Self-delivery at any meaningful scale tends to get written off as too complicated or too expensive. Restaurants need to figure out insurance, the technology to route drivers, more technology to make sense of the in-restaurant operations, and then they have to hire drivers. In short, it’s a lot.
But it’s getting easier, as Ido Levanon, CEO of Dragontail Systems says.
“Most of the mom-and-pops use third-party, they didn’t even think of self-delivery, they didn’t want to get into these logistics,” said Levanon. “COVID pushed many to think about it.”
Up until 2020, the overall portion of delivery remained pretty small. Hovering in the single digits for the vast majority of the restaurant industry, especially on the independent non-pizza or pan-Asian cuisine side of things. As delivery surged through the pandemic era, those third-party users saw more of an impact from the aggregator orders. At a certain level, there’s a breaking point where all those logistics and costs associated with doing self-delivery start to be worthwhile.
“As soon as more than 20 percent of your business is delivery, then you should start considering using your own driver, even if it’s just one or two. We see the trend more and more. And third-party drivers, there are all those issues like those in California, they’re not cheap anymore,” said Levanon, referring to the impact of AB-5 on delivery prices for restaurants and consumers.
While the big providers won the battle for Proposition 22 on the ballot, they are facing their own margin pressures from legislation that is passing through to everyone along the delivery chain.
He said it’s the same story seen in major brands like McDonald’s. It started delivering exclusively with Uber Eats, then opened up to the other providers in 2020. In very active delivery markets like Asia and Israel where Dragontail is based, McDonald’s is already doing its own delivery via its McDelivery program.
Now, technology to do self-delivery efficiently is within reach of almost any restaurant operation. Levanon points to Dragontail as one of many companies out there along the delivery chain. Dragontail, among others, boasts the ability to be a one-stop shop for restaurants seeking to manage their own deliveries—but with a little technical savvy operators can plug into APIs and build their own delivery technology stack as well.
Levanon said the ideal solution for many small operators is a hybrid model.
“The ultimate solution for any restaurant is use your own drivers, but during peak times tap programmatically into third-party. That’s what we offer and it’s a great solution. It maximizes your own drivers, then when you don’t have enough it will basically programmatically look for the closest third-party driver, the price, and the location of the driver,” said Levanon.
Having AI behind the scenes is nice, and a reason Yum Brands approached Dragontail with an acquisition offer (which Levanon said is still in the works). It is, however, doable without the sophisticated AI via the third-party white-label or delivery-only solutions that originate on a company’s website or ordering app.
There are other perks beyond the margins, Levanon said, namely the original worry in the space: control. For one, employees doing self-delivery are just that, employees. They know the brand, have the uniform and can help out in the kitchen or front of house when there aren’t deliveries. Or better yet, multi-unit or multi-brand operators can spread a few drivers across their entire operation and potentially have a leg up on hiring gig drivers away from their platforms with the promise of more stability.
The other big self-delivery headache is insurance. That’s a widely variable cost, but one that can be de-risked. See how in part two of this story: Self-Delivery Insurance Demystified, Somewhat.
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