Do F&B brands still need to sell via food aggregators? 

In a landscape that is completely different from the one we were familiar with a mere two years ago, starting an F&B brand in 2022 can be quite the daunting experience. The options are endless: should you launch a food truck concept? A dark kitchen? Or maybe a restaurant specializing in fusion cuisine? 

What’s even more challenging is the online distribution channel you will choose to sell to your customers. In a much simpler past, most restaurants focused on the dine-in experience, whereas food delivery was a nice addition to have if the business could afford it. In 2022, in a world reshaped by COVID-19, this is simply no longer the case, as consumers continue to pursue convenience. Online delivery is now a must for most brands, and while on paper this could sound like a boon, with restaurants expanding their reach and customer base, reality is quite different. 

Restaurants can’t simply hire a few drivers and buy a handful of mopeds and call it a day. With the advent of the internet, and particularly food aggregators, the game has been forever changed. Online aggregators like Careem NOW, Noon Food and Zomato offer restaurants unparalleled visibility and access to a massive customer base, larger than most can reach organically. Couple this with the sudden arrival of COVID-19 and lockdown orders in early 2020, and most restaurants were essentially hung out to dry. 

With most of these brands having no other choice, they resorted to online delivery platforms to try and maintain some semblance of revenue. However, restaurants soon realized that this sudden lifeline came with some considerable strings attached. The biggest offender was the high commissions charged by these platforms (up to 35% in some instances when factoring in delivery charges), which whittled down already narrow profit margins for restaurants operating in a limited capacity. Additionally, restaurants didn't have access to consumer data when they sold via these platforms, and didn’t have much opportunity to market their brand to build loyalty and customer relations. 

The pandemic aside, we are finally returning to some relative normalcy, but the trends that this global crisis catalysed have forever changed customer behaviour and expectations in this industry and every other. 

The question, then, is do F&B brands still need to sell via food aggregators? The answer, for most brands, will be yes, but also no. You should continue selling via aggregators, but you also shouldn’t. 

Let me explain. 

Where things went wrong

There has been a lot of bad blood between restaurants and food aggregators, especially at the height of the pandemic in early to mid-2020. Many restaurants felt that aggregators were being inconsiderate, to put it mildly, by upholding their high commission fees, especially at a time when these businesses could no longer offset said fees with more profitable dine-in sales.

"Third-party aggregators have been taking advantage of restaurant owners like myself by charging huge commissions and imposing mandatory discounts. In addition, the COVID-19 crisis was proof they were not in this to support us in any way," Gaurav Varma, CEO of The Royal Orchid Group of Restaurants Abu Dhabi, said in a conversation with Khaleej Times in 2020.

“This was a time period to show solidarity and generosity. Unfortunately, many of the biggest players in that industry did not really step up,” Andre Gerschel, food industry consultant and the COO of Loud Table, a hospitality investment group in the GCC, told publication Rest of World.

This came to a head in 2020, when disgruntled UAE restaurants took matters into their own hands, with a group of them pooling their resources to launch their own online delivery platform, GoFood, which segues nicely into why you should and shouldn’t continue selling via aggregators. 

These platforms have received a lot of flak as we mentioned, and it can be easy to paint them as the villain, even considering the fact that they didn't really help their case (though some of them did decrease or eliminate commissions eventually). In reality, they too have costs to cover, and their platforms truly do offer great reach and value for restaurants. For that reason, you should keep selling via their platforms. However, if you don’t want to be solely at their mercy, you have some options. 

The restaurants behind the GoFood app had the right idea. To keep up with these well-funded online platforms, they pooled their resources together and created their own direct distribution channel. This, according to Imad El Fay, a consultant and the Vice President of Strategy at managed cloud kitchen platform Kitopi, is the key to success in the business world. 

“Outsourcing distribution has almost always proven to be a recipe for disaster,” he said in an article he authored on MENAbytes.

So how can your small, up-and-coming F&B brand regain control of its distribution channel, you ask? 

Aggregator alternatives

If your budget allows it, you can set up your own website or app to sell directly to your consumers, with your own delivery staff and all the necessary infrastructure and manpower. The upfront costs might be high, but in return, you will gain full control over the consumer journey, reaping data and insights in the process that you can use to further improve your business and offerings. You are also able to offer realistic and often personalized discounts, in addition to maintaining a direct communication channel with your customers, allowing you to build loyalty. On top of all this, you are able to better leverage your marketing efforts, while also ensuring a speedier delivery service where your drivers have to worry about one restaurant’s orders only: yours.

Still, even this option might be out of reach for your business. So what other options do you have? 

Well, you’re in luck. Some tech companies have stepped up to help solve the aggregator dilemma. Companies like UAE foodtech startup Chatfood are putting F&B brands “back in control.” The SaaS company does this by allowing brands to monetize their social media channels and their own websites, giving customers a new way to order from their favourite restaurants, with special deals and loyalty programs available. The best part about this service is that there are no commissions or hidden fees - restaurants only pay for a monthly subscription. 

One more option, but one that’s not for the faint of heart: forego delivery entirely. Now that pandemic restrictions have been mostly lifted, this has become a viable option once more. However, and a major disclaimer here, this is not for everyone. 

In the past, we’ve seen an example of this with celebrity chef Akmal Anuar, whose fine dining restaurants were clearly not cut out for takeout dinners. Most likely, however, you’re not a celebrity chef or influencer, so your next bet is to dabble with a dining concept. Consider the Irish Village in Dubai, for example, which pays homage to the cosy streets of its namesake country. Food delivery is not the first thing that comes to mind when you think of the string of F&B establishments there that offer a unique dining experience above all else. If you are able to concoct a unique and memorable dining concept for your new F&B brand, then you might not need to bother with food delivery in the first place - diners will come to you. 

Speaking of diners coming to you, if you invest in a food truck concept, you can flip this the other way around - bring your restaurant to your customers. This business model is one of the most affordable around, and we’ve seen many interesting new brands emerge as food truck concepts.

At the end of the day, food aggregators are a mainstay of the industry. It’s not wise to forego them entirely, as they still have a part within your business model as a food and beverage brand. However, it’s up to you to explore direct distribution channels, be this a first-party effort or via commission-free online ordering platforms like Chatfood or ChowNow. And, exclusively for a select few concepts, delivery can be completely brushed aside.