You’ve set a goal – you’re going to grow your top line sales by 5% in the upcoming quarter. Obviously butts won’t fill seats by simply wishin’ and hopin’ so you put your Google skills to work and start researching marketing strategies online. You see a daily deal service exploiting “hard data” on their expertise in increasing sales and it seems as though the heavens have opened up! With their assistance you’ll not only reach your goal, but you’ll crush that thing so you immediately get to wheelin’ and dealin’.
Pause for a second: Did you just make a standout choice for your business or did you do yourself more harm than good?
In our previous post we dissected the most common types of deal/delivery companies we’ve seen restaurants utilize in attempt to drive sales and plump up that bottom line. We also left you with a few questions to mull over (which you can find here). After reviewing the ins and outs of these companies, it’s clear that inking any marketing type deal yields much risk, but what’s the reward? For many restaurants, the reward of more customers walking through the door far outweighs the risk that taking a hit on fees and deep discounts may have on their operation… they’d spend those dollars on traditional marketing elsewhere right? So really, what’s the harm in signing on that dotted line?
As an owner/operator, you have a cash management strategy in tow. Let’s take a look at how a deal/delivery service may fit within your budgeting and cash management strategies, or in some cases, completely annihilate them. Let me be clear: we’re not saying all deal/delivery services are bad for your business. What we are saying however, is that it takes some serious food for thought to make certain the shoe fits, and a little math to find out who gets the real deal.
Since we all know cash is king, let’s first look at how these types of deals may affect your cash flow. It’s essential to analyze the fees that are involved and to do some calculations – we’ve said it before – math doesn’t lie!
Let’s say a customer places an order with you for a $10 burger, from a delivery service; including tax you’re ringing in $10.80. Now average in 20% fees deducted from your sale price and you’re looking at $8.64 on that burger, minus the other $0.80 in sales tax you’re still on the hook for. Do the math and that $10 burger just dropped to a $7.84 burger…. Now your 32% food cost just hit 41%. So you’re looking at a about a 25% discount for your work, with the possibility of waiting a full month to even get that money since most of these services deposit your cash far after the original sale.
So what other additional costs should you consider? If you choose to use a delivery service you may also need to factor in the costs of to-go packaging and any additional marketing materials to accompany the food upon arrival; targeting to bring those customers in to your brick and mortar location.
So maybe a deal/delivery service can fit in with your cash management and budgeting strategies, but does the shoe fit? Keep in mind, you’re not the one delivering product. If your gourmet burger and hand cut fries arrive mangled and soggy, your customer isn’t going to consider the delivery service – THEY BLAME YOU! My point? What effect might this have on your brand?
Does your menu even lend itself to delivery? There are certain foods necessary for consumption immediately after being cooked while there are others that could possibly survive a 30 minute car ride in its own personal sauna. If everything doesn’t travel and hold well, maybe you don’t allow full access to your menu. If you need to test it – fire a dish, put it in your normal to-go packaging and then let it sit for 30 minutes – open your container and test it. Most of these companies will allow you to limit your menu available for delivery. Ensure you’re always putting your best foot forward if using a service like this.
Finally, ask yourself, will this ultimately drive foot traffic to my restaurant or is the consumer only coupon shopping?
The type of customer you bring in to your business matters. You have your regulars and you don’t want that diluted to one-time coupon clippers. Remember your goal is to always get customers to come back, brand loyalty being key to your survival. So if you can turn a onetime daily dealer into a success story of a loyal customer, then get creative and include some sort of incentive to get them to come back again – then you track your success rate from that. Remember, you don’t have to continue to offer the service if it doesn’t work for YOU!