How should restaurants operate in the omnichannel era? A queueing game approach

Abstract

Omnichannel service delivery, which combines online and offline sales channels, is transforming many traditional service businesses with the advancement of IT technologies and the impact of the pandemic. This paper examines whether a service provider such as a restaurant should operate through dine-in only, delivery only, or omnichannel (i.e., using both channels simultaneously). For the omnichannel mode, we further compare a pooling system, where a single server handles both dine-in and delivery orders, and a dedicated system, where the restaurant uses separate servers to handle offline and online orders respectively. We focus on the restaurants that do not have their own online ordering systems and must rely on a third-party platform to receive and process online orders. The platform charges a commission fee to the restaurant for each online order. We model the interactions among the three parties: platforms, restaurants, and customers, as a Stackelberg game. To find the equilibrium, we first analyze the customer choice between online and offline channels, then study the restaurant’s decision on the channel choice and, if omnichannel is chosen, whether to adopt a pooling or dedicated system, and finally study the platform’s decision on the commission rate. We show that the pooling system yields a higher profit and throughput for the restaurant, while the dedicated system only generates a larger social welfare than the pooling system when the commission rate is relatively high. Interestingly, we reveal that under the dedicated system, the platform has an incentive to increase the commission rate to extract more profits from the delivery channel, while the pooling system can mitigate this platform’s opportunistic behavior.