Direct orders come straight from customers. The rest come through a third-party platform or delivery companies. Let’s examine why direct orders are critical to the survival and growth of a new cloud kitchen.
The cloud kitchen dilemma
Cloud kitchens are online-based restaurants and 100% dependent on technology. Consequently, they can save on operating expenses while focusing on kitchen efficiencies and making great foods.
The big problems, however, are as follows:
- The growing dependence on the third-party platforms
- Reduced margins
- Having zero control of customer relationships and data
Let’s elaborate a bit on each point.
Growing dependence on third-party platforms
Doordash, Grubhub, etc. are not just delivery services as they want you to believe. They have become the giant online restaurants that spend hundreds of millions dollars to take your customers away. Once customers land on their sites, they control which customers to send to which restaurants. Their fee structure and advanced technologies are designed to maximize their profits, not yours.
If you are simply waiting for orders from these giants, you are giving your business – and customers – away each day. At the same time, you continue to pay for rent, staff, utilities, and all the other operating expenses.
Despite the initial resistance from participating restaurants, the 30% commission cut off the top has become widely accepted. That is because every restaurant has overhead expenses that need to be paid for with or without any orders.
As a result, most restaurants impose higher prices on the delivery menu. It’s hard to know if this business model is sustainable. Everyone loses: restaurants, customers, drivers, and even the platforms who continue to lose money as they push for market share and expansions.
Zero control of customer relationships and data
The single greatest asset of traditional restaurants is customers and their relationships. Customers choose where to go based on familiarity with foods, services, staff and locations.
All of that disappear with cloud kitchens who perhaps unknowingly depend on third party platforms and orders.
The solution: Direct Orders
In order to guarantee survival and growth, cloud kitchens need to focus on building their own customer base. In addition, they need to work on shifting more orders to direct orders.
Almost all cloud kitchens start out with 100% of their orders coming from third parties. A typical 30% commission cut off the top doesn’t leave much profits for cloud kitchens, who do not have a dine-in business to make up for the loss margins. By reducing third-party orders from 100% to 90% of total sales for example, you can put thousands of dollars back in your pocket at the end of each month.
Over the course of 3 to 6 months, cloud kitchens can aim to reduce the 100% third-party dependence to half. They will not only enjoy significantly higher profits but also much happier customers.
The key to boosting direct orders
You will need to be able to:
- Optimize third-party orders
- Market to customers who order through third-parties
- Boost customer experience who order directly
- Reward direct customers
It really doesn’t have to require a lot of time. With the right tools and technologies, all the steps can be automated with little manual work.