Restaurant SMEs bring huge value to platforms

The food delivery sector is experiencing a massive period of growth. Infact, change in consumption habits during the pandemic turned out be a massive accelerant for the food service industry, pushing it to adapt to new challenges, and opening up enormous opportunities in quick-commerce and the last-mile delivery sector. In 2021, Deliveroo was able to bring 11,500 new restaurant partners onboard in the UK alone.

The last five years have seen a 204% increase in growth across the entire food delivery value chain as platforms have been able to create value by providing better services and business funding for restaurants. Yet, there are always challenges around the horizon and recently, rising inflation, supply-chain problems and soaring fuel prices are having a huge impact on the industry.

But as long as platforms are able to offer their merchants new products and business funding support features, as seen in Just Eat’s recent partnership with YouLend, they are likely to enjoy healthy profits and a strategic advantage over competitors. 

The cash flow challenge for restaurants

For restaurants, cash flow has always been king as they often find themselves in a working capital crunch, which creates a cash flow gap that can have a serious impact on day-to-day operations. Without funds readily available to pay staff and suppliers, replace equipment, and pay the bills - restaurants simply cannot operate. 8% of SMEs say that accessing finance is the biggest issue they face compared to 4% for larger companies, and the need for quick and accessible finance is particularly crucial for restaurants. That’s why if they feel their current platform is not providing a good enough service in helping them manage cash flows, they’re 20% more likely to shift to a competing platform, as per a study of 500 small businesses conducted by YouLend.

Restaurants also have to grapple with challenges specific to the present moment. Labour shortages, supply chain issues, menu price increases, and the influx of new business following the pandemic are all factors that present new operational difficulties that require merchants to adapt. Not only that, but the rising costs associated with incoming inflationary pressures are causing sales and transaction value to dip, which has a domino effect on revenues for delivery platforms.

Let’s imagine an example: Your business is an app for restaurant food delivery, like Deliveroo, and you’re intent on providing the best possible service to your partners. During a tough economic period, such as the current inflationary period, one of the restaurants you work with experiences a massive hike in menu prices as a result of supply-chain disruptions, soaring overheads, and a global shift in fuel prices. 

At the same time, they’re dealing with increased demand using your food delivery app, and as their platform of choice, you need to provide instant working capital solutions or else they’ll go out of business and you will lose revenue in return. 

Additionally, platforms only provide settlements to their restaurant partners once a week, or even once a month. If you can offer faster payments and greater cash flow for your restaurants, drivers, or freelancers - the value you bring skyrockets. So, how do you do that? By offering business funding for restaurants through embedded finance.

Flexible business funding for restaurants

Embedded finance offers an immediate solution to the cash flow problem faced by restaurants and delivery platforms. Instead of taking days or even weeks to process and provide payments, YouLend’s best-in-class embedded finance solution takes just minutes to provide an instant offer, followed by an instant settlement - allowing platforms to deduct fees and repayments on working capital at the same time the payment is made. With revenue-based financing, merchants are also able to repay funding based on their takings, which in the highly variable food service industry provides security for both restaurants and the platforms financing them. That’s an offering few traditional lenders are able to make.

Increased cash flow and more flexible funding don’t just make platforms that offer revenue-based embedded finance more likely to retain their restaurant partners, they reduce churn rate by 75%. Benefits like these make for an attractive offering when it comes to onboarding new merchants, and that means new revenue and increased growth.

In an already highly competitive sector, embedded finance gives delivery platforms a strategic advantage over their close competitors, but YouLend’s low maintenance API integration offers unique benefits. Our best in class white label products help delivery platforms hold on to their partners by building trust and brand recognition, and with merchant cash advance, platforms can bring new support features and products quickly to market, offer seamless integration, and solve restaurants’ cashflow problems with ease. It’s restaurants that ultimately drive growth for platforms, and as the food delivery space grows, embedded finance is the way to keep a competitive edge.