Digital restaurants are more lucrative

According to new research, digital platforms such as Foodora and Booktable benefit the restaurants they cooperate with.
NHH By Sigrid Grøm Bakken

28 December 2018 10:01

Digital restaurants are more lucrative

Online food delivery services such as Foodora make restaurants more profitable and productive, according to new research. ‘However, their prices are high, and collaboration can therefore be expensive,’ warns professor.

Norwegians have a growing appetite for food delivered to their doorstep, and the pink cyclists of the food delivery service Foodora are becoming increasingly visible in Norwegian cities.

Food delivery makes the day easier for the customer, but a new study from the Norwegian School of Economics (NHH) shows that digital platforms such as Foodora and Booktable also benefit the restaurants they cooperate with.

Through in-depth interviews and surveys, the master's degree students Vilde Koch Fredriksen and Iselin Kvitstein have mapped the opportunities and challenges of entering into partnerships with digital food delivery services.

The findings demonstrate that the platforms contribute to increasing the profitability and productivity of the restaurants they work with.

‘The study shows that restaurants that have an agreement with food delivery services, earn more than restaurants that are not available on such platforms,’ says the master’s students’ supervisor John Iden at NHH.

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Reaches out to more customers

Iden explains that the restaurants' profitability mainly increases because they reach more customers.

‘By participating on these platforms, the restaurants find that they become more available to their customers. This has led to both an expansion of their existing market, and to their being able to reach new markets,’ says Iden.

However, this increased demand is not at the expense of restaurants’ quality or service.

‘Quite the contrary. The partnership gives the restaurants the freedom to focus on their core activities such as food and service, while the food delivery business can focus on what they are good at, namely delivering food. The restaurants thereby become more productive,’ he says.

The services also function as good platforms for marketing, which again contributes to increasing demand and earnings for the restaurants.

Can lead to uncertainty

The food delivery services’ business models mainly consist of entering into partnerships with restaurants, where they take care of the home delivery. They require a fee from the customer, as well as a share of the restaurants’ turnover.

Iden says that there are several disadvantages to entering into partnerships with online food delivery services, and that the restaurants should be aware of these.

‘The research shows that the players have high prices and that it can be expensive to enter into a partnership. In addition, the restaurants have little power and influence, and some agreements can be terminated on short notice. The collaboration can therefore lead to a certain amount of insecurity,’ says Iden.

The study has been conducted in a few restaurants, and these have been chains. The results, therefore, may not necessarily be representative of and/or applicable to small, independent restaurants.