UK Takeaway Platforms: Profit or Just Promotion ?

Hello, wonderful hospitality community!

In today's fast-paced world, takeaway platforms like Deliveroo, Uber Eats, and Just Eat have become ubiquitous. For many independent restaurants, cafes, and bars, they represent a significant channel for reaching customers. But the big question remains: are these platforms truly profitable, or are they simply an expensive form of advertising?

Having spent over two decades in the trade, I've seen firsthand the impact these platforms can have, and it's rarely black and white. Let's delve into the advantages and disadvantages to help you decide how much you can, or should, rely on them.

The Allure: Why Platforms Attract Businesses

One of the most compelling advantages of partnering with these takeaway giants is their massive reach and ability to acquire new customers. These platforms boast millions of users, providing access to a vast potential customer base that would otherwise require significant marketing spend and effort to reach. Many customers browse these apps without a specific restaurant in mind, making the platforms powerful "discovery" tools for new businesses seeking initial exposure. For the customer, the convenience is undeniable: a few taps, and food is on its way. This ease of ordering drives demand, and if your business isn't present on these platforms, you risk losing out to competitors who are.

Beyond customer acquisition, these platforms also offer a significant benefit by handling delivery logistics. For businesses that don't have their own delivery drivers, they provide the entire infrastructure, from riders to routing. This outsourcing saves on vehicle costs, insurance, wages, and valuable management time. Their optimized systems can often deliver food faster and more efficiently than an in-house team, particularly during peak hours.

Furthermore, these platforms offer a distinct form of marketing and brand visibility. Your restaurant gains a presence on a highly popular app, essentially a digital shop front that's always accessible. The platforms themselves invest heavily in advertising, which indirectly benefits all listed restaurants. While customer reviews can be a double-edged sword, positive feedback on these platforms can build trust and attract even more customers.

The Reality Check: Disadvantages and Profitability Concerns

Despite the advantages, the reality of working with these platforms comes with significant challenges, especially concerning profitability. The high commission rates are often the primary pain point, typically ranging from 15% to 35% (or even more for some services) of the order value. For businesses already operating on tight margins, this can decimate profitability. Consider that if your average profit margin on a dish is, say, 20-25%, a 30% commission means you're effectively losing money on every sale through the platform, or at best, breaking even before factoring in other overheads.

Another major concern is the loss of direct customer relationship. These platforms typically own the customer data, meaning you don't get direct access to customer email addresses, phone numbers, or detailed preferences. This makes it challenging to build direct relationships, implement loyalty programs, or run targeted marketing campaigns. Consequently, the customer's primary relationship might become with the platform itself, rather than your unique brand.

Operational demands and control also present hurdles. While convenient, managing multiple tablets and ensuring seamless integration with your kitchen operations can be challenging, particularly during busy periods. Takeaway also necessitates specific packaging, which adds to your operational costs and can further impact profit. Moreover, once the food leaves your premises with a third-party driver, you inevitably lose some control over the final delivery experience and food temperature.

The competitive environment on these platforms often leads to pricing pressure and discounting. To stand out, restaurants frequently feel compelled to offer promotions, further eroding already thin margins. Historically, some platforms have even included "price parity clauses" that prevent restaurants from offering lower prices on their own direct channels, limiting crucial pricing flexibility.

Finally, there's the question of reliability and dependence. While these platforms became a lifeline for many, especially during lockdowns, relying solely on them is inherently risky. Fluctuating commission rates, algorithm changes, and potential service disruptions can all impact your business. It's highly unlikely you can rely only on these platforms to "make ends meet" profitably in the long term, unless your cost structure is exceptionally lean or your product boasts very high margins. For most, they serve as a supplementary revenue stream rather than a primary one.

So, Is It Just Free Advertising, or Can It Be Profitable?

It's a bit of both, though referring to it as "free advertising" is a misnomer, as you are indeed paying a significant fee (the commission) for that visibility.

Yes, they absolutely function as a marketing tool, providing visibility and customer acquisition that would be expensive to replicate independently. For new restaurants, they can be critical for initial traction.

As for profitability, for many, the direct profitability per order is minimal, or even negative, once all costs (food, labour, rent, and commission) are factored in. The real profit often comes from two key areas: increased volume (if the platforms drive enough incremental sales that you wouldn't otherwise get, and your fixed costs are covered, then even a low-margin sale contributes to overall profit) and converting to direct orders (the ultimate goal for many smart operators is to use the platforms for discovery, and then encourage those customers to order directly next time via your website, phone, or in-person pickup, where you retain 100% of the revenue).

The Customer's Convenience vs. Restaurant's Marketing Tool

This is where the balance truly lies. For the customer, these platforms are undeniably about convenience, choice, and speed; they have fundamentally changed consumer behaviour. For the restaurant, they are a powerful marketing and sales channel, but one that comes at a significant cost. They allow you to participate in the "convenience economy" that customers now expect.

My Take: A Strategic Approach is Key

From my experience, the key is not to view these platforms as your sole sales channel, but as one part of a diversified strategy.

Firstly, understand your numbers meticulously. Calculate your true cost per order on these platforms and know your break-even point for every dish. Secondly, optimise your menu specifically for delivery. Not all dishes travel well, and some offer better margins than others. Focus on items that are both profitable and maintain quality during transit. Thirdly, and crucially, drive direct orders. Actively encourage customers acquired through platforms to order directly next time. This can be achieved by including flyers in bags, offering loyalty discounts for direct orders, and promoting your own website and phone number heavily. It's also worth remembering that you can negotiate commission rates, especially as your volume grows and you become a more valuable partner to the platform. Finally, and perhaps most importantly, don't over-rely on them. While they offer reach, don't let them dictate your entire business model. Maintain a strong dine-in experience and robust direct takeaway channels.

In conclusion, UK takeaway platforms are a necessary tool for many independent hospitality businesses. They offer unparalleled reach and convenience, but at a substantial cost to profitability. The smart approach is to use them strategically as a customer acquisition and marketing tool, while actively working to convert those customers into direct orders to secure your long-term financial health.

What are your experiences with these platforms? Share your thoughts in the comments below!

Warmly,

DineLogix Hospitality Consultancy