Restaurants weigh benefits, cost of third-party food delivery
Food delivery is a small part of Roy Ring’s business at North Kingstown’s Carriage Inn, he says, yet it’s also a large part of his strategy to keep his restaurant COVID-19 competitive against pandemic poachers looking to steal business.
“Every time you put your food in someone else’s mouth, you are building your brand,” said Ring, restaurant owner, noting it costs him nearly 26% per order when using popular delivery service DoorDash.
Although this outside delivery service accounts for about 7% of his total business, paying his own staff to do deliveries may very well cost him more money, he said.
Ignoring delivery requests could mean a loss of revenue and customers now and in the future, he added. He and other local restaurant owners using these for-hire services – a taxi for your food – said they are necessary.
With fewer people dining inside and the rising popularity of these delivery services, demand is for convenience and customers are willing to pay higher costs for it. So, too, must restaurants, various owners said.
That sentiment is reflected in Marketwatch’s trend reporting. It found that with the top four delivery service companies – DoorDash, Grubhub, Uber Eats and Postmates – boom times came in the first five months of the pandemic.
The four companies raked in roughly $5.5 billion in combined revenue from April through September last year, more than twice as much as their combined $2.5 billion 2019 revenue for the same period, according to Marketwatch.
Restaurants are paying a surcharge or commission, often passed along to customers through menu price hikes. In addition, customers also face other fees, such as delivery charges for placing the order and tips for drivers.
For example, a hamburger, fries and a vegetable might cost $23 with tax when dining inside. However, some restaurants might boost that cost a few dollars to $26 to cover part of their delivery costs.
Then comes with some services possibly a $5 or more delivery charge at the time of the order. Next follows perhaps a 15% tip of about $4 bringing the total to about $35 – a $12 increase to the customer.
Nonetheless, many local drivers reported they continue to find opportunity for quick and certain cash from schlepping around food.
“I very much enjoy the job and I get to do it whenever I want to,” said Madalyn Openshaw of South Kingstown, mirroring the sentiments of other drivers interviewed who serve South Kingstown, North Kingstown, Narragansett, Charlestown and other local communities.
Changes to Restaurants
“Restaurants are heading into a terrifying winter with no lifelines other than delivery platforms,” restaurant analysts MKM Partners have reported.
Owners in South County know the perils of that situation all too well. They have normal winter-season sinking revenues made worse by the pandemic bringing fears of indoor dining and restricted limited space inside.
Christian D’Agostino, owner of Tavern on Main in Wakefield, said he’s doing only about 50 percent of the business he usually does this time of year.
Even though some popular delivery services can take as much as 30% of the meal’s menu price, various restaurant owners say they feel trapped into participating.
Ring at The Carriage Inn said he just started using the delivery services. In part, it was a response to the increased demand brought on by COVID-19 restrictions.
“Yes, it costs 26% of the price, but you have to look at it as business you wouldn’t have gotten because those people want delivery and do not want to leave their house,” he said, adding that they use apps to find participating restaurants.
Peter Watson, owner of El Fuego Mexican Grill in Wakefield, isn’t happy either about the cost.
“Honestly, I don’t know where I’d be without it,” he said about a delivery service, noting that his small restaurant on Main Street cannot accommodate any indoor dining because of its size and restrictions. He depends on takeout and delivery.
Peter Gautam, owner of Bombay Flame in South Kingstown, said he uses five delivery services with varying results, but all bring some cost to him.
One benefit for his restaurant, he and others said, is that they also get advertising through the apps and that helps to bring in sorely-needed business, especially in the winter months when tourists are gone.
However, some restaurant owners remain uncertain about the value of third-party delivery services.
Still unclear is how long the surge in deliveries will last, according to Marketwatch, and what it means to the financial success of food delivery apps in the long run.
While these delivery companies are seeing a surge in business, their own costs remain too high to post any sustained profit, Marketwatch believes.
And the other stakeholders involved, such as the restaurants, states and cities, are looking to curb the cut. They want to cap the restaurant fees companies charge and get some share of the companies’ revenues, perhaps through additional taxes.
One local restaurant group posted to a social media site, “It’s an absolute rip off. We can’t believe any business wants to use them and lose money in order to get sales. 20-30%, Nah ..... we rather not deliver.”
David Thomas, owner of Benny’s Clam Shack, said in a social media post that he’s uncertain about continuing a trial use of one service.
“It costs me nothing, but I will eventually drop them because I know at one location I’ve worked at and have made sure every product that went out was spot on, and some of the reviews from the customers were a rating around 3 to 4 when I know that it should not have been,” he said.
In Rhode Island, some push back started against delivery’s services’ commission fees on restaurants and the services listing them on their apps without restaurant owners’ permissions.
One entrepreneur, Anthony Spiratos, formed “No Contact Valet” in Newport. That service will run errands, deliver groceries, fetch restaurant takeout and other essential items.
He doesn’t charge restaurants a fee. The delivery charge is a flat rate of $5 coupled with a 2.9% online charge transaction fee, and workers keep 100% of any tips earned.
Customers Like the Services
Despite paying more, many local customers reported favoring delivery services in the pandemic even though they still have some complaints.
Andrya Fitzgerald of West Kingston and Ben Marketos of North Kingstown each report some mixed results for using delivery apps frequently.
“It’s been a great service. Especially during a pandemic. It’s always safe, they follow mask protocol and distancing. It’s obviously more expensive than going to get the orders myself, but you’re paying for convenience so it’s expected,” said Fitzgerald.
The one recurring issue that has arisen is drivers finding her address, she said.
“GPS makes it a little tricky so I try to be as descriptive as possible in the instructions,” she said. “I have had disgruntled college-aged drivers who were very unhappy with not being able to find my address.”
“I anticipate this happening, so I am never upset unless their attitude toward me is less than favorable. This has happened and DoorDash is very responsive in providing credit for not-so-stellar service,” she added.
Marketos said he has used Grubhub a few times during the pandemic.
“Overall the service was good and there was no contact with the delivery person, which is a plus,” he said. “One thing I didn’t like was the requirement to tip the driver at checkout.”
Rather than give the tip upfront, he prefers to give after delivery. However, going back into the app to tip is not possible. He also noted he has had problems occasionally with cold food and the pricing is costly.
“I will say that it is very expensive. It costs a good amount of money to order delivery food as it is. Last night I got two large grinders delivered from a local pizza place and it was almost $30 with tip. That’s without involving Grubhub and paying them,” he said. “So delivery apps, probably not worth it.”
There are also others who don’t trust the services or the COVID-19 safety precautions.
These include no contact with customers, deliveries made to door steps or porches only, drivers following requirements
to always wear gloves and masks as well as sanitize their own vehicles, which they use, for the safe transportation of food.
From the Driver’s Seat
Chris Sherman, who lives in North Kingstown has been “dashing,” as delivering for DoorDash is called, for almost a year and follows all safety precautions required.
“I got started on DoorDash when COVID-19 swept the world and my university sent me home for the remainder of the year,” he said, noting a summer hotel job evaporated and he instead signed up for DoorDash deliveries.
He travels around North Kingstown, South Kingstown, Narragansett, Jamestown and parts of Exeter, Richmond and Charlestown.
When he first began, he said, “There were a lot more orders every night back then compared to now. You could expect to be taking deliveries well into the morning during the lockdown.”
Now he signs off about 9 p.m. because only a few orders come in late in the evening, Sherman added.
He explained how safety is part of his and other drivers’ deliveries.
Most restaurants hand the food to drivers in a sealed bag, which the driver then puts into their own insulated bag. “Frequent use of hand sanitizer and cleaning the insulated bag plays a big part in ensuring that the food and the bag remain safe as possible,” he said.
“Most deliveries I take are actually no-contact drop offs. It’s usually as simple as dropping the food on the doorstep and stepping away, but some customers will have you leave their order in a specific spot, or will have to direct you to
their apartment,” he said.
He said that he usually takes a picture of the order where it is dropped off. He sends the photo to DoorDash, which will pass it along to the customer. This helps to prevent claims that the order never arrived and DoorDash needing to refund costs.
Madalyn Openshaw, who lives in South Kingstown, does “dashing” both locally and in the Providence area. She has worked frequently during the pandemic.
She said she expects delivery services requests to continue strong until more customers return to indoor dining.
“The only time I saw any change was in the summer when people felt comfortable dining outside, and during the holidays,” she said, noting the same as Sherman that hers are mostly contactless deliveries.
“I think my best customer story was a woman who appreciated all the lengths I take to make sure orders are correct and safe,” she said. “She made sure to express her feeling to me on that.”
Openshaw said the worst is when customers report that she didn’t deliver ordered items and she has taken photos, as Sherman does, to prove the delivery is correct and to combat scams.
Bryan Testa, who delivers in the South County area, said a customer once ordered “an extra entree and when I dropped the food off, she took the extra entree out of the bag and told me to take it with me.”
Drivers all reported that earnings varied depending on the number of days worked, tips given and whether any added bonuses come from the delivery companies who give a base pay per order. Sometimes even miles traveled are included.