insight shows a clear distinction in delivery performance between restaurant chains, independent restaurants, and convenience stores that sell meals. The data was pulled from April 2024 to June 2024 and, in a nutshell, restaurants performed better than c-stores while independents performed better than chains — across the board.
The overall satisfaction with the entire delivery experience breaks down like this: independent restaurants, 91%; chain restaurants, 84%; and convenience stores, 80%. Perhaps one reason for the gap between indies and chains is their favorable markup average for delivery orders; independents charge an average of $1.25 more for delivery of their main items, while chains charge an average of $1.90.
Independent restaurants also scored high for accuracy (89%) compared to chains (83%) and c-stores (77%), as well as for food temperature with a 96% satisfaction rate versus 89% for chain restaurants and 87% for c-stores. Speed also weighed in restaurants’ favor, with 94% of restaurant guests noting they were satisfied with their delivery speed of service, versus 88% of c-store customers.
Indies vs. chains
On paper, the gap between chains and independents may come as a bit of a surprise. After all, and as already outlined, chains have made considerable investments to bolster the delivery experience. But overall satisfaction scores are 7% higher when the order is placed at an independent brand versus a chain. How are mom-and-pop establishments punching above their weight? There are a few theories, including simply having more care.
“In another study conducted earlier this year on coffee chains, we saw similar results demonstrating that scores for friendliness and employees going the extra mile were higher at regional brands compared to the large, national brands, so it’s possible that independent restaurants and smaller chains are also going the extra mile to make customers happy,” said Intouch Insight chief revenue officer Laura Livers.
That’s exactly what delivery driver Zachary Lyvers has experienced. Lyvers has delivered food for all the major third-party players for about four years in the Louisville, Ky., market.
“It doesn’t surprise me at all that independent restaurants have higher scores. I can always tell the employees care a little more because they had more skin in the game than some of the chain employees,” he said, adding that customers may also have an influence. “I think customers are probably more willing to rate independent restaurants higher than chains, too, especially in the past couple of years because they know it helps them out.”
Another explanation for independents’ delivery success may come from drivers favoring such establishments. Meredith Sandland, CEO of Empower Delivery and co-author of “Delivering the Digital Restaurant: Your Roadmap to the Future of Food,” said indies may have higher average order volumes than chains and therefore correspond with higher tips.
“If this is the case, drivers will be more willing to quickly pick up independent restaurant orders, which would have the downstream effect of hotter, fresher food reaching the guest. If the guest has a better experience, they are more likely to rate the independent restaurant higher and order from the restaurant again,” she said.
This is exactly what Lyvers experiences during his delivery gigs.
“I always drive a little further out to areas where I know there will be higher tips, and people ordering at indie shops know the expectation in tipping when ordering a larger amount,” he said.
One smaller concept that has had a tremendous amount of success with third-party delivery is Seoul Taco, which was started by David Choi as a food truck in 2011 in St. Louis, expanded to a handful of brick-and-mortar locations, and added the delivery channel in 2015. Pre-COVID, the channel used to be about 25% of sales, and now it’s over half of the business.
Pre-COVID, delivery was about 25% of sales for Seoul Taco, and now it's over half of the business.
“After everyone got into the delivery mode, it seems that no one wanted to go back,” Choi said.
Seoul Taco measures customer satisfaction for delivery, but he said this experience can be frustrating and difficult because the source of most complaints come from the delivery service versus the restaurant. Still, the success of the channel speaks for itself, and Seoul Taco has kept up with delivery demand by funneling all orders through its point-of-sale system, adjusting its packaging, and limiting its delivery offerings.
“We stay away from dishes that tend not to travel well,” he said.
The success of delivery has become a bit of a Catch-22 situation for Seoul Taco, however, and Choi is now on a mission to shift some of his delivery business back to the dining room. The hassle, he said, has become too daunting.
“We are ultimately losing the battle when it comes to keeping our customers regular without the presence of third-party apps. However, this has evolved into a landlord-like situation with these operators pocketing 15-30% of our margins,” he said. “Since so much of our sales come through this channel, it’s hard not to see it as a major downside.”
In other words, though independents score higher for delivery service satisfaction, chains likely have the upper hand when it comes to negotiating fees and pricing structures to better insulate margins. Customers, meanwhile, probably don’t realize the difference.
“In an ideal world, it would be great to have a platform that doesn't penalize the business for using the service through such high percentages. If this is resolved, we would be more willing to call attention to it with our customer base. Instead, we have to treat it as a special promotion or sort of sampling, almost marking it as more of a product advertisement than a strong stream of sales,” he said.
C-stores have entered the chat
As independent restaurants continue to figure out how to best support and sustain their third-party delivery business, convenience stores are just getting started in the space. DoorDash didn’t launch its “convenience category” until the third quarter of 2020, for example, which is around the same time most major c-store players added the channel. Perhaps the category’s newness to delivery explains why its customer satisfaction scores are lower than both chain and indie restaurants.
"Convenience stores are relatively new to delivery marketplaces like DoorDash and UberEats, so they likely have not yet learned how to deal with the complexities of third-party delivery,” Sandland said. “Over time, restaurants have responded to delivery marketplaces by making operational improvements, like how to present the menu and customizations, where to coordinate order-driver handoff in the store, dedicated pick-up parking spots, and dedicated digital lines. Most importantly, they have added tech layers, which are expensive and complex, but which solve some of the underlying problems with a third-party system.”
C-stores, however, just aren’t quite there yet. Such operational and technological refinements could eventually help c-stores better customize orders, a major driver of overall customer satisfaction with delivery. Ninety-three percent of orders placed for a restaurant had the ability to customize an order, compared to just 45% of orders for c-stores. As such, overall satisfaction for restaurant orders is 11% higher than c-store orders, according to Intouch Insight data.
"Convenience store products are more often packaged rather than made-to-order, so there are likely not as many opportunities for customization as there are in restaurants. However, if consumers are using third-party platforms to order, there is a consumer expectation of timely delivery and convenience stores will need to respond to this expectation,” Sandland said.
That said, c-stores are sprinting to compete in the delivery space, particularly as many of them work to improve their food offerings and win over more share of stomach. Lula Commerce, a managed service provider for c-stores, has added more mid-sized chain partnerships, such as Par Mar, Clipper, and Jacksons, to provide business intelligence and operational solutions that support the growing channel. Graham McAden, head of account management and customer success at Lula, said those chains have higher customer satisfaction scores in a recent benchmarking study than chains that haven’t added such infrastructure.
“Convenience chains that devote effort and resources can provide phenomenal customer experience,” he said. “Those that struggle either have a lack of resources (staffing and time) or inventory issues — either too few items online or too many out-of-stock items.”
If historical patterns are any indication, it’s worth noting that customer satisfaction scores for third-party delivery at restaurants have improved for most attributes since 2022. The exception is order accuracy, which remains at 90%. Otherwise, food temperature scores are five percentage points higher (94% versus 89%), ease of placing an order is one percentage point higher (98% versus 97%), and overall satisfaction scores are four percentage points higher than they were in 2022 (91% versus 87%). This improvement likely bodes well for c-stores playing catch-up in the space and we will therefore likely see the competition in third-party delivery continue to intensify.
