Restaurants and Startups Try to beat Uber Eats and DoorDash

A new harvest of services promises online orders at a lower cost for restaurants, leaving restaurants to organize more deliveries on their own.

Chipotle Mexican Grill Inc.,

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Shake Shack Inc..

and a growing number of chains have recognized the cost of application-based delivery orders, and many say they intend to address it. Local governments from New York to Seattle have enforced rules that limit application delivery fees, in an effort to limit restaurant costs, while the health crisis keeps people at home.

“The pain of app fees is not new … the pandemic has just made it worse,” said Andrew Wang, the founder of Spread, a website that charges $ 1 per order and sells it as a cheaper and friendlier alternative for restaurants to large applications. .

Mr. Wang says restaurants offer lower prices for menu items. Restaurants say that they usually register in popular applications to compensate for the commissions that these services charge.

Delivery is an expensive logistics undertaking. DoorDash and Uber Eats reduced their losses as orders increased, but did not yet make an annual profit. Grubhub suffered further losses, in part as the commission ceilings weighed on the bottom line.

Some new players say they can run enough orders for restaurants to organize their own deliveries – as pizza shops and delivery companies have long done – or outsource deliveries to a partner. Lyft Inc.

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said it is exploring such partnerships with restaurants.

Whether these alternatives can gain market share or make a profit is an open question. The producers of the new service culture say they save both restaurants and consumer money, because restaurants do not set menu prices to offset commissions and may charge customers lower delivery fees.

Sales of third-party food delivery services are more than double the pandemic, with demand levels remaining high, according to an analysis of credit and debit card data from Earnest Research. DoorDash, Uber Eats and Grubhub saw the largest increases, although smaller delivery companies such as Chowbus and Ritual Technologies Inc. saw year-on-year increases in December and January, the data show.

Long John Silver’s LLC, the fast-food chain of nearly 700 units, plans to introduce a system later this year so customers can order directly on the company’s website, with delivery being handled by a third-party delivery service.

“We didn’t want to keep dealing with these companies,” said Stephanie Mattingly, the chain’s marketing director, about the big delivery applications. “They are the evil we need right now.”

Larger applications say they are taking steps to help. DoorDash has recently started building websites for small restaurants that allow customers to order directly from restaurants. Instead of receiving a commission, DoorDash charges restaurants a flat fee for delivering orders placed through these sites. Consumers also usually pay for the cost of delivery. Uber Eats started a similar feature. Grubhub said it is building chain applications and will provide similar free services for independent restaurants in the coming months.

All three applications say they have spent millions of dollars to support small restaurants through free grants and promotions. DoorDash said it gave up commissions for restaurants with five or fewer outlets in the first months of the health crisis. Grubhub said he suspended commissions for independent restaurants in the first few weeks of the pandemic. Uber Eats said it has halved commissions for restaurants that make their own deliveries by mid-this year.

Spread is Mr. Wang, who helped Groupon Inc.

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launched its delivery service, tried to navigate the growing consumer sentiment against commissions, designing cartoons and stickers that show the disadvantages of larger application practices. He encouraged restaurant partners to pack them into orders.

Half of the 150 restaurants on the Spread make their own deliveries, Mr. Wang said. They set their own delivery fees for customers, he said, often at lower prices than large apps to encourage more orders. The New York company is working with a partner to complete the other orders.

Fare, a New York-based delivery service launched by catering company CaterCow, offers customers a limited selection of on-demand restaurants – a game piece to increase volume. Fare restaurants deliver themselves, with the owners and managers acting as delivery drivers at the same time. Deliveries are made at set times during lunch or dinner, which helps restaurants reduce costs.

“It’s not the best if you want your food in the next 20 minutes,” said Sean Li, executive director. The service is a better bet for people who like to order their meals in advance, he added.

Similar to Spread, restaurants on Fare often display lower prices for menu items than for other applications, because Fare does not charge them a commission. Charges customers a service fee, similar to large applications; Mr Li said customers still pay less than they would pay for apps like DoorDash and Grubhub.

Fare has worked with about a hundred restaurants since its launch in June last year, Mr. Li said.

Some restaurants take on more online business in an attempt to bypass applications.

Hot Dogs LLC of Portillo entered into a delivery agreement with DoorDash in 2017, but began directing some business to its own application during the pandemic. The chain of 63 units left some workers empty during delivery and began handling larger orders.

Drivers reach the thresholds of customers in Portillo’s uniforms, and workers are tilted directly. “There’s a benefit to controlling the whole experience,” said Nick Scarpino, the company’s vice president of marketing for Chicago.

Big restaurant chains can negotiate better commissions with delivery apps, but they say they feel there are some fees for order management.

Chipotle is one of the restaurants that introduces new pick-up services designed as an alternative to third-party deliveries. Customers can enter a parking space at the restaurant, tap an app and an employee brings the order into their car. CEO Brian Niccol said many customers prefer to pick up their own food.

“It’s faster and, by the way, you can avoid delivery fees,” Mr Niccol said in an interview this month.

Write to Preetika Rana at [email protected] and Heather Haddon at [email protected]