Last-mile services vs employed drivers: what to choose when expanding your restaurant

Aug 29, 2021 7:17 PM

Last-mile delivery services are third-party companies that offer delivery logistics at a negotiated rate.

The explosion of startups and hefty capital in this space promises restaurants quick expansion of their delivery operations, while saving time & money otherwise spent on recruiting new drivers.

But do they deliver?
pun intended 😁

If you’re a successful restaurant looking to expand, you may have already run into some logistic reliability issues with your delivery solution. In this article, we’ll consider how last-mile delivery performs against employing your own drivers.

Common last-mile delivery challenges:

  • Delivery area alignment with your location
  • Delivery time from kitchen-to-customer
  • Customer experience control & feedback
  • Cost per order
  • Operational and training hurdles

What are last-mile services?

As the demand for on-demand food grows rapidly, to the tune of USD 44.23 billion during 2020-2024, merchants need to find a solution for delivery logistics in order to keep up and transition successfully to prioritizing delivery.

They’re companies with a fleet of bikes that you can request on a per-order basis, that aim to be at pickup within minutes.

Last-mile delivery services promise to offer the on-demand logistics restaurants need in a plug-and-play fashion, trying to reduce costs and operational workload while maintaining quality of service.

Last-mile services vs employed drivers

1. Delivery area alignment

The first thing to consider is your target location. Although you need to factor in a myriad of variables, your delivery solution is going to affect the priority of location against your other targets and projections. Adding these up depending on your choice will help you evaluate the potential of a given area amongst the dozens of other metrics to consider.

Last-mile delivery partner:
You need to make sure that your considered provider can adequately service your target delivery area, to your standard. This can help inform your ghost-kitchen location selection and ensure a great experience for your newly-targeted customers.

Employed drivers:
With your own drivers, you don’t have to weigh an external partners delivery coverage as heavily in your consideration of where to launch a new brand. With less logistical hurdles, you can consider other metrics that could increase your order volume like your target-audience geolocation, proximity to existing kitchens, competitor penetration in that area, and so on.

Top tip when screen last-milers for area:
We’ve found that partnering-up with multiple last-mile services allows you to expand to the areas that you consider high-potential, without being limited by your delivery logistics.

2. Delivery time: kitchen-to-customer

Depending on your concept, you need to outline an appropriate average delivery time. If you were a piping-hot ramen concept, it’s more crucial that your delivery time is shorter than if you were a cold-food ice cream concept. This variable can inform what kind of dishes to offer in your expansion.

Last-mile delivery partner:
Aside from the delivery distance from kitchen → customer affecting the time, the time it takes for your last-mile driver to pickup the food is going to affect the total time from order placed → delivered.

This time fluctuates depending on how many orders the partner is receiving from other merchants, and directly affects your ability to predict the ETA and accurately inform customers.

You need to make sure your delivery partner has the driver volume to pickup your prepared items in a reasonable amount of time, every time.

Employed drivers:
Aside from peak delivery times, traffic blockages, or a drastic and sudden increase in order volume generated by a marketing campaign (e.g. SMS), you can be almost 100% certain of the delivery time your own drivers are capable of.

This means you can promise shorter delivery times to customers, and continually improve customer experience.

“What if I don’t have enough of my own drivers for the peak?”:
We discuss a solution to this problem at the bottom of this article: the hybrid model.

3. Customer experience

Your customers want to know where their food is, when to expect it, and to receive it in a reasonable amount of time. Your choice of delivery solution and tech partner makes all the difference here.

Last-mile delivery partner:
If you’ve carefully selected your partner, you should be able to reasonably predict this, and inform the customer appropriately.

When combined with a leading tech provider that integrates your order management with a wide-variety of last-mile services, your customers may even be able to see live-order tracking and an accurate ETA, and receive order updates via Email/SMS/WhatsApp.

Employed drivers:
Having your own drivers allows you to not only brand your restaurant all the way to the customer’s door with liveried bikes and uniforms, it also means that you can more finely control your customer’s experience. Your own drivers will become familiar with their assigned areas, reducing kitchen-to-door times, and enabling them to route combined drop-offs.

Although your tech partner can probably still provide customer update communication, you may lose out on the live-map tracking that a last-mile partner could provide.

Top tip to improve customer experience:
We’ve mentioned how important your choice of tech partner is — make sure they give you the ability to accept direct customer feedback. This will allow you to not only contact customers in the event of a mishap, but also understand the performance of your delivery directly from your fans.

4. Cost per order: now and in the future

Last-mile services promote cost-saving as one of their primary value propositions. But in reality, the cost to you will vary depending on your order volumes as well as the above considerations.

Last-mile delivery partner:
Last-mile services offer a number of pricing structures and plans. You can rent a bike and driver on a monthly basis and pay a fixed fee, or you can calculate a per-order fee based on average distance, volume, and weight.

Last-mile services offer a number of pricing structures and plans. You can rent a bike and driver on a monthly basis and pay a fixed fee, or you can calculate a per-order fee based on average distance, volume, and weight.

Employed drivers:
As you increase your order volume sustainably, your cost-per-order of your drivers works out to be cheaper. You begin to benefit from economies-of-scale, and your initial cost outlay (motorbikes, uniforms) are paid back and non-recurring. With a last-mile partner, you’re continually paying for their expansion costs.

Top tip on evaluating costs:
After you’ve negotiated points 1-5 with a range of partners, carefully consider your costs on a low and high end basis, to understand how much you’re missing out on as you grow. This is quite the task, but the better informed you are, the more you’re in control.

5. Operational and training hurdles

How your staff internally manage the order flow from order placed → kitchen → customer door is often a point of frustration, but it doesn’t have to be.

Last-mile delivery partner:
How capable your restaurant tech is can hinder or help your order management. If either your last-miler nor your online ordering system have what it takes to integrate your order management system with your delivery bike request, your staff are going to have to capture orders on one platform, and submit a request for a bike on another.

Not only will this increase time-to-manage the order, it will also increase training requirements as well as the likelihood of mistakes, leading to penalized customer experience.

Employed drivers:
Once your drivers are hired, the operational hurdles are reduced when compared to the last-mile alternative. Your staff only have to learn to manage one system, and drivers are always accessible to contact.

Top tip to simplify your operations:
Choosing a tech-partner that provides a digital menu, online-ordering system, and integrated order management system means you can have your cake and eat it too: manage your last-mile requests from within the same place you accept and manage online order for the kitchen, and provide customers with live order updates regardless of whether the driver is a last-miler or fully-employed.

The Hybrid Model

Weighing up the pros and cons of last-mile versus employed drivers might not leave you with a clear winner. But — there is a path between, that combines the best of both worlds. Here’s the game-plan:

On launch:
You don’t have the incoming revenue yet to justify your expansion with a whole fleet of added drivers, this model can not only work for you in the short-term, but prove sustainable in the long term.

Begin with a majority mix of last-mile drivers, selected to appropriately fulfill delivery times, areas, and cost against the price of food. This will ensure that you do not yet lay out additional upfront costs (bikes, uniforms, etc.) while you buildup your brand awareness and penetration in this new location.

After 3 months:
Now you have a healthy order volume and predictable costs, you can begin employing dedicated drivers and reducing last-mile deliveries. This is going to improve your customer experience and reduce cost over time.

You keep a sizable amount of last-mile deliveries for your core audience, as well as for peak driven by marketing campaigns.

After 1 year:
By now, you are well-established in your targeted location, and the majority of your fleet servicing this area are employed full-time. You can predict and control the customer experience, and control your branding all the way from your selected online-ordering system to the customer’s door.

You keep a minority of last-mile drivers ready for continued growth and peaks from marketing campaigns.

Conclusion: what’s right for you?

In closing, you need to consider quite a few variables when deciding how to offer delivery for your new brand, additional outlet, or ghost-kitchen expansion.

It may not be about choosing a winning formula for your delivery area alignment, time-to-customer, customer experience, cost per order, or the operational hurdles — we’ve outlined a strategy for a hybrid model that simultaneously fuels quick growth and scales sustainably.

Regardless, it’s a lot to consider all-at-once.

Our team is here to help — let’s discuss how we can simplify your operations and increase your order volumes at 0% commission.

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