Third-party platforms and marketplaces are not new to the restaurant industry, but as their long-term impacts become increasingly clear (and ominous), more and more restaurant franchise operators are asking: Do we really want to be chained to them?
The opportunities sparked by third-party platforms like Grubhub, OpenTable, Yelp, and others come at a cost—and we’re not just talking high fees and commissions.
Third-party platforms have a knack for profiting off your restaurant data, while not giving you access to it at the same time. They keep you on the hook, leaving you powerless to take command of your business growth.
If platforms are going to profit off your data, you should too.
We’ll walk you through the ways tech platforms are profiting from the data you provide them—and not offering something of equal value in return, including:
- The bait-and-switch of third-party delivery orders (+3 scandals from 2019)
- How OpenTable charges multi-unit restaurants for their own customers
- Why ghost kitchen platforms will inevitably compete against you
Then we’ll share the one way you can gain the benefits of third-party platforms and keep all your customers and data so you can build a sustainable business that’s not reliant on third parties.
Third-Party Delivery Platforms Offer Orders, But At What Cost?
You know the pitch. “We’ll find delivery and takeout customers for you.”
Restaurant delivery platforms market themselves as order-machines. You join, gain access to their network of customers, and voila: more orders. At first, it appears that orders are your primary conduit of doing business.
But it’s not true.
Restaurant businesses are built on customer relationships, not orders.
Chasing orders puts on an endless marketing treadmill of one-time transactions. But when you win over customers, they spend more, return more frequently, and become evangelists for you. It’s no wonder why the famous Bain & Company study showed that a modest 5% increase in customer retention can increase annual profits by 25% or more.
Extrapolate this over dozens or hundreds of locations, and we’re talking top-tier growth potential.
Delivery platforms have controlled the conversation so that it almost seems reasonable to give away 20-30% of each order as commission, but when they don’t give you access to your customers, they’re holding back something far more valuable than just another order.
And by the way some platforms have behaved in recent years, they’re fully aware of it.
Grubhub’s Fake Websites
In the summer of 2019, Grubhub was caught creating thousands of fake websites and phone numbers for restaurants on the marketplace. The intention was to capture customers who thought they were ordering directly from the restaurant, and bring them into Grubhub’s ecosystem—all while charging the restaurant higher fees.
Many of these restaurants already had their unique websites, and Grubhub used alternative URL structures that appeared genuine to innocent searchers. So while restaurants already had loyal customers, Grubhub went out of their way to capture them, then billed the restaurant to access them.
Grubhub Charged Restaurants For Customer Phone Calls
Another scandal from just months earlier had Grubhub charging multi-unit restaurants hidden fees in their monthly bills for phone calls that didn’t result in orders. The contracts explicitly stated that Grubhub would only charge for calls that resulted in orders, which made this practice a clear violation that’s currently being battled in court.
Contract violations aside, it’s more validation that for Grubhub, it’s more important to own the customer than just the order.
A Third Grubhub Controversy, This Time With Yelp’s Help
To round off the trio of scandals from the summer of 2019, Yelp and Grubhub teamed up to replace restaurant phone numbers on Yelp with Grubhub-owned phone numbers without the restaurants’ permission. Grubhub then charged restaurants a marketing fee for each call.
When the switched phone numbers were discovered, restaurant owners were rightly irritated. Mohammad Zaman, Co-Owner of Afghan Kabab and Grill House in Brooklyn, put it bluntly:
“It’s not fair because this is our customer who called directly into our restaurant. It’s a trick.”
Grubhub and other third-party platforms recognize that it’s the customer, not the order, that’s the real prize.
OpenTable Will Sell Your Customer Data Back To You
In early 2019, OpenTable revised their waitlist management platform’s pricing model. As part of the new model, OpenTable removed all customer identification data from the restaurant’s view, most importantly: emails and phone numbers.
Pre-2019, restaurants could remarket to customers that reserved tables via OpenTable. The whole idea behind OpenTable was that it was a customer discovery platform, so restaurants believed they were well within their rights to turn discovered customers into loyal customers by remarketing to them via email. But this new policy change—pitched as a customer privacy measure—cut restaurants off from that opportunity.
To add insult to injury, OpenTable was actively out-bidding restaurant partners in Google Ads. This meant OpenTable was capturing already-loyal customers looking for their favorite restaurants, having them book through OpenTable, then charging the restaurant for those reservations.
Facing significant backlash and negative press, OpenTable quickly revised its pricing model again, this time offering to sell restaurants their customer data for $200 to $1,000 per location. To restaurants big and small, the initial “privacy” argument now felt more like a thinly veiled attempt to profit from their customer data—even customer data they had earned outside of OpenTable’s platform—rather than genuinely protect diners.
Even marketplaces as innocuous as a waitlist app will compete against you when the incentives are there—but there’s a way you can use those marketplaces and keep your data. More on that in a moment.
Ghost Kitchen Platforms: The Next Big Data Play
Two years ago, hardly anyone knew what a ghost kitchen was. Today, almost every restaurant in the country has pivoted to some type of ghost kitchen-esque model that’s heavily dependent on delivery and takeout.
But even before the COVID-19 crisis, ghost kitchens were on the rise, largely thanks to Travis Kalanick, former co-founder of Uber, and his new venture: Cloud Kitchens. Kalanick raised a record-breaking $400 million to launch his new ghost kitchen empire.
Essentially, Cloud Kitchens is buying up large swaths of real estate, building out commercial kitchens, then licensing the space to food startups and existing franchises that want to experiment with new delivery-only concepts or expand their reach.
But when you compare Cloud Kitchens’ early moves to those of Uber, it’s clear that Kalanaick isn’t trying to be a real estate mogul—he’s after the customer data.
Uber’s growth path was enabled by using wild amounts of investor funding to undercut existing cab fares. This allowed Uber to acquire scores of customers looking for cheaper rides. It’s not sustainable long-term—and Uber still isn’t a profitable company—but it doesn’t matter. Uber runs 3,000,000 trips per day, and you can bet they’re using all that data in clever and more profitable ways (like UberEats).
Cloud Kitchens looks to be on the same path. With a blend of cheap kitchen space, powerful software, and capital, Cloud Kitchens is already starting to undercut existing real estate markets, making it easy for restaurants of all sizes to capitalize on lower-investment opportunities.
It begs the question: what will Cloud Kitchens do with all that data from restaurant tenants?
The answer has already been given to us.
Ghost Kitchen Platforms Are Starting Their Own Ghost Kitchens
Echoing the moves made by Grubhub and OpenTable to compete against partner restaurants and capture their customers, ghost kitchen platforms are already starting to compete with their tenants.
In late 2019, Grubhub partnered with Bon Appétit to open a Chicago-based ghost kitchen that features some of the food publication’s most beloved recipes. Weeks later, we learned that UberEats was experimenting with a Rachel Ray ghost kitchen partnership. Over in Europe, the restaurant delivery app Deliveroo is launching its own ghost kitchen brands—this one’s the most transparent data play.
Leaked investor slides reportedly reveal that Deliveroo knows how to cut food costs by 50% in their own ghost kitchen brands, doubling their profitability. And where do you think they learned how to do that, if not from the 80,000 restaurants on the Deliveroo platform?
In each of these cases, we see platforms and marketplaces following the same path:
- Attract tens of thousands of restaurants to their space
- Capture restaurant customers and data, then learn from it at scale
- Launch self-run concepts that compete directly with marketplace partners
It’s AmazonBasics all over again.
Third-Party Platforms Are Here to Stay, So Here’s How to Use Them and Keep Your Customer Data
As much as we’d all love to escape third-party platforms and marketplaces altogether, in most cases it’s just not feasible. Even though 70% of customers prefer to order directly from restaurants, the prevalence of delivery, waitlist, and other platforms can’t be ignored.
So you’re stuck between a rock and a hard place: the marketplaces provide real value, but surrendering your customer data is shooting yourself in the foot long-term.
It’s especially true for growing multi-unit restaurant brands. Not owning your customer data means you’re severely stunted in your ability to nurture brand loyalty for a huge segment of customers. It’s a bottleneck enough for one location, but across dozens, it’s a major constraint to growth and resiliency.
This is one of the big reasons we built HungerRush: to give multi-unit restaurants access to marketplaces and platforms without surrendering your customer data.
HungerRush is a comprehensive Restaurant Management System (RMS) for franchise and multi-unit restaurants that gives you full power to collect, analyze, and use your data—even when you partner with marketplaces like DoorDash and others.
Since no two restaurants are the same, we build integrations with a variety of partners that give you power over your data. It’s the best of both worlds!
For example, when you offer delivery and takeout from your own website or mobile app, you can leverage DoorDash’s network of delivery drivers so you don’t have to worry about managing the delivery logistics. You get on-demand delivery fulfillment—and you get to keep all your customer data.
We firmly believe multi-unit restaurants that take command of their customer data have an accelerated growth curve over restaurants who don’t actively try to retain it.
- They’re closer to the customer
- They can market and generate loyalty more effectively
- They’ll be resilient when marketplace partners compete with them
Ready to take command of your business? Watch our on-demand webinar for real-world examples of how the HungerRush RMS helps you integrate systems in new ways and take command of your restaurant operations like never before.
See you there!