In an industry with razor-thin margins, every dollar matters. Demand generation is one side of the coin – bringing in new & repeat customers to drive increased orders and sales. But maintaining operational excellence is equally critical in order to make the most of every order placed. In an era marked by a surge in online order volume, a critical strategy for upholding operational excellence involves minimizing order cancellations. Cancelled orders happen when a customer places an online order which is then rescinded, for whatever reason, by the customer or the business on the receiving end of that order.
Particularly during the holiday season – when staffing is challenging and order volume varies – it’s key to make sure your online operations are tight so you can avoid cancelled orders. Read on to learn 5 tips to lower your order cancellation rate.
Order Cancellations by the Numbers, Brought to You by Otter
Otter, a Restaurant Operating System with 275k+ customers in 40 countries, took a look at the 1 billion+ orders they’ve processed over the past couple years to gain insight into how restaurants can keep cancellations down and revenues up.
Why Reducing Cancellations is Critical to Your Restaurant’s Success
Restaurateurs have no shortage of things to worry about. If you’re wondering whether or not order cancellations should be one of those things, consider this:
| ● | The average order cancellation rate for restaurants in 2023 is between 1.5-3%. | ||
| ○ | In dollars, a restaurant that collects $10k in revenue a week loses between $150 and $300 per week due to cancelled orders. | ||
| ● | Cancellation rates directly correlate with restaurant ratings. | ||
| ○ | Stores with cancellation rates… | ||
| i. | Below 2% have an average rating of 4.5 | ||
| ii. | Between 2% and 4% have an average rating of 4.4 | ||
| iii. | Between 4% and 6% have an average rating of 4.3 | ||
| iv. | Between 6% and 8% have an average rating of 4.2 | ||
| v. | Over 8% have an average rating of 4.0 | ||
| ○ | Beyond rating, most delivery apps will automatically pause stores who experience two cancellations or non-acceptances in a row – resulting in increased downtime and decreased order volume. | ||
5 Tips To Keep Cancellations Down at Your Restaurant
| 1. | Pay close attention to online orders that come in during and after dinner. | |||||
| ● | Online orders spike around dinner time – 32.2% of orders come in between 5:00 and 8:59 p.m. With more orders comes more cancellations: 29.9% of order cancellations occur during this same time period. | |||||
| ● | Lots of cancellations happen after dinner: peak cancellation hours are between 9:00 and 9:59 p.m. While only 4.6% of the day’s orders are placed during this time period, 8.2% of the day’s cancellations occur here. | |||||
| 2. | If you’re going to stay open late, make sure your team is prepared to keep up with late-night online orders. | |||||
| ○ | Cancellation rates are higher than the 1.5-3% average between 8:00 p.m. and 5:00 a.m. They’re highest between 10:00 p.m. and 4:00 a.m. (between 4% and 6%). | |||||
| ○ | Restaurants tend to drop more orders in their last hour of operation. | |||||
| ■ | During this hour, the average restaurant’s cancellation rate is up to 4.8% higher than that of restaurants that do not close within the hour. | |||||
| ■ | 18% of orders and 28.6% of cancellations happen in the hour before closing. | |||||
| 1. | To overcome this issue, begin by verifying your hours of operation, and consider adding some buffer time so that an order won’t come in at 9:59 when you close at 10:00. Once your hours are correct, automatically ensure your store(s) are marked “open” when they’re meant to be with Otter’s Always On solution. | |||||
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| 3. | Pay close attention to the top cancellation reasons: late delivery, internal issues, closed kitchen, and out-of-stock items. | |||||||
| ○ | While it can be challenging to know why an order was cancelled, occasionally the customer or operator provides a cancellation reason: | |||||||
| ■ | The top reasons given for orders cancelled by customers are late delivery and general customer-requested cancellations (which are often related to late delivery). | |||||||
| 1. | Eliminate customer-initiated cancellations and take control of your delivery timeline with Otter’s Couriers & Logistics solution, which helps you manage your fleet and timing. | |||||||
| ■ | The top cancellation reasons for orders cancelled by restaurants are internal issues, kitchen closed, and out-of-stock items. | |||||||
| 2. | Keep your menus up-to-date with Otter’s Menu Management solution, so that your staff and customers see accurate menus across locations and platforms. | |||||||
| 4. | Maintain tight operations if you’re one of the three cuisine types that are most susceptible to order cancellations: convenience stores, pizzerias, or dessert restaurants. | |||||||
| ○ | Convenience stores have the highest overall cancellation rates, with an average of 6.3%. Most of these cancellations occur on Sundays between 2:00 and 4:00 a.m. | |||||||
| ■ | This is not a popular time for orders (4.7% of the day’s orders are placed between those hours), but cancellations spike to 8.4% during this period. The most frequently cited cancellation reason for C-stores is items being out-of-stock (27.9%). | |||||||
| 1. | Otter’s Menu Management solution offers cross-platform item removal that makes delisting out-of-stock items before they’re ordered easy. | |||||||
| ○ | Pizzerias experience the second-highest cancellation rate at 2.61%. Most of these cancellations are driven by operators taking too long to confirm placed orders. | |||||||
| ■ | A restaurant may see this cancellation reason during rushes when their staff are unable to keep up with each order that comes into their delivery system. With Otter’s Auto-Accept feature, you can ensure you never miss an order due to human error. | |||||||
| ○ | Dessert restaurants have the third-highest cancellation rate at 2.8%. Out of the top 20 cuisine types, dessert restaurants are the most likely to experience order cancellations due to unavailable items. | |||||||
| ■ | Since dessert items require preparation, it’s not unlikely that a dessert restaurant may have a limited inventory of each item for the day. In cases like this, it’s critical to be able to 86 an item across every platform instantaneously. That’s made possible with Otter’s Menu Management solution. | |||||||
| 5. | Double down on staffing and preparation for all major holidays. | ||||
| ○ | Cancellation rates spike on major holidays, particularly Thanksgiving (9%), Christmas Day (8%) and Christmas Eve (6.5%). | ||||
| ■ | On Thanksgiving, Christmas Day and Christmas Eve, the majority of cancelled orders are due to kitchens being closed (22.4%, 46.2% and 50.6%, respectively). | ||||
| a. | Outside of kitchen closures, order cancellations on holidays are largely due to out-of-stock items, late deliveries, internal issues, and customer issues. | ||||
| i. | Combat holiday cancellations with Otter’s Menu Management solution. Use it to update your menu, remove items, sync hours across all your delivery apps from a single interface, and set special hours in advance for individual holidays. | ||||