Food Delivery Growing at Explosive Rate Through Third-Party Apps

Local restaurants are finding new life through third party food delivery apps – and these apps are growing at an explosive rate. Tweet This Leading apps such as GrubHub, Postmates offer restaurants the opportunity to reach more customers through easy web and app interfaces whether they have a delivery staff or not. Even chain restaurants and larger corporations have started joining up as these startups experience growth at explosive rates.

How it Works

Third party delivery groups are rarely associated directly with a restaurant. The delivery groups subcontract with local drivers to provide a service. Food delivery groups like Postmates work by charging a fee for the delivery, then collecting a percent of the total sale from the restaurant provider. This delivery service is available to any local restaurant that agrees to pay the fees, and is now being tried on a larger scale by food giants like Taco Bell, Chipotle and Starbucks. Starbucks Corp. recently decided to test the third-party system with Postmates by using its own mobile app and integrating this with the Postmates delivery app. Customers can order and pay ahead online.

Groups like GrubHub and Door Dash provide an online listing that offers a one-stop shopping experience for consumers and saves them from downloading multiple apps. For GrubHub, restaurants can pay a varying commission of up to 13.5%. Restaurants that choose to pay a higher commission will get ranked closer to the top of the page of listings.

Success by the Numbers

The number of food delivery apps available will, of course, vary by city. Large metro areas such as San Francisco and New York will offer the greatest variety, but there is still heavy competition in most major markets. Food-based apps have experienced explosive growth in the Apple App store in 2014, with Food and Drink becoming the second fastest growing category at a rate of almost 200% growth for the number of apps that year.

This food ordering platform has continued to see success ever since, with fourth-quarter revenues in 2015 reporting a 43%rise to $361.8 million up from $253.9 million in 2014. As of 2015, Postmates has been charging $5-$20 per delivery but is working to move towards $1 deliveries to stay competitive in this fast-growing market. The San Francisco-based startup is currently worth around $400 million in investment values, and recently raised an additional $80 million in funding to improve these deliveries.