Covid-19 and the great food delivery pivot

The logistics involved for restaurants to switch to a carry out and food delivery model cannot be underestimated, reports Liz Cooley

As people across the US adjust to the new normal mandated by ‘stay at home’ orders, the demand for both carry-out and food delivery is growing.

Restaurants that have been forced to close their doors to dine-in customers are now faced with a new challenge: how to pivot their model to meet this increased demand and get their freshly prepared meals to people’s doors.

Many restaurants already operating in the carry-out and delivery space may simply have been able to increase that capacity, redeploying staff or even taking extra people on.

Countless others who hadn’t offered these services before have had to act quickly to join their ranks and compete for customers.

The logistics of delivery

But being able to prepare enough meals is one thing. Actually getting them from the kitchen to people’s homes is another.

For small operations without the existing infrastructure to deliver, this presents a whole slew of challenges, from engaging staff and providing them with transportation, to ensuring their health and safety.

“For a restaurant to develop a full delivery program, to have people on staff who are available to take deliveries, is very expensive,” explains owner of New York restaurant group, Havana Central, Jeremy Merrin. “If you’re not doing the volume and the area you’re delivering in is not concentrated enough, you may not make any profit from offering that service.”

Karen Malody FCSI and principal of Culinary Options, agrees. “There are many advantages to doing one’s own delivery – retention of customer data and assurance that the brand is being conveyed appropriately to the receiver of the order, for example – but it takes time to do it right and safely,” she says. “Many restaurants are conducting a cash benefit analysis surrounding the issue of doing their own deliveries. However, this is a sticky wicket, as the operator must do a thorough analysis of potential insurance and liabilities costs.”

Third-party delivery

This is where third-party delivery services come in. Companies such as GrubHub and DoorDash already have everything in place to process orders and a host of riders to make the deliveries.

Of course, these services don’t come for free. The restaurant industry in the US has long fought over the enormity of the fees charged by third-party delivery services and now is no exception.

Sign-up fees, delivery fees and commissions of up to 30% on each order are just some of the costs enforced by third-party delivery services that many have called predatory or exploitative.

“Charging 25% to 30% for delivery seems incredible when you consider that in most cases that represents more than the margin of gross profit in the item itself,” says Chris Tripoli FCSI, founder of A’ La Carte Foodservice Consulting Group.

Larger restaurant groups have been able to negotiate a fixed delivery fee at 10%-15%, due to their volume of business, says Malody. “But smaller and midsize restaurants do not have that negotiating power.”

Postponing fees

In the wake of Covid-19, numerous apps have advertised a reduction, waiver or postponement in collecting certain fees.

UberEats has waived delivery fees for the more than 100,000 independent restaurants across US & Canada and has launched a daily pay-out feature to help restaurant cash flows.

DoorDash has reduced all commission fees for restaurants with five or less locations by 50% between April 13 and the end of May.

And Grubhub is delaying the collection of $100 million in fees for independent restaurants.

To try and mitigate the impact during such challenging times, many states have also enforced a cap on the commission third-party delivery services can charge of 15%.

“The reduction or postponement of fees is brilliant from a marketing perspective. It shows concern for the restaurant that is trying hard to cover costs and also helps the buyer save a little,” says Tripoli.

But does this go far enough?

“While many restaurants and groups have been very upset with the fees that these services have been charging – which I don’t disagree with ¬– now they understand the necessity of having them in place. They are now very important players in keeping a lot of these restaurants alive during this period,” says Merrin.

Tripoli agrees that third-party delivery companies have become something of a necessary evil. “As consumer demand grows and volume increases I would like to see them respond with volume-based discount programs that greatly reduce their fees,” he says. “It would also be wonderful if these services would use this period of time to promote restaurants – spotlight the owners and workers – and donate any fee charged to the area restaurant relief fund.”

Additional support

As it happens, once such service – UberEats – is already offering its users in the US the option to make contributions to their favorite restaurants at the checkout. The company has pledged to match each contribution with a donation to the Restaurant Employee Relief Fund up to $5m.

GrubHub has also set up a community relief fund of its own, which will pay cash grants to organizations supporting independent restaurants and food delivery drivers.

Other options to support local favorites include purchasing gift cards and merchandise, or donating to one of the many Venmo or GoFundMe accounts springing up to support workers.

“The best thing customers can do to support their local restaurants is curbside pickup,” says Malody. “It is also safer and assures accurate delivery. Purchasing gift certificates for when the restaurants open again is also a grand idea.”

An ongoing battle

In spite of these efforts to support the industry – be they purely altruistic or simply savvy marketing – the big four are currently the subject of a class-action lawsuit in New York. Filed on April 13 2020, the lawsuit alleges that UberEats, Grubhub, Postmates and DoorDash have abused their power to create a monopoly and force restaurants to charge the same for online and in-person orders. It seems the battle for delivery is far from over.

Liz Cooley

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