Food Delivery Service vs. In-House Dining: Which Is Better for Your Restaurant?

Food Delivery Market in Malaysia

Malaysia's food delivery market isn't just growing—it's experiencing a digital culinary transformation. The industry is projected to reach US$1.02 billion in 2023, with an impressive annual growth rate of 8.36% through 2027. Nielsen's research reveals a profound shift in Malaysian dining habits. Approximately 60% of consumers now order food delivery at least weekly. This shows that the food delivery service isn't just a trend, but a fundamental shift in how Malaysians consume food.

Food delivery landscape in Malaysia is a competitive arena dominated by tech-savvy platforms. GrabFood, Foodpanda, and ShopeeFood aren't just delivery services, they're complex ecosystems reshaping restaurant economics. Their commission-based models (usually ranging 25-35% per order) represent both an opportunity and a challenge for restaurateurs.

However, for restaurant owners, making such key operational considerations may required better understanding the nuances of food delivery services: 

1. Economic implications of delivery: Delivery fees typically range between RM3-8, with restaurant commissions hitting 25-35% of order values. This economic model demands strategic pricing and menu engineering.

2. Service performance metrics: In Malaysia's consumer forum research highlights several critical performance indicators including delivery times (averagely 30-45 minutes for Malay businesses),  order accuracy rates and geographical or periodic order volumes and distribution rate.

3. Demographic insights: Delivery platforms primarily attract urban millennials and Gen Z, but post-pandemic adoption shows promising growth across age groups.

 

Dine-in VS Delivery Comparison

The financial equation differs significantly between delivery and in-house dining, with each model presenting distinct advantages and challenges that restaurant operators must carefully evaluate. While food delivery services offer revenue expansion opportunities, they come with complex cost structures that can dramatically impact bottom-line profitability in ways that aren't always immediately apparent.

 

Aspect	In-house Dining	Delivery Services
Revenue Potential	• Average bills are 30–40% higher  • Natural upsell opportunities	• Sales volume averagely lower by 10–20%  • More difficult to upsell
Commission  / Direct Costs	• Direct costs took averagely 65–70% of revenue • Ability of cost management falls at optimizing labor, COGS, and processes	• Major platforms charge 25–35% commission, which means on every RM50 order, up to RM17.50 may go to the platform.
Price Adjustments	• Standard in-store pricing •  Promotions can be executed directly • Menu engineering focused on on-premise high-margin add-ons	• “Delivery pricing” often set 10–15% higher to offset commissions • Strategic delivery menu engineering can recover up to 60% of commission costs
Cost Comparison	• Bears front-of-house staffing, tableware supplies, and dine-in utilities • Plating/presentation costs ~2–3% of order value	• Eliminates some FOH and utility expenses, can save around ~15–20% • Packaging costs: average 8–10% • Potential risks: spoilage/ accident in transit, scams customer service issues
Profitability Implications	• Depends on stronger control	• Requires pricing discipline and menu redesign

 

Revenue Potential

• In-house dining: According to the Malaysia Retail Association, traditional dine-in generates average bills 30-40% higher than delivery orders due to beverage sales and impulse ordering. This difference stems from the natural upselling opportunities that occur when customers are physically present—from appetizers to desserts to additional drinks.

• Delivery services: McKinsey research indicates that restaurants can increase their sales volume by 10-20% through delivery platforms, reaching customers beyond their physical location. However, this volume increase doesn't always translate to proportional profit increases due to the associated costs.

 

Read more: Effective Menu Pricing Strategies: Understanding Margin vs Markup (eats365pos.com)

 

Commission Structure

• Major platforms in Malaysia charge commissions ranging from 25-35%, creating significant margin pressure. For example, on a RM50 order, restaurants might pay up to RM17.50 to the platform—a substantial portion that must be factored into pricing strategies.

• In contrast, in-house dining's direct costs (excluding fixed overheads) typically consume 65-70% of revenue, according to RestaurantOwner.com. While this might seem comparable, the key difference lies in the restaurant's control over these costs and the ability to optimize operations directly.

 

Price Adjustments

• Many restaurants implement "delivery pricing" that's 10-15% higher than in-store prices to offset commission fees, though this strategy requires careful market testing to avoid customer resistance.

• According to Eats365's restaurant client data, restaurants that strategically adjust their delivery menu pricing can recover up to 60% of platform commission costs. This involves not just blanket price increases, but strategic menu engineering that emphasizes higher-margin items for delivery.

 

Cost Comparison

• Delivery eliminates certain in-house costs like front-of-house staffing, table setting supplies, and some utilities, which can represent 15-20% savings in operational expenses.

• However, packaging costs for delivery average 8-10% of order value compared to 2-3% for dine-in plating, according to F&B packaging industry reports. Additionally, delivery-specific costs include potential food spoilage during transport, customer service complications, and the opportunity cost of kitchen capacity dedicated to delivery orders during peak dine-in periods.

It seems likely that the most successful restaurants will be those that view delivery and dine-in as complementary rather than competing channels, optimizing their operations and pricing strategies to maximize the unique advantages of each model while mitigating their respective cost challenges.

 

Read more: What are the Top Food Delivery Platforms in Malaysia? (eats365pos.com)

 

Top Considerations to Choose from Dine-in or Delivery

1. What's Your Restaurant Type?

Different restaurant concepts interact uniquely with delivery platforms. Fast casual restaurants emerge as delivery champions, with conversion rates soaring 30-40% higher than traditional dining models. Their streamlined menus and quick-service ethos align perfectly with digital ordering expectations.

Conversely, fine dining establishments face more intricate challenges. Quality perception research reveals a stark 40-50% drop in dining experience when sophisticated cuisines transition to delivery. For these restaurants, strategic menu adaptation becomes crucial.

 

2. Where Do Your Restaurant Locate?

Urban landscapes usually present more remarkable delivery opportunities. Here're some facts you should look at:

• High-density city centers can expect delivery representing 30-40% of total restaurant orders

• Suburban zones typically witness 15-25% delivery penetration

• Rural locations might require innovative logistics solutions or targeted marketing strategies

Urban restaurant performance data suggests location isn't just a factor—it's a decisive strategic element in delivery success.

 

3. Do Your Dishes Transferable?

Not all culinary creations are delivery-friendly, taste of dishes can go wrong especially those are:

• Moisture-sensitive

• Crispy textures

• Temperature-sensitive

Eats365 restaurant partners have discovered that strategically redesigning recipes can improve delivery customer satisfaction by 25-30%, transforming potential weaknesses into competitive advantages.

 

4. Which is more profitable?

Implementing a rigorous financial evaluation framework is essential:

Profitability Formula:
(Average Order Value × Volume Increase) − (Commission Percentage × Total Delivery Sales) > Additional Operational Costs

Restaurant financial analysts recommend maintaining a minimum 15% profit margin to ensure delivery service sustainability.

 

Elevate Your Restaurant with Eats365

Streamline your operations with Eats365's comprehensive pos system, integrating seamlessly with online ordering and delivery platforms. This allows you to efficiently manage both in-house dining and deliveries, maximizing revenue and minimizing manual tasks. Contact Eats365 today for a personalized consultation tailored to your restaurant in Malaysia.

 

FAQs about food delivery service in Malaysia

How can food delivery service impact my restaurant's profitability?

Food delivery service can increase sales volume by 10-20%, but high commissions of 25-35% and additional packaging costs reduce profit margins. Strategic pricing and menu design are essential to maintain profitability.

 

What are the key operational steps for integrating food delivery service?

Integration involves platform verification, digital menu transformation, operational training, and using performance dashboards to optimize presence and service efficiency.

 

How does customer behavior influence food delivery service in Malaysia?

About 60% of Malaysians order delivery weekly, driven by convenience, diverse food choices, loyalty programs, and easy digital payments. Urban millennials and Gen Z are the primary users, but all age groups are growing in adoption.

 

How does Eats365 support restaurants in managing food delivery service?

Eats365 offers integrated pos systems and online ordering systems that help restaurants manage delivery menus, control pricing tiers, and recover up to 60% of platform commission costs through strategic menu engineering.

 

What types of restaurants benefit most from food delivery service?

Fast casual restaurants see 30-40% higher conversion rates with delivery due to their streamlined menus and quick service. Fine dining requires careful recipe adaptation to maintain food quality during delivery.

 

How can Eats365 help optimize delivery and dine-in operations together?

Eats365 provides tools to implement a hybrid model, allowing restaurants to balance delivery and in-house dining, optimizing orders, pricing, and customer incentives across both channels for better overall performance.