Delivery apps helped restaurants survive the pandemic

After navigating the closings, openings, supply shortages and staffing issues of the COVID-19 pandemic, local restaurants and retailers are emerging with a changed relationship with their customers.

Part of that change, particularly for restaurants, has been the rise of third party delivery apps. In the Central Valley, restaurants and grocers embraced the convenience of no-contact takeout and delivery option services like Doordash, Grubhub and Uber Eats.

New data from the University of California, Riverside shows that app-based delivery services greatly boosted Central Valley restaurants, grocers and merchants across the region.

In Modesto, the number of businesses using these platforms increased by 106% from the third quarter of 2019 to the third quarter of 2021. Modesto now has 1,543 merchants on the platforms, bringing in a total of $35.5 million in revenue, compared to $29.6 million from 794 businesses in 2019.

To conduct the analysis, UC Riverside researchers used data provided by Doordash, Instacart and Uber Eats.

Delivery app use in Central Valley rose sharply in pandemic

Among the restaurants leaning heavily on delivery apps was Modesto-based My Garden Cafe, which uses Grubhub and DoorDash at all five of its locations in Stanislaus, San Joaquin and Tuolumne counties. Owner Lisa Welch said during the heart of the pandemic, after restaurants were allowed to reopen their dining rooms, she estimated half of their sales were still coming from the delivery apps.

Since then, she said it has slowed to about 20% of sales. But she still finds value in using the services, despite the fees they charge restaurants, because new customers keep finding them through the service.

“It’s not a money maker for us. But we’re trying to continue to offer it to customers as long as they continue to utilize it, as a convenience factor,” she said of her locations in Modesto, Turlock, Ripon and Sonora.

The third-party apps became a necessity for restaurants like Papachinos, a Mediterranean restaurant in downtown Modesto. Before the pandemic, they had relied on local delivery drivers, but that business model became unfeasible as COVID-19 spread. So in early 2020, they signed up for all four major delivery services — Doordash, Grubhub, Postmates and Uber Eats — said manager Daniel Escobedo.

But after dining rooms opened back up, Escobedo said they took a look at which had the most volume and sales and narrowed their use down to Doordash and Grubhub. Postmates has since been purchased by Uber Eats and merged services.

Escobedo said while they appreciate the apps, and would otherwise have to train and maintain their own delivery fleet, the service takes some of their quality control away. Once the order leaves the restaurant, they have to field complaints if something goes wrong in transit.

“It’s a double-edged sword,” he said. “It’s good and bad. We have gotten new customers out of these companies where they probably wouldn’t have run across (our restaurant) walking around, versus on an app, seeing that there’s this restaurant that has good reviews or food that they they didn’t think was available to them or nearby.”

Food delivery services have become necessity for some

For newer restaurants like north Modesto’s Viet Noodles Xpress on Coffee Road, the apps were a necessity. Open only about six months before the pandemic started, owner Tien “Viet” Nguyen said the apps helped the restaurant survive the in-person dining closures. Indeed, their use has remained pretty consistent through the pandemic, accounting for about 30% of their sales then and now.

The restaurant uses Doordash and Uber Eats, though Nguyen said DoorDash is the dominant delivery app in the region with more customers and drivers. He said he has had customers try them out first on the apps, and then come to the restaurant for dine-in later.

Nguyen has seen the reliance on the third-party delivery apps in his own home as well. The rise of convenience ordering, where people can stay home and scroll through their dinner options on their phones, has became a new way of eating for many during the pandemic.

“I hear it from my two daughters, who are 11 to 10. They ask, ‘Can we DoorDash this, can we DoorDash that?’ Instead of, ‘Dad let’s drive for ice cream,’ it’s now, ‘Let’s Doordash some ice cream,’” Nguyen said.

Still, the apps have their downsides and many local restaurant owners agree the biggest is the fees. Tech companies take anywhere from 15% to 30% of the sale price. To help local restaurants, in February 2021 the Modesto City Council also approved a 15% cap on fees the delivery apps could charge on each order.

Regionally, some restaurants have been able to circumvent the highest fees by signing exclusive deals with one of the apps.

Modesto’s Tasty Thai restaurant has been on Grubhub for almost five years, since before the pandemic started, said manager Laureano “Jay” Salva. The longtime Village One Plaza eatery manager said at the height of the pandemic, while dine-in was available, they estimated about 30% of their orders were through the apps. Now, about 20% of sales come through Grubhub.

With in-restaurant dining back to pre-pandemic levels, Salva said he credits the apps with helping the restaurant grow during an extremely challenging period for the industry. And, on the other end of the spectrum, he said they had many loyal customers who made a point of picking up their own food or dining in instead of using the apps, to help save them the fees.

“We are more popular than ever. So it’s worth it to be on (the apps),” he said. “Honestly, it would probably cost us more to try to (set up delivery) for ourselves. And people are getting used to it and expecting it.”

Some restaurants still hold out

While many restaurants have capitalized on delivery apps, a few oppose them altogether.

One restaurant is La Huerta Vieja, a Mexican restaurant in north Modesto. Manager Franky Acosta told The Bee that he wasn’t happy to see his restaurant listed on Gruhub — quite the opposite.

The app used to offer delivery from La Huerta Vieja, even though Acosta had never signed up.

His restaurant’s curbside pickup system is a welloiled machine: customers place their orders on the phone and then pick them up in the parking lot. But Acosta began noticing that a number would recur often in his order logs, but the driver and car were always different. He quickly figured out those drivers were contracted out through delivery apps, and that the services had uploaded an incomplete version of the menu to their sites.

When Acosta contacted the apps in question, he said it took a long time to get his restaurant’s listing removed. They tried to tell him that they’d listed La Huerta Vieja based on customer interest, and joining the apps would be good for business. And they continued to send him orders, and tried to charge him fees, in an effort to get a contract signed with the app.

Acosta said his restaurant benefits from a large, loyal customer base, easy access — La Huerta Vieja is located in the same complex as a Save Mart, so there’s ample parking space — and proximity to many different neighborhoods. All these factors mean they don’t need to rely on delivery services for sales.

Not using delivery services means Acosta and his staff have control over all their orders and can make things right if there’s an error. They’ve expanded their options for family-style meal kits during the pandemic, which have proven popular, and they reach customers organically on social media.

But he recognizes not all restaurants are that lucky.

“(Big delivery services are) terrible, but I think a lot of (restaurants) take it as a necessary evil,” Acosta said.