I was crying every day, I was crying, I'm not I'm not even going to I'm not even a front.
I was crying every day.
I was sitting there in the kitchen crying.
The pandemic has crippled many industries, but restaurants have had an especially challenging
year.
Pre-pandemic, over half – 51 one percent of all food spending in America was allocated
towards the restaurant arena.
During the pandemic second quarter that dropped down to the high 30 percent range.
It's now around 46 percent.
But while dining has dropped way down, food delivery has grown considerably.
DoorDash and Uber Eats, the two largest delivery apps by market share, both saw their sales double
from the end of 2019 to the end of 2020.
As of February 2021, DoorDash held the most market share in the U.S.
by far. But some cities have other favorites, like Uber Eats in Miami and Grubhub in New York
City. Restaurants are relying on these delivery apps more than ever before.
It was fifty-fifty before the dine-in and walk-in and our personal website, obviously it took the
majority of the share.
After the pandemic, it was...
No, I think it's close to 80 now.
It's 80 percent. It's definitely 80 percent.
DoorDash alone delivered 543 million orders between January and
September of 2020.
The pandemic has been a huge challenge for all of us, DoorDash, the industry
and everyone.
And I think it was both a challenge as well as an opportunity.
And in an economy with about 9.5 million fewer jobs in February of
2021 compared to February 2020, the flexibility of food delivery as a job
can be beneficial.
Of all the industries in America today, the restaurant industry has been the
industry that has been most impacted in terms of sales declines as well as employment
declines.
Kind of the height of the pandemic, we...
nearly 2 million new dashers joined the platform, which was incredible.
So I started full time for DoorDash in March of last year.
So yeah, that's how I got into – a at closing restaurant and then full time once the pandemic
hit. I don't know, I just really enjoyed it and the money was good as long as you're very driven.
And some of these guys have like three phones, you can see them.
It's crazy. They have three phones, one from Grubhub, one for DoorDash, one for Uber Eats.
It's fascinating. It's a whole other world.
Yeah, it's a completely different world.
Though the rise in delivery has provided new jobs for drivers, there have been some challenges for
restaurants. The delivery apps charge the restaurants fees in order to make money.
Uber Eats charges a one time $350 set-up an equipment fee, plus a
15 to 30 percent fee for each delivery.
Grubhub charges a 20 percent marketing fee, a 10 percent delivery fee and a processing fee of
$0.30, plus 3.05 percent.
DoorDash told CNBC that the company doesn't disclose specific fee amounts given they vary since
the company offers a variety of services for vendors.
Delivery like for my business is 80 percent.
So I can understand before as a restaurant that was 30 percent delivery, taking a commission fee of
30 percent for my 30 percent of delivery wasn't a lot of money.
But when your delivery is now 80 percent, and you're taking 30 percent of my 80 percent.
That's a significant amount of money.
The average markup is 41 to 58 percent across platforms,Gene?
It does Melissa and that excludes typically a 15 percent tip that they put in,
all three major platforms put in, you got to back that tip out.
These fees result in higher food prices for consumers as well.
There's the price of the meal you'd get if you were going physically to a restaurant.
This handy guide from Loup Ventures sets that price at $18.58.
That price usually goes up when a restaurant lists items on these apps.
Then there's a delivery fee, which is sometimes covered by subscriptions like DashPass and Grubhub
+ and a service fee.
There's also a regulation fee which companies, including DoorDash and Uber Eats added to their
tally after cities like New York capped delivery fees at 15% percent.
We're always using these apps as a consumer and not the other
way around where we're like, OK, we'll pay the extra five or six bucks convenience fee, but you
don't see what's happening on the other side.
And that was mind-blowing blowing.
We're both engineers by education and our careers were in engineering, and then we actually met our
previous company where we worked as sales engineers, and then a month before the pandemic, we
bought Uptown Poké and we became the new owners.
By the time we got a feel for the way things operated with the business and making those little
adjustments here and there, it was lockdown.
After cities and states banned indoor dining in March of 2020 restaurants around the country
had to figure out new ways to stay in business.
In the pandemic environment, one of the most important components of maintaining what sales
there are is dealing with what the industry calls the off-premises market, and that
includes, for example, takeout delivery, drive-through, curbside, food trucks
and catering. The one thing that the pandemic has done for the industry is basically
accelerate more usage of that off-premises market.
The majority of online orders are coming from third party apps like DoorDash, Grubhub and Uber Eats.
An analysis from Second Measure shows that nearly half of U.S.
consumers have used one of these food delivery apps in February of 2021.
Dana and Eric started using these apps as soon as they took over Uptown Poké, a month before the New
York lockdown started.
It was a move they felt they had to make to stay relevantand in business, especially in New York
City, which is home to over 20,000 restaurants.
We feel like we're very small fish in that area.
How many restaurants are participating?
Third-party delivery companies have a base of customers.
Right? People are scrolling up and down trying to figure out where to order food from.
My restaurant is based on the working class people of New York.
Working class people like myself, we used their part delivery companies.
Now, maybe as we get familiar with the restaurant, we will start to order directly from them.
But there are some restaurants that are in our community that we don't know about.
So for us at Feildtrip, we use third party deliveries for new people to figure out who we are.
There's a saying in the restaurant industry, the demographics is destiny, and that's entirely true.
And the demographics continue to trend towards pickup and delivery.
Pre pandemic, over 60 percent of all restaurant traffic was off
premises. That 60 percent pre pandemic in the second quarter of 2020
actually moved up close to 90 percent and is currently edged back a little to around
80 percent.
He's a cool guy.
He comes in a suit sometimes.
I was like, are you working?
He said, no it's my day off.
To help out businesses in the first few months of the pandemic, Grubhub suspended fees for
independent restaurants in certain major cities, UberEats waived delivery fees for over
100,000 independent restaurants in the U.S.
and DoorDash offered zero commission on pick up orders and set up a $20 million merchant marketing
program, among other initiatives.
A lot of the platforms were offering some concessions.
There were promises of concessions, especially for New York City, but this is not something we were
seeing right away, which could have helped us in the beginning because the first few months of the
pandemic were just hitting our pockets.
It was difficult.
We were really thinking about, maybe we should close down.
Uptown Poké continued to use multiple third party delivery apps to widen their consumer base,
including Grubhub, DoorDash and Uber Eats.
And they noticed the amount they were paying in fees.
When you see your net payout, and you compare it to how much actually you made from that order
and they're taking 20, 30 percent, you feel like uhg,it's a pandemic.
Like, I wish we didn't have to pay these fees.
But on the other hand, you're telling yourself that we're exposed to a much larger area.
Hopefully because of our ratings and reviews, people will see an order from us.
It's a lot harder to advertise directly to get people to your website.
But it still, at the end of the day, during a pandemic, after a lockdown and you're trying to pay
rent and you see that the money is being taken away, it's taken away...
Yeah, and you're counting every single penny, you're becoming more in tune with your
finances. And you have to be because it's either or you close your doors.
Before the pandemic and at the beginning of the pandemic, restaurants across the U.S.
could pay up to 30 percent in commission fees for these delivery apps on top of other fees
like marketing and delivery fees.
DoorDash decided to reduce their fees.
Some cities and states put a cap on the commission fees that delivery apps could take.
So I'm curious to know how DoorDash feels about that fee cap.
Yeah, I would say that the pandemic obviously is a challenging time for
restaurants and local businesses and in general.
But some apps found a workaround.
It turns out that simply they're adding what is called a regulatory service charge.
If you look when you're checking out tonight, you'll see this.
So it is more expensive than you think.
So they can cap the commission rate, but they're like, well, you know, we're just going to raise the
marketing and order processing fees.
And we can't afford the marketing because the amount of money we put into the marketing, just for
one platform – it's not across all platforms, it's just one platform – completely wipes out that
profit margin and we're actually running negative
With some of these platforms.
Dana and Eric also say there is some difficulty connecting with customers.
We would want everyone to order with us.
The thing is that when people order directly through us, we are able to solve issues like that.
We're able to solve it so fast.
Now, when they order through third party delivery, that distance is so far, we're not even able to
sometimes reach the customer to resolve an issue.
We're not even able to maybe change something or offer them something.
So that's a little tough.
I would say I prefer Grubhub because they have that phone number, they have the customer's phone
number where we can call them if there's an issue.
Yeah, their driver's show up in a timely manner.
We want them to have that conversation and we'll be evolving the technology to enable more and more
interactions between the merchant and the consumer as we go through time.
But despite the expenses, the restaurants we spoke to still do need these apps and say there was a
positive side to using these platforms.
There's definitely a lot of positives.
And one of them is like knowing that there's a delivery guy nearby to pick up the food and we
don't have to have someone on staff.
We would need about 15 guys here at all times.
We looked at restaurants that that were off the DoorDashplatform and those that were on the door to
the platform and those that were on the DoorDash platform were 8 times more likely to still be
around now and ready to thrive post pandemic.
And that's something that we're all very, very proud of.
It's hard to speculate what the new normal will be for restaurants post pandemic, but there could be a
lasting avoidance of dine-in restaurants.
J.D. Power and Associates basically did a survey that said 71 percent of consumers say they will
continue to get food delivered from restaurants as much as they have or even more when the
pandemic does subside.
According to the National Restaurant Association's 2021 report, only about half of adults say
they plan to eat on premises at a restaurant or fast food place during the next few months if
that option is available.
36 percent of adults would sit inside at a restaurant and 25 percent of adults would sit
outside.
Uptown Poké used to have space for indoor seating, but after the lockdown, Dana and Eric converted the
space to accommodate a larger kitchen for more off premises orders.
They're hoping to bring people back inside once it's safe to do so.
But it's not impossible to imagine a future where many restaurants only exist to deliver.
I feel like whenever they place an order on Grubhub or DoorDash or Uber Eats or any of
these third party platforms, it's distancing ourselves from them, from having that connection.
We're just a store on Grubhub, just like an item on Amazon.
In fact, many restaurants don't have any dining options, and the popularity of these ghost
kitchens, as they're called, is on the rise.
Ghost kitchens could create a $1 trillion global market by 2030.
You might be ordering from a ghost kitchen on DoorDash, Uber Eats or Grubhub and not even know
it.
A lot of ghost kitchens are four restaurants in one with the same staff putting out the food.
So you cut down on labor, you cut down on all your expenses.
You still be able to put out delicious food.
The ghost kitchen world excites me.
I think it's a good place for a diverse talent.
People that don't have a lot of money to start up.
And then from the ghost kitchen world, they can then open up a brick and mortar later on.
This is a whole new environment that is definitely a long term trend.
It is not a fad.
It doesn't mean that every restaurant operator will elect to go down this venue.
It just means that, in terms of how the industry has adapted, not only
to the pandemic environment, but how the industry will operate in the post pandemic environment
has changed.
It's important to note that while these delivery apps are much larger than any one restaurant – New
York City councilperson Mark Gjonaj compared it to David and Goliath – these companies are
actually running net losses for 2020.
Grubhub lost $155.9 million, DoorDash lost
$461 million and Uber Technologies lost about $6.8 billion
in 2020, though the company doesn't break down its gains or losses from Uber Eats in a usable
way.
We recognize that there is a balance for restaurants between growth and profitability, and
not every restaurant can afford to pay the same amounts, right?
Because delivery costs money, right?
The dasher actually has to be incentivized to do the delivery, right?
And so our strategy has been to offer a range of options for merchants.
But I understand, it's a business, right?
They're running a business, not doing us a favor.
So we kind of understand what they're trying to do.
That doesn't mean it isn't tough on restaurants, though.
It might be an easy decision for customers to use apps like DoorDash, Grubhub and Uber Eats.
The decision for restaurants is not so easy.
There is a lot to consider and it's not a one size fits all solution.
As a restaurant owner, entrepreneur, there's always a hesitation about any decision you make.
Is this right for me?
And what might be right for me might not be right for my peers or my friends.
And those are some decisions that I had to make.
There's more to us and there's more to other small businesses that are on these platforms, just that
we have to tailor ourselves a little bit.
If you really like the food, I would just say, you know, get to know them personally.
It's even though it's a pandemic, there's all these ways to reach out and get to know the
restaurants, and I'm sure that restaurants would prefer that, you know, over just seeing your first
name.