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Daily news and analysis about the food tech revolution

Bite Squad

Bite Squad to End Service in 3 Minnesota Cities

Around this time last year, we predicted that small- to mid-sized U.S. cities would be key battlegrounds in the war to win food delivery, and that this expansion would give smaller services a chance to stand out.

We were half right. Restaurant food delivery has indeed made its way to every conceivable corner of the nation, and the majority of restaurant growth over the next 10 years is expected to come from off-premises sales. But it looks like instead of benefiting from this expansion, smaller services are getting edged out by the usual suspects (DoorDash, Grubhub, etc.).

Case in point: this week, Minneapolis-based food delivery company Bite Squad said it was ending service in three Minnesota cities: St. Cloud, Rochester, and Duluth. The announcement comes mere months after Bite Squad launched services in these cities. 

“We were unable to grow the market fast enough to become profitable,” Bite Squad Media Relations Director Dean Turcol told the SC Times this week.

Bite Squad sent a bare-bones email to those partners in those cities saying only that the company is suspending service “indefinitely” and that its last day of operations will be December 5.

One year ago, Bite Squad was far more optimistic about food delivery and the company’s approach to the model, which has always been to focus on small and mid-sized cities in the U.S. rather than fight the competition in LA, NYC, and other major metropolises. At the time, Bite Squad’s Chief Marketing Office, Craig Key, said the company was “very bullish” on restaurant delivery across Middle America. “We’re confident in our position because we’re not haphazardly going into markets,” he told The Spoon.

Then Waitr acquired Bite Squad in December 2018 for $321 million, a deal that at the time seemed like a win for smaller delivery companies. Waitr has since written off much of that deal, laying off many of Bite Squad’s staff at the latter’s Minneapolis headquarters.

So who’s winning over Middle America and all the smaller cities in between the nation’s coasts? DoorDash. Despite recent controversies, the San Francisco-based company continues to seize the suburbs and lead the market for third-party restaurant food delivery. Unfortunately for companies like Bite Squad and Waitr, that doesn’t look likely to change anytime soon.

Bite Squad Launches Campaign to Deliver Meals to Needy Families This Thanksgiving

It’s not even Halloween yet, but already grocery store displays are showing off pumpkin pie filling, boxed stuffing, and other accoutrements to the traditional Thanksgiving meal. But with 37 million people in the U.S., including 11 million children, currently struggling with hunger, putting an elaborate holiday feast together is a stretch for many, out of the question for some.

On-demand food service Bite Squad has responded to the problem today by announcing a new campaign to deliver hot meals on Thanksgiving to thousands of families in need. Called Share Thanksgiving 2019, the program originally belonged to food delivery service Waitr, which Bite Squad acquired in 2018. It works like this: from today until November 5, restaurants are invited to commit to donating meals to families in need. Meanwhile, Bite Squad-Waitr employees and customers can nominate families. Bite Squad will also work with local community organizations to identify those most in need.

From the campaign page:
Over the next month, Waitr and Bite Squad employees and members of the local community will nominate families in need for the program. During this period, when anyone orders from Waitr, the company will make a donation that will go toward covering the cost of the meals. Each meal will be prepared by participating restaurant partners, allowing us to jointly provide eligible families with (literally!) restaurant-quality meals.

Just before Thanksgiving day, volunteer employees will come together to deliver the meals to the families.

Waitr founded the campaign in 2017, when it delivered 1,000 Thanksgiving meals to families in need. That number doubled in 2018, and this year, the Waitr-Bite Squad entity said it aims to share over 4,000 meals across 50 U.S. Waitr-Bite Squad markets. That includes the following states: Alabama, Arkansas, Florida, Georgia, Hawaii, Louisiana, Minnesota, Mississippi, North Dakota, South Carolina, South Dakota, Tennessee, Texas, Virginia, and Wisconsin.

We’ll be keeping an eye out over the next few weeks for other restaurant and food companies doing their part to help the needy this Thanksgiving. (Know of any? Drop me a line.) In the meantime, those interested in Bite Squad’s program can nominate a family here.

Protests Over Waitr’s Fee Structure Highlight How Flawed Third-Party Food Delivery Is — For Everyone

Restaurants and customers in Baton Rouge, LA are currently holding a weeklong boycott of restaurant delivery platform Waitr. The protests are in response to the company’s recent adjustments to its terms and fee structure deal it has with participating restaurants.

Lake Charles, LA-based Waitr runs a third-party food delivery service similar to those of Uber Eats or DoorDash. The biggest difference in their business models thus far has been around expansion: since its inception in 2015, Waitr has focused on serving smaller U.S. cities, rather than the country’s huge metropolises. The company went public in 2018, the same year it acquired Bite Squad, another delivery service targeting mid-sized markets.

These protests, which started this past Sunday, take a shot at Waitr’s new “performance-based rate structure” for restaurants, which it unveiled a little over a week ago. With this new structure, Waitr takes a higher commission from restaurants with a smaller volume of sales, and a lower one for those restaurants with larger volumes. According to The Advocate, Louisiana’s oldest newspaper, restaurants with monthly food sales above $20,000 will be charged 15 percent per-transaction commission. The commission caps at 25 percent for restaurants with food sales below $1,000, according to a new Master Services Agreement sent to restaurants working with Waitr.

The new terms are set to take effect on August 1. Any restaurant that doesn’t sign the new agreement will be removed from the Waitr platform by July 31, according to The Advocate.

But Waitr could lose restaurant customers over these new terms, and many have already voiced concerns and frustrations over the kind of financial impacts this performance-based structure will have on already thin margins.

“We’re very concerned about Waitr changing their fee structure,” Mitch Rotolo, founder of Rotolo’s Pizzeria in Baton Rouge, told The Advocate. “If their model requires more revenue, they need to ask the customer to pay more for the service, instead of going back to the vendor and squeezing them. That’s unfair.”

Baton Rouge restaurant owner Jim Uridales, who owns Mestizo, told Louisiana news channel WAFB9 that, “Most people would be surprised that most restaurants live in a five to two percent margin on food, so taking that margin away would mean that every transaction would be a loss for us.”

The other side of the picture, of course, is that Waitr is now a public company under pressure to become profitable, which suggests this new fee structure is an effort to prioritize restaurants with higher profiles, inevitably weeding out the smaller businesses in the process. As Rotolo said, it’s unfair. However, it’s also probably one of the only cards Waitr has to play at the moment to boost its margins, even as larger third-party delivery services, most notably DoorDash, continue aggressive expansions into what some days seems like every nook and cranny in the country. And Waitr doesn’t have the $2 billion DoorDash has rasied to help its cause.

According to WAFB9, Waitr released the following statement:

To stand out in the competitive food delivery landscape, Waitr has adopted a performance based rate model where the more our restaurant partners deliver, the lower their rate will be. Our partners will discover this is a far more attractive option than those offered by our competitors. Waitr constantly strives to be the most valuable partner to our restaurants and this structure is reflective of the quality and service we provide.

Back in March of this year, Waitr’s CEO, Chris Meaux, told me, “We believe in the next five to seven years or so, we have a chance to be a significant leader in the space.” He also seemed very optimistic about his company’s approach to growth, which he likened to Walmart’s in the 1960s, when the now-giant retailer slowly expanded from its home state of Arkansas and took decades to even reach the coastal metropolises.

That style of growth seems slow for a public company considering growth is what the market wants to see. But is it also too slow for the tech-driven delivery era, where companies must move as fast as possible to offer as much choice as possible to a user base that isn’t loyal to any one platform? And are smaller restaurants taking the hit for what could ultimately have just been an unfortunately short-sighted business decision by Waitr?

The bigger question, though, is how Waitr’s situation will contribute to the debate around third-party delivery services’ power, which grows louder each week. Grubhub and Uber Eats both partook of a recent oversight hearing in NYC that addressed commission fees for restaurants (which are every bit as high as Waitr’s, by the way), and Grubhub has also come under deep scrutiny for potential cybersquatting and antitrust issues.

One idea, as Rotolo noted, would be to push the burden of cost back onto consumers by raising delivery and/or service fees, though that would spark just as much if not more outcry, most likely.

Waitr laid off 20 employees at the end of June in an effort to get rid of redundancies from the Bite Squad acquisition. This week’s protests, however they end, won’t help the company’s reputation, which it can’t afford to lose as other third-party players continue their march into the mid-sized markets.

Forget IPOs. DoorDash Is the One to Watch Right Now in Third-Party Delivery

Grubhub still leads the third-party food delivery market in terms of sales, and of late, Postmates and Uber Eats have gotten a lot of attention for their respective pre- and post-IPO news. But DoorDash may well be the most important company to watch in the escalating showdown for third-party delivery dominance, according to new data from tech company Second Measure.

Second Measure analyzes anonymized credit card transactions and uses that data to shed light on customer behaviors. In the world of third-party delivery, those behaviors underscore the rapid growth DoorDash has undergone recently, growth that has the company almost on equal footing with Grubhub in terms of monthly sales. Grubhub leads the market, with 32 percent of total monthly sales. But the company’s growth is now slower than its competitors, as evidenced in the following graph:

Source: Second Measure

DoorDash, meanwhile, holds 30 percent of the market in terms of monthly sales, and unlike Grubhub, it’s still growing rapidly. In February 2019, DoorDash closed a $400,000 million round and had a valuation of $7.1 billion. Besides investors, Second Measure notes in its report that DoorDash saw “a staggering 216-percent year-over-year jump [in sales], compared to 58 percent at Uber Eats and 4 percent at Grubhub.”

Part of those rising sales numbers are no doubt due to DoorDash’s aggressive push across the country. The service is the only third-party delivery service right now to be in all 50 U.S. states, in case you couldn’t tell from the endless numbers of promotions and partnerships the company does with everyone from Canter’s Deli in LA to Taco Bell to the Wyndham Hotels chain. The service is also now in 50 Canadian cities.

Impressive as the numbers are, no one’s place in the third-party delivery market seems certain because the space changes so rapidly — something that will continue for the rest of 2019 and beyond. DoorDash will have to work hard at retaining its customers if it wants to keep up. And as Second Measure and others have noted, loyalty to any one service isn’t something third-party delivery customers prioritize. For example, in the first quarter of 2017, 88 percent of Grubhub’s customers didn’t use another service; two years later, that number has dropped to 62 percent.

Unless, that is, you’re in the south. It seems of all the third-party delivery services out there, Waitr, who’s business is more focused on second-tier U.S. cities, has the highest number of loyal customers on the list. Waitr (who recently acquired Bite Squad) doesn’t (yet) have the reach or growth rate of DoorDash, but focusing on customer loyalty in cities that aren’t New York, LA, or other major metropolises could eventually be hugely advantageous. DoorDash should take note.

Waitr Takes a Bite Out of the Third-Party Delivery Market, One Small City at a Time

A brief history lesson: When Walmart first became successful enough to expand outside its home state of Arkansas in the 1960s, the company didn’t immediately barrel into heavily populated coastal cities like New York or Los Angeles. Instead, it opened locations Missouri and Oklahoma — neighboring states but not exactly the epicenter of commerce. Walmart didn’t actually make it to California until the ‘80s and New York until the ‘90s.

Chris Meaux, CEO of delivery service Waitr, argues that this focus on smaller markets is how Walmart built the mega-popular status it enjoys today. And if he has his way, Waitr will eventually be able to tell a similar story.

“[They] had such brand equity that they eventually got pulled into [major] cities,” he says of the big-box retailer’s eventual coast-to-coast expansion. “And I think the same thing could happen to Waitr over time. We’re building a very strong brand in the markets we serve. If the demand for that brand requires we get pulled into major markets, we’ll do it.”

To the consumer, Waitr looks much like any third-party delivery service: You download an app, order food, and wait for someone to deliver it. The company operates in many of the same markets as — and many markets where those bigger players aren’t.

To be clear, Waitr isn’t trying to be the next Walmart. It is, however, following the retail giant’s strategy of expanding from its smallish hometown — in this case, Lake Charles, Louisiana — into other smallish cities before heading to the mid-sized markets a la Minneapolis or Amarillo, Texas. Major metropolises aren’t even on the wish list right now.

Even its website emphasizes this localish approach, pushing the image of a hometown food service rather than a faceless entity that’s in every other American city. As Meaux explained over the phone recently, these places are perfect markets for Waitr’s business “because they haven’t gotten attention from some of the larger companies.”

Waitr’s current territory includes much of the Southeast and two dozen cities in Texas. And with its recent acquisition of Bite Squad for $321.3 million, that reach expands to smaller coastal markets like Virginia and Hawaii.

“It was almost exactly the same business model as Waitr,” Meaux says of Bite Squad, adding that larger companies tend to be more focused on demand for consumers, whereas Waitr/Bit Squad puts a lot of emphasis on partnerships with restaurants and drivers, too.

How to employ drivers was a key area on which Waitr and Bite Squad agreed, and it’s the other thing setting Waitr apart from the larger delivery companies. Waitr has, according to Meaux, around 18,000 W2 employees as drivers on its payroll. And he’s aware of how absurdly expensive that sounds to most people.

“It’s really a policy that employees are more expensive,” he says. “Efficient employees are much less expensive.” Because Bite Squad can schedule employees to work when they actually need them, they can more easily accommodate busier periods of the day (dinnertime) and cut back when it’s slow (2 p.m.). Meaux says drivers are reimbursed for personal vehicle and cellphone use. “If you manage the driver flee right and you schedule the drivers when you need them, [you] can do it with a fraction of the drivers that [competitors] require. And as long as employees stay busy, the company profits, because its fees are hourly, rather than a flat rate. Bit Squad, who still maintains its own operations, uses an almost identical approach when it comes to drivers.

It’s impossible to now right now whether this is a sustainable model for the long term. But Meaux, along with Bite Squad CMO Craig Key, are optimistic. “We’re excited about the future about Wiater and Bite Squad, we’re deep into the integration,” says Meaux. “We have a lot of opportunity for growth and expansion. We believe in the next five to seven years or so, we have a chance to be a significant leader in the space.”

He says there will also be room in that future to continue exploring a subscription-based model, something other delivery companies are currently experimenting with, too. Bite Squad’s Unlimited service costs $5.99/month, and users can order from participating restaurants within a four-mile radius. Meaux says there’s “tremendous opportunity” for the unlimited model, though it won’t be as significant as, say Amazon Prime was for e-commerce. “Products or services are oftentimes options. Food is not an option.”

One could argue that delivery is optional, but at this point, it’s so widely and cheaply available it’s become commonplace. In fact, Waitr’s heaviest users, Meaux tells me, are “moms with kids” who “have no time.” Paying a five dollar fee to not throw kids in the car and drive to the restaurant or grocery store seems a small investment when looked at in that light, especially when it comes to smaller cities and longer distances between any two places.

DoorDash Now Delivers Food to All 50 U.S. States

DoorDash just announced services in three new states, and with that it reached a new milestone: becoming the first third-party delivery service officially operating in all 50 states. According to a press release sent out today, that makes DoorDash available to roughly 80 percent of Americans. As is pretty much customary at this point, DoorDash will offer a deal in honor of today’s news: for today, customers will only pay a 50-cent delivery fee for all orders over $10.

The milestone comes with the addition of DoorDash service to Montana (Billings, Bozeman, Missoula), Alaska (Anchorage), and South Dakota (Sioux Falls), and brings the total number of cities where DoorDash delivers to over 3,300. By comparison, Grubhub says it currently serves 1,700 U.S. cities (plus London). Uber Eats, meanwhile, serves only a few hundred in the U.S. but is expanding all over the map, including to the Middle East and Asia. However, number of cities doesn’t necessarily equal the most marketshare, and DoorDash is still third behind Grubhub and Uber Eats in terms of customers.

It should also be noted that expanding into these new cities (as well as a few in North Dakota and West Virginia) doesn’t mean DoorDash gets a break from the competition, be it Uber Eats and Grubhub or the slew of other services who’ve long operated in small- and mid-sized U.S. cities.

Back in December, we wrote that these places are a new battleground for third-party delivery, now that major metropolises like LA and NYC are (mostly) saturated. To that end, Bite Squad, who was acquired by Waitr in December, is already in Sioux Falls, as is a small company called Zip Dish. BringMeThat operates in Alaska, and CafeCourier is in Missoula, MT.

The U.S. is a big place, but it seems our appetites for delivery are even bigger. I wouldn’t be surprised if we see DoorDash or any of the other top three look to acquire some of these smaller companies at some point in the near future. Stay tuned: the winning battleground could wind up being where we least expect.

Bite Squad Brings Food Delivery and a New Economy to America’s Small Cities

Minneapolis is landing on more radars these days as a destination for all things food related. It has a food startup scene, food halls, and accelerator programs backed by major CPGs. And it’s got Bite Squad, a food delivery service that’s changing the economies of smaller U.S. cities at the same time it drops meals off at customers’ front doors.

The service works much like any other third-party food delivery operation. Users order and pay for food either online or via the Bite Squad app, with delivery fees based on the distance between customer and restaurant. Bite Squad functions a bit like Uber Eats in that users can see a detailed breakdown of where their order is in the preparation process: the five-step status checker lets a guess track their meals’ progress after placing an order, notifying them when an order is sent to the kitchen, when it’s being cooked and quality checked, and, finally, when it’s on the way.

Bite Squad may be based in Minneapolis, but it is in over 300 U.S. cities now, thanks to a recent expansion; they aim to be in 400-plus cities by the end of 2018. But unlike a lot of food-delivery services, Bite Squad focuses on Middle America’s big towns and small cities, rather than trying to grab a sliver of major hubs like NYC and LA. “[Delivery] is still a very new part of a Middle America city economy,” Bite Squad’s Chief Marketing Office, Craig Key, who adds that “the most exciting thing we’re doing is that we’re reinventing economies of these towns.”

They do this by tackling new cities neighborhood by neighborhood, sometimes also acquiring local food-delivery businesses that can give Bite Squad access to new audiences. That was the case with the company’s recent 100-city expansion, where they acquired 13 regional restaurant-delivery services across Florida, Minnesota, Texas, Mississippi, and a few other states. “We really build this business one neighborhood at a time,” says Key. “We optimize each zone, and we make sure we have the right number of drivers and restaurants [available]. We’re confident in our position because we’re not haphazardly going into markets.”

Part of that calculated growth includes Bite Squad’s approach to hiring drivers: almost all of them are W2 employees with a guaranteed hourly wage and access to things like workman’s comp and overtime pay. It may sound expensive to keep 5,000 drivers at employee status (not to mention the fleet of Prius cars Bite Squad company owns), but Key points out that other companies who hire drivers based on a gig-economy model have their share of frustrations, too: namely in the form of court cases and lawsuits around worker classification and treatment. Plus, Bite Squad claims the employee model is a profitable business. “We built a business based on employee drivers,” says Key. “As long as we’re keeping those drivers busy we can be profitable because our profits can be hourly, not based on a flat delivery fee.”

Bite Squad is able to do things like prioritize employees over contractors because so far the company has managed to keep its business going from its own profits, rather than having to raise funds and answer to investors. Since Bite Squad is private, Key didn’t disclose any actual figures to me. But he did mention the food-delivery service sector is growing at a rate of roughly 30 to 50 percent per year, and that Bite Squad’s growth rate is faster.

Even so, the company has no plans in the immediate future to expand into the major metropolises. Rather, Bite Squad sees years’ worth of opportunity still waiting to be grabbed up in small cities and big towns around the country. “We’re very bullish on the upside of Middle America’s appetite for restaurant delivery,” says Key. “By our own math, we’ve got hundreds of more markets we’re looking at and evaluating. Just to fulfill our own pipeline of markets will take years.”