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The Controversy of Third-Party Restaurant Food Delivery Services

Jay Bandy • January 9, 2022

How this "necessary evil" is evolving for restaurant operators

Two-wheel food delivery vehicle with driver in city environment

The demand for food delivery services increased when COVID-19 emerged. These third-party delivery services provided an independent delivery personnel to deliver food to customers through their apps with a delivery fee and tip for the delivery driver.

Most restaurants benefitted from these third-party food delivery services, but other restaurants did not have the same success rate. According to Mary King, “third-party food delivery services have setup fees of up to $400, charge a commission of 10% to 40% per order, and may not integrate with your point-of-sale system.”1

Restaurants are not opposed to using third-party delivery apps if that means they have gained new customers through them, but what happens when these customers are not willing to spend the extra fees to have their food delivered to them? What happens if the independent driver of these third-party food delivery services is not given a tip because the customers do not believe in tipping if there is a delivery fee?

The positive side of third-party delivery services

Food delivery through third-party services is very popular among Millennials, Gen-Z, and busy working parents. Food delivery services are not the quickest or cheapest, but it is popular because of the convenience it provides for consumers.

“A 2021 study by Buyer’s Edge Platform found, 42.3% of consumers still prefer eating takeout or delivery at home.”2

Companies such as GrubHub, DoorDash, Postmates, and Uber Eats have been growing in popularity, more so now during the pandemic. “According to a study conducted by Zion & Zion, 63% of young adults use third-party delivery apps.”3

In addition, using these delivery services also opens marketing opportunities for restaurants. Many of these companies provide services in which allow restaurants to gain loyal followers in the delivery service with the use of discounts and other loyalty strategies.

If a restaurant is new, marketing themselves on these delivery services allows the restaurant to gain another target audience. For example, DoorDash may notify its users in the area that the restaurant has opened and is on DoorDash.

Moreover, to further promote your restaurant on these apps, “you can pay extra for priority placement, promoted listings, and featured offerings.”4 On GrubHub, a restaurant using their marketing commission can increase their visibility on the app by 20%, for example.5

The negative side of third-party delivery services

Some restaurateurs claim that third-party delivery services are doing more harm than good. After commissions and fees, it can cost consumers and providers up to 30-40% more.6

During the pandemic, these third-party delivery services were putting a hold on delivery fees to help aid in the pandemic, but ever since restrictions have been lifted, these delivery fees have come back and are more expensive than ever.

Customers using these apps have complained that the delivery fee is too high and ridiculous. They claim it serves no purpose because most of these delivery fees do not go towards the driver at all, which means customers still must add on an additional tip.

Customers are reluctant to tip their drivers through these third-party delivery services. Some are not aware that the delivery fees do not go directly to the independent driver, or they know and do not care enough to put in a tip.

Furthermore, this hurts the drivers and the restaurant in which the order was placed at. When drivers get an order notification, they can only see how much the order is. After they choose to accept the order, they can then see how much they will be paid in tips.

For drivers, they will be angry that they did not receive a tip and continue the order depending on whether they will still get paid a specific rate provided by the third-party service. However, some choose to cancel the order, which will result in the customer waiting longer to receive their food, resulting in it getting cold.

Having said that, if no one is willing to accept the order, restaurants will have to throw away the order that was not picked up, which results in a waste of ingredients and supplies. In addition, “a survey of 42,000 people by Service Management Group found that 35% of customers experienced a problem when using a third-party delivery service, and almost half of them faulted the restaurant.”7

Other third-party delivery services

Ways in which restaurants can still provide delivery services are through smaller third-party services. Smaller third-party services do not overcharge restaurants for commission, and some have little to no delivery fee depending on where the restaurant is in a specific area.

A few examples include ChowNow and Toast. ChowNow is an online ordering platform in which restaurants can easily use to manage delivery or pickup orders. The company does not charge for delivery fees. Instead, they charge flat rate monthly fees – “$99 a month for a two-year plan (plus a $199 setup fee), $119 a month for an annual plan (plus a $199 setup fee) and $149 a month for a monthly plan (plus a $399 setup fee).”8

In addition, Toast is a restaurant technology sales company. However, when COVID-19 emerged, the company developed Toast TakeOut, which allows for customers to order their food online, pay in advance, and pick up their order from the restaurant themselves. Toast TakeOut does not charge restaurants any software fees if they are participating in using the Toast Online Ordering product.

Should restaurants continue using third-party delivery services?

The use of third-party delivery services is dependent on the restaurant and how much they are willing to pay for these services. It may be best for restaurants to use smaller food delivery companies, but this may not help the restaurant gain visibility or provide a larger scale of marketing services.

Furthermore, consider your restaurant’s demographics. There are some well-known delivery services in which cater to a specific target audience such as Black-owned restaurants.

It is also important to note whether the third-party delivery service will integrate well with your POS. If not, consider how easy it is to make changes to the system such as menus and prices.

Overall, delivery should always be something restaurants should consider because most people are looking for convenience now.

References
1. https://fitsmallbusiness.com/pros-cons-third-party-delivery-services/
2. https://www.touchbistro.com/blog/third-party-food-delivery-services/
3. https://www.forbes.com/sites/stevenbeagelman/2020/07/24/third-party-delivery-is-more-important-than-...
4. https://fitsmallbusiness.com/pros-cons-third-party-delivery-services/
5. Ibid
6. https://www.forbes.com/sites/forbesfinancecouncil/2020/05/04/why-food-delivery-companies-may-be-doin...
7. https://www.forbes.com/sites/forbesfinancecouncil/2020/05/04/why-food-delivery-companies-may-be-doin...
8. https://www.today.com/food/top-alternative-delivery-sites-aim-help-local-restaurants-t208001

By Jay Bandy August 24, 2025
The Phenomenon From Baby Boomers to Gen Z: A Generational Divide The current decline in alcohol consumption is not a fleeting trend but an accelerating, long-term generational shift. A Gallup poll shows that the percentage of American adults who report drinking alcohol has fallen to 54%, the lowest point in three decades. This trend is particularly pronounced among the younger generation. According to research, the share of adults under age 35 who drink has dropped by 0 percentage points, from 72% in 2001-2003 to 62% in 2021-2023. This suggests that today’s young people are the least frequent drinkers in recent decades. These changes are starkly reflected in consumer spending data. In 2021, U.S. Gen Z consumers spent just over $2.2 billion on alcohol, the lowest amount compared to all other age groups. Further reports reveal that 21.5% of Gen Z abstains from alcohol entirely, while 39% consume it only on occasion. Additionally, Gen Z consumes about one-third less beer and wine than previous generations. These figures not only validate a bar owner’s concerns but also signal that the traditional “party-hard” model is becoming obsolete. This is not a temporary fad but a lasting trend that requires a fundamental business model adjustment. Taking a Different Path: The Unexpected Impact of Economic Factors When exploring the reasons for Gen Z’s reduced drinking, a commonly overlooked factor is the economy. While many attribute the shift to changing values, a senior beverage analyst at a drinks company put it bluntly: “Gen Z ain’t got no money”. Compared to previous generations, today’s young people have lower incomes, less stable employment, and many have yet to reach the legal drinking age. Their disposable income is naturally limited. Interestingly, data indicates that Gen Z spends the same proportion of their after-tax income on alcohol as Millennials did at the same age. This suggests that Gen Z isn’t inherently averse to drinking; rather, they simply have less money to spend. For bar owners, this means the challenge isn’t just about “selling alcohol” but about convincing consumers that, within a limited budget, “going out for a drink” is a worthwhile and high-value experience. This forces businesses to reconsider their value proposition: Are they selling a beverage or an unparalleled social experience?   The Drivers Health Above All: Prioritizing Physical and Mental Well-being Gen Z’s focus on physical and mental health is at an unprecedented level. They are more aware of alcohol’s negative effects than previous generations and see it as a potential health risk. A Gallup poll found that 53% of U.S. adults now believe moderate drinking is harmful to health, a view driven primarily by young people. Two-thirds of respondents aged 8 to 34 hold this view. Crucially, mental health awareness plays a central role in this trend. While Gen Z reports higher rates of anxiety and depression, they are also more willing to seek professional psychological help. They openly discuss their sobriety journeys on social media platforms to manage their emotions and cope with stress. For this generation, alcohol is no longer a tool for “relaxing” or “de-stressing.” Instead, it can be a stumbling block to emotional stability and quality sleep. In fact, 34% of Gen Z cite mental health as a reason for abstaining, and 46% say they are “simply not interested in drinking”. Therefore, bars can no longer position themselves solely as places of “indulgence” but must adapt to consumers’ pursuit of “self-care” and “wellness.” The Digital Footprint and the Desire for “Control” The digital age has fundamentally altered the rules of socializing for young people. The ubiquity of smartphones and social media creates a constant state of digital surveillance. In 1991, 64% of U.S. high school seniors had been drunk at least once, but by 2024, that figure had dropped to just 33%, with two-thirds of the decline occurring after 2012, the year smartphones became widespread. Today, the risk of leaving a “digital footprint” after getting drunk has evolved from a social faux pas into a permanent public record that is impossible to erase. This pushes Gen Z to be more cautious in social settings and to “maintain control and avoid embarrassing moments that might be documented online”. This desire for “control” stands in stark contrast to the “indulgence: mentality of previous generations. If bars continue to promote a “binge drinking” culture, they will be out of sync with Gen Z’s core values. Instead, creating an environment that encourages safe, mindful consumption and offers curated social experiences will meet their new demands. The Shift in Socializing: From “Drinking” to “Doing” Gen Z’s social life is being redefined. They prefer to socialize at home or at friends’ houses rather than at traditional bars and nightclubs. They are actively creating “activity-centered” social patterns, such as escape rooms, rock climbing, pottery classes, or immersive art exhibitions. In addition, “wellness-focused gatherings,” such as yoga classes and “sober raves,” are increasingly popular among Gen Z. These activities all provide an interactive environment for people to connect without relying on alcohol. The bar’s status as a social venue is facing unprecedented competition. It is no longer the only “place to go” and must now compete with a wide range of engaging activities. Successful bars need to transform their space from a simple drinking spot into a social hub that offers unique, non-alcohol-centric experiences. The business model must shift from selling beverages to selling a curated social experience. The Unexpected Impact of Demographics A subtle, but often overlooked, factor is a fundamental demographic shift. Traditionally, men, especially white men, have been the main drivers of alcohol consumption volume. However, their share of the drinking population is declining, being replaced by women and people of color—two groups that have historically consumed less alcohol. Today, women make up most alcohol consumers under the age of 25, and their average consumption is only half that of men. Furthermore, Gen Z is the most racially and ethnically diverse generation in U.S. history. This indicates that even if individual drinking habits within each demographic group remain unchanged, overall, per-capita alcohol consumption is bound to decline due to these population shifts. This is a structural, permanent challenge, not just a change in consumer sentiment. Key Drivers of the Sober Shift Health & Wellness Awareness of negative health effects; connection to anxiety and depression; viewing sobriety as a form of self-care. Economic Factors Lower disposable income; price sensitivity; a desire to save money. Digital Culture Fear of a permanent digital footprint; desire to maintain control; normalization of sober culture on social media. Social Norms & Demographics Shift to activity-centered socializing; rise of non-alcohol-centric events; a demographic shift towards groups who historically drink less (women, people of color).   The Strategy Rethinking the Product: Embracing the “No & Low” Menu Gen Z’s beverage choices reflect their preference for novel flavors and convenience. Studies show that spirits and Ready-to-Drink (RTD) products are the most popular categories among Gen Z, while traditional wine and beer have a mixed outlook. More than half of Gen Z drinkers “often or sometimes” choose non-alcoholic beers, mocktails, or low-ABV cocktails when socializing. Non-alcoholic beers like Heineken 0.0 and Guinness 0.0 are even considered “trendy” brands by Gen Z. Therefore, a bar’s inventory model must expand beyond traditional alcoholic beverages. Bars should position themselves as “beverage destinations,” not merely “alcohol providers.” Specific suggestions include: • Develop a premium mocktail program: Offer complex and visually appealing non-alcoholic cocktails to satisfy Gen Z’s desire for flavor exploration. • Curate a selection of non-alcoholic and low-ABV options: Create a diverse menu of non-alcoholic beers, spirits, and low-alcohol beverages. Highlight “better-for-you” qualities such as natural ingredients, organic fermentation, or functional ingredients like vitamins and adaptogens. By making non-alcoholic beverages a premium, core product line, a bar can directly meet Gen Z’s demand for health, self-care, and flavor innovation. Redefining the Venue: From “Intoxication” to “Experience” The shift in Gen Z’s social patterns requires bars to reimagine their reason for existence. If a bar is just a place for “drinking,” it will be unable to compete with at-home gatherings and new types of event venues. A bar must transform itself from a simple drinking spot into a place that offers a unique social experience. • Host activity-based social events: Organize regular weekly or monthly events centered around activities, such as trivia nights, board game nights, live music performances, or mixology workshops. • Cultivate a “third space” atmosphere: Create an environment that prioritizes community and genuine human connection. Make people feel comfortable and safe, whether they are drinking or not. This atmosphere provides a unique social experience that cannot be replicated at home, offering consumers a valuable reason to go out. Marketing Strategies for the Modern Drinker Traditional top-down advertising is largely ineffective for Gen Z, a generation of digital natives. They place greater trust in recommendations from friends, family, and relevant influencers. Successful marketing must be a two-way conversation that builds an authentic community around the brand. • Embrace a digital-first strategy: Invest heavily in social media platforms like TikTok, Instagram Reels, and YouTube. Produce short, shareable video content, such as 5-second cocktail recipes or fun behind-the-scenes clips. • Collaborate with micro-influencers: Partner with micro-influencers who have authentic niches in areas like mixology, wellness coaching, or food. • Encourage user-generated content (UGC): Create branded hashtags, filters, or remixable music to inspire users to post original content related to the brand. Use an authentic, creative, and inclusive tone, focusing on celebrating human connection and mindful drinking, and avoid outdated “party-hard” or “macho” imagery. The goal of a bar’s marketing should not be to convince Gen Z to drink but to show how the bar’s beverages and atmosphere can enhance the lifestyle they seek—one focused on health, fun, and authentic connection. Gen Z’s Preferred Drink Categories (Alcoholic and Non-Alcoholic) Preferred Categories Spirits (especially white spirits like tequila and flavored vodka), Ready-to-Drink (RTD) canned cocktails, hard seltzers, mocktails, non-alcoholic beers (e.g., Heineken 0.0), adaptogen-infused spritzers. Flavor variety, convenience, health consciousness, self-care, suits at-home socializing. Mixed or Declining Categories Traditional beer, red wine, heavy spirits. Lower consumption among women and people of color; does not align with “health” or “control” narratives; considered less novel in taste than spirits and RTDs. Goliath Consulting Group is a restaurant consultancy group based in Atlanta, Georgia. To learn more about our services including menu development, business strategy, marketing, and restaurant operations, contact us at http://www.goliathconsulting.com or email us at getresults@goliathconsulting.com
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