Close Ad

The Spoon

Daily news and analysis about the food tech revolution

GrubHub

Report: DoorDash In Talks to Secure $400M Ahead of IPO

DoorDash is in talks with banks to open a line of credit for $400 million ahead of a possible IPO, according to an article published on Bloomberg late Thursday.

As the article notes, securing a line of credit from Wall Street is common before an IPO. Sources for the Bloomberg article, who were not identified because the news isn’t yet officially public, said JPMorgan Chase & Co. is leading the potential financing. DoorDash could go public as early as next year, according to those sources.

Should that happen, the company will join rival third-party delivery companies Grubhub and Uber Eats on the public market.

Just last week, San Francisco-based DoorDash acquired food delivery service Caviar from Square for $410 million, and in 2019 alone DoorDash has raised $1 billion and become the first third-party delivery service with a presence in all 50 U.S. states.

The successes don’t come without controversies, though. DoorDash has also been under fire for its controversial tipping practices for workers and recently had to change its policies around tipping in the wake of a storm of bad press.

Nor is DoorDash the only third-party delivery service to be steeped in controversy of late. Grubhub’s summer has been chock-a-block with criticism around its fees for restaurant structures as well as accusations of cybersquatting and calls for an antitrust investigation into the company.

Uber Eats hasn’t recently had so many ethical thorns in its side, but parent company Uber just posted $5.2 billion in losses for the second quarter, and Uber CEO Dara Khosrowshahi said he didn’t expect Uber Eats “to be profitable in the next year or year after frankly.”

If DoorDash does move forward with an IPO next year, it will face the same struggles around profitability its rivals Uber Eats and Grubhub currently grapple with. Ultimately, that issue of profitability could have more sway over the long-term viability of these companies than any criticism over tipping policies or restaurant fee structures.

Aramark Acquires Campus Food-Delivery Service Good Uncle

Just in time for school to start again, food services provider Aramark announced today it has acquired Good Uncle, an on-demand meal-delivery service that drops food to students at specific pickup points around college campuses. Terms of the deal were not disclosed.

Good Uncle launched in 2016 and has raised a total of $2.2 million. The service, accessible via an iOS or Android app, aims to offer college and university students restaurant-quality meal options at student-friendly prices, including free delivery.

To order food, students first sign up with the Good Uncle app and choose items from a menu that rotates every couple of weeks. Certain campuses also feature 15-week membership plans that theoretically could function as an alternative, or at least a supplement, to a traditional student meal plan purchased from the university.

Good Uncle partners with local chefs to make the food and uses its own fleet of vehicles to deliver meals. All food is delivered at drop points on or around the campus. When a user purchases a meal, they choose one of these designated points, marked in the app, and are given an estimated time for how long the food will take to arrive at that point. The Good Uncle site claims an average of 26 minutes for most orders. Payment and order tracking are available through the app.

Aramark, meanwhile, is a longtime food services provider to universities and currently works with over 400 of them in the U.S., offering everything from dining hall services to convenience stores and coffee shops. But thanks to delivery, restaurant-quality food is easier and faster than ever for students to get their hands on, which means slimy spaghetti and endless bowls of cereal from the dining hall aren’t the only options anymore. For Amarak, acquiring a company like Good Uncle is a way to stay relevant as the campus culinary landscape changes.

And it’s definitely changing — specifically to meet the demands for delivery. In 2018, Grubhub acquired Tapingo, whose platform lets students order ahead at on-campus restaurants, cafes and dining halls. And universities are also a hot testing bed for delivery robots, with companies like Starship and Kiwi sending their bots to roam about the quad delivering meals and snacks to hungry students.

Right now, Good Uncle is available on eight campuses in the U.S. According to the press release, the company will operate independently of Amarak and maintain its own unique brand identity. Even so, linking up with a larger company like Aramark, which has a long history and wide reach with universities, could enable Good Uncle to expand to new campuses and compete with the plethora of delivery technologies currently headed back to school.

Grubhub and Shake Shack Team Up for Nationwide Delivery Deal

Grubhub announced this morning it has partnered with Shake Shack to become the burger chain’s nationwide delivery partner.

Shake Shack CEO Randy Garutti told CNBC that the company picked Grubhub for its nationwide program thanks to the NYC-based delivery service’s wide reach, as well as its technology: “We decided Grubhub was the best partner overall. With their national footprint and the way we are going to integrate on the tech side — we have a really good opportunity to give the best guest experience,” Garutti said.

Some of that technology includes direct integration of Grubhub into Shake Shack’s POS system, as well as more precise order timing and tracking via Grubhub’s Just In Time technology.

The deal with Grubhub follows comments Shake Shack made less than a year ago suggesting delivery didn’t really suit its brand, according to Bloomberg.

But times change fast in restaurant tech. Third-party food delivery apps will hit 44 million U.S. users by 2020, according to new forecasting, and QSRs are a key part of this growth. And last week’s news that DoorDash announced its acquisition of Caviar for a cool $410 million only underscores how big a business food delivery has become in the last several months alone.

Grubhub has received its own share of headlines recently — not all of them glowing. In June, the company was part of an oversight hearing in Manhattan that called into question third-party delivery services’ controversial fee structures for restaurants. Grubhub has also had numerous accusations lobbed its way since then over cybersquatting and unfairly charging restaurants for phone orders. The company has denied the accusations and recently put out a blog post addressing its “treatment of restaurant partners.”

The Grubhub partnership with Shake Shack will start in four locations total, in Manhattan, Chicago, New Jersey and Connecticut, with plans to expand to more locations over the next nine months.

The White Castle-Uber Eats Deal Highlights the QSR Battleground for Delivery

Today White Castle announced a new delivery partnership with Uber Eats. The majority of the White Castle menu is now available via the Uber Eats app in over 330 of the fast-food chains’ locations.

Of course, if you’re of a certain generation, the name White Castle almost always brings to mind a certain cult classic film, and the launch of the Uber Eats program coincides with the 15-year anniversary of “Harold & Kumar Go to White Castle.” To celebrate, White Castle is giving away up to 1 million of its Original sliders (sorry, Impossible fans) to customers who order via the Uber Eats app. If you’re so inclined, you can also order a Harold & Kumar meal via the app that offers “special 2004 pricing” — which basically means it’s a cheaper deal.

Of course, when the movie came out in 2004 it was a very different QSR landscape from the one we see today. Nowadays, no amount of gimmicky moves like the above will guarantee you customers if you don’t also have a robust delivery strategy in place. White Castle already delivers via Grubhub and DoorDash, which makes the deal with Uber Eats neither surprising nor earth-shattering.

However, it does highlight just how heated competition between third-party delivery services is bound to get in the QSR arena. In fast food or otherwise, consumers don’t demonstrate a particular loyalty to any one of these third-party delivery services. At the same time, the services themselves are making moves to try and capture more of that elusive customer loyalty, particularly via subscription services that offer — depending on what you order — better prices and some discounts. All of which suggests QSRs like White Castle, who work with multiple delivery partners, could become a mini-battleground of sorts as the novelty of digital ordering and delivery wears off and consumers align with whatever service will get the food to their door cheapest and fastest.

Uber, for its part, has been hard at work initiatives that actually go beyond faster cheaper food when it comes to building customer loyalty: the company offers a $25/month subscription to its overall service, which is an Amazon Prime-like membership that offers discounted rides and free bike usage in addition to deals on Uber Eats. It’s also offering Eats functionality from the main Uber app, subsidizing customers’ rides to restaurants, and drone-dropping haute burgers, all of which are in part geared towards keeping customers in the Uber ecosystem. (Ok, maybe not that last one but drones are still cool.)

While publicity gimmicks like Harold & Kumar-themed meals are amusing and even commonplace when restaurants announce delivery deals, realistically, customer loyalty is going to come from how well Uber or any other service can execute on the above while still keeping menu prices competitive.

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.

Call for Grubhub Antitrust Investigation Suggests Deep Scrutiny of Third-Party Delivery Is On the Way

DoorDash may have knocked Grubhub out of the top spot overall for U.S. market share of third-party food delivery, but in NYC, the latter is still king. And a growing number of parties are starting to take issue with that. Case in point: Grubhub took another blow at the end of last week when a New York City council member called for an antitrust investigation into the company.

In a letter dated July 2 and obtained by the New York Post, Mark Gjonaj, head of the City Council’s Committee on Small Business, asked New York Attorney General Letitia James to open the investigation and revisit the 2013 settlement agreement that allowed Grubhub to purchase Seamless.

“While I am not accusing any entity of committing unlawful acts, I do believe that Grubhub’s outsized market share and heavy-handed tactics could lead to artificially reduced competition which in turn may drive up the commissions paid by struggling locally owned restaurants,” Gjonaj wrote.

Currently, Grubhub controls 69 percent of the food delivery market in NYC, according to Gregory Frank, an antitrust lawyer who testified at the June oversight hearing in NYC that addressed concerns over the commission fee Grubhub and other third-party delivery services charge restaurants.

The call for an antitrust investigation comes on the heels of a report that Grubhub has been buying website domains by the thousands and creating so-called shadow sites without those restaurants’ knowledge. At the same time the New York State Liquor Authority is creating new rules that could cap the fees Grubhub can charge its participating restaurants to 10 percent. Currently, those fees range anywhere from 15 to 30 percent. Grubhub has denied those accusations.

Grubhub isn’t the only player in the third-party delivery space currently under scrutiny. Earlier this month, the UK government’s Competition and Markets Authority put the brakes on Amazon’s minority investment in Deliveroo while it investigates potential breaches of competition rules.

Third-party food delivery apps were recently predicted to have 44 million U.S. users by 2020. More lawmakers are stepping in to regulate the market, combined with others questioning the economics of third-party food delivery, and still others urging brands to pull their delivery programs back in house suggest the honeymoon period for third-party is over. Massive players like Grubhub aren’t going anywhere anytime soon, but they’ll likely be operating under far more scrutiny from government bodies and civilians alike going forward.

ShiftPixy’s Delivery Tech Promises Restaurant Chains More Brand Control

If the last year was was all about restaurants realizing they must do delivery, the next 12 months will be about how they’re doing it, and this question in particular: Do you go with a third-party service à la Uber Eats, or go it alone?

Those in favor of third-party delivery cite increased visibility, lower costs (you don’t have to hire your own driver fleet), and fewer technical responsibilities. Others say they will never use it because of the lack of control over service and brand integrity that happens when one signs on with a third-party service.

Over the phone last week, ShiftPixy cofounder and CEO Scott Absher seemed to agree with the latter argument: “How could a brand that has spent maybe billions of dollars over decades or generations to curate their brand suddenly surrender that brand and their customer experience and data to a kid in a red golf shirt and cap?” he asks.

He went into detail with me about how a restaurant’s choices no longer have to be the kid in the golf shirt or no delivery program at all. There’s a new middle ground afoot, and ShiftPixy is helping to establish it.

The Irvine, CA-based company makes a software stack for restaurants that was originally designed to help businesses combat high employee turnover. According to demos shared by ShiftPixy, when a restaurant signs up with the company, they are given access to a network of workers, called “Shifters.” The ShiftPixy app uses AI to rigorously onboard these Shifters, who undergo the same vetting any job candidate would, including background checks and providing proof of citizenship, driving records, and other details. Once approved, these Shifters become W-2 employees not of the restaurant but of ShiftPixy. When the restaurant needs to fill a shift, they can notify their network of nearby Shifters, who pick up work in much the same way Uber drivers pick up people to drive to the airport.

But Absher, who helped found the company in 2015, says ShiftPixy quickly became acquainted with what he calls the “dark side” of third-party food delivery: incorrect food orders, cold or poor-quality food, orders never arriving, and angry customers galore, to name a few. More importantly, users were getting frustrated with the brands themselves, though none of the ordering or fulfillment took place within a restaurant chain’s ecosystem.

“All of that anger was rolling back on those multi-unit operators,” he says, referring largely to national chains. But, he adds, these chains, “didn’t even know when a customer [was] angry so they could fix it.”

So ShiftPixy built a delivery component for its technology. For restaurants that use it, the ShiftPixy architecture works behind the scenes of a restaurant’s consumer-facing app to notify drivers of potential orders. This isn’t terribly different from the way any other third party operates the last mile of food delivery. It’s still a kid in a golf shirt picking your food up and dropping it at the door.

What is different is the slew of potential benefits restaurants — larger chains and their franchisees in particular — could reap from this arrangement. Through the deal they set with ShiftPixy, they’re not paying a fee on each and every delivery transaction made on a given day the way they would with Grubhub or Uber Eats. Most big-brand franchisees are locked into certain pricing structures and policies — having to choose a specific food distributor, for example — they can’t just dump to offset the cost of those fees. So a system that does away with them entirely could mean these restaurant operators reap the benefits of delivery without incurring the financial setbacks of working with traditional third-party services.

And while restaurants still can’t control what happens to the food when the driver picks it up, they can at least control the brand, and be aware of potential issues. When a restaurant uses ShiftPixy, customers don’t leave the brand ecosystem to order and pay for their meal, or to leave feedback or contact customer service. It all happens within the restaurant’s own mobile app, with ShiftPixy in the background, powering the last-mile logistics aspect. This, Absher reasons, could go a long way towards helping brands with their image. “The issue is brand integrity and the customer experience. As soon as that order goes out the door you’ve surrendered your customer experience,” he says.

This is a larger trend we’ll start to hear more about as delivery becomes, pardon the pun, baked into daily restaurant operations and more companies come to market with solutions aimed at national brands and their franchisees. Olo, whom Absher references during our talk, is another such company looking to help restaurants drive more delivery orders through their own in-house ecosystems and maintain more brand integrity in the process.

Absher can’t yet name these larger brands ShiftPixy is currently in talks with, though Denny’s and Carl’s Junior come up in conversation. He also says the company is “getting a lot of viral introductions” as franchisees jump onboard and encourage other nearby franchisees from the same brand to do likewise.

“When you talk to the operators, that’s where it really gets interesting,” he says. “There are a lot of mixed opinions about third party [delivery]. It’s a very confusing landscape. It looks to me like we’re entering the market at the right time in the midst of confusion. We’re hopefully being a source of help and clarity.”

Report: Consumers are Loving Plant-based Food Delivery — Especially the Impossible Burger

Last week delivery service Grubhub released its “State of the Plate” report, which detailed popular food trends from the past year.

According to the report, in the U.S., Grubhub’s overall orders of vegan-friendly foods increased by 25 percent in the first half of 2019 compared to the same period the year before. Anyone who follows dining trends knows that consumers are demanding more plant-based options in grocery stores and restaurants. Apparently that demand extends into delivery, as well.

One vegan-friendly food in particular seems to be a Grubhub darling: The Impossible Burger. Grubhub reports that orders for the “bleeding” plant-based meat rose 82 percent in 2019. The Midwest in particular saw a huge uptick in orders (326 percent). Grubhub also noted that the Impossible burger was a popular late-night choice this year, with orders up 529 percent over the same time period last year.

We should take Grubhub’s report with a few hefty grains of salt, though. Since Grubhub conducted the survey, it doesn’t take into account how Impossible and other plant-based foods are doing via Doordash, Uber Eats, etc. However, Grubhub was the #1 delivery service in the country for the vast majority the timeframe covered by the report (Doordash took the title in May).

It’s also important to note that one of the reasons Grubhub is delivering more Impossible burgers this year is simply because the meatless burgers are more widely available. Since May 2018 Impossible has steadily growing, quickly forging partnerships with national chains like Burger King, White Castle, Umami Burger, and Red Robin. All of which could explain the insane 529 percent jump for the meatless burger.

I was particularly interested to see that Impossible was such a popular choice for late-night food delivery. At least for me, when ordering late-night food I typically go for something more indulgent, perhaps even something known for its alcohol soaking-up properties. It seems that, for a growing number of consumers, Impossible qualifies. That’s good news for the Redwood City, CA-based startup, which is trying to appeal to flexitarians and show them that plant-based meat can be just as juicy and delicious as meat from a cow.

One curious thing in the Grubhub report is the complete omission Beyond Meat. Grubhub only mentions the Impossible burger when outlining vegan-friendly options. However, Grubhub delivers from a wide range of restaurants that serve both Beyond burgers and Impossible burgers.

Likely the choice was simply because Beyond’s delivery sales didn’t increase in such eye-popping numbers as Impossible. After all, Impossible had a more dramatic uptick in restaurant partners over the past year. Beyond also gets about 50 percent of its revenue from grocery sales — unlike Impossible, which is just in foodservice for now — meaning it has to split its focus between restaurants and retail.

Despite its shortcomings, Grubhub’s report clearly shows that more and more people are looking to order plant-based food for delivery. As a growing number of companies wake up to this trend and put plant-based meat, milk, and eggs on their menus, customers will have even more options — and Impossible will have even more competition.

Keep up with consumer trends for plant-based dining and subscribe to Future Food, our weekly newsletter offering stories and analysis on the alternate protein landscape.

Now the Top Food Delivery Service, DoorDash Stands Behind Its Controversial Pay Structure

While Grubhub made a lot of headlines this week as the poster child for controversial restaurant fees, DoorDash was all over the news for its controversial stance on how it pays its drivers.

Once considered the underdog of third-party delivery, DoorDash has spent the last year or so doubling down on its expansion efforts. The service became the first of the top four (which includes Grubhub, Uber Eats, and Postmates) to be available in all 50 U.S. states, and it’s seemingly made its way into every nook and cranny of suburban America through high-profile partnerships with major chain restaurants like The Cheesecake Factory, Chipotle, and the ubiquitous Chili’s. It’s also raised lots and lots (and lots) of funding.

So far those expansion efforts are paying off. In the last week, news surfaced that DoorDash now holds the number one spot in terms of marketshare for third-party food delivery services, unseating longtime leader Grubhub. Currently, DoorDash is valued at $12.6 billion, which is almost double the $6.5 billion market cap of the publicly traded Grubhub.

The growth isn’t without controversy, however, because in addition doubling down on its expansion plans, DoorDash has also, it seems, continued its controversial pay structure for drivers that many feel is unethical. TechCrunch reminded us of that point yesterday when it called out a blog post by DoorDash CEO Tony Xu that was meant highlight DoorDash’s commitment to “transparency” but really just wound up highlighting the fact that despite its $12 billion-plus valuation, the company seems to be barely paying its drivers.

“With our current pay model, Dashers see a guaranteed minimum — including tips — prior to accepting a delivery,” Xu wrote in the post.

For every delivery the DoorDash driver (also called a “Dasher”) takes, they are guaranteed a minimum pay amount. (Dashers see this number before they ever accept or decline a job.) Unlike a serving job in a brick-and-mortar restaurant, that guaranteed minimum pay isn’t derived from any kind of hourly wage. Rather, DoorDash pays a $1 base fee then uses the tip from that order to count towards that minimum guarantee. If tips plus that $1 aren’t enough, DoorDash makes up for the rest:

Image via DoorDash.

Where this becomes really problematic is when drivers (which the company calls Dashers) get an especially large tip that winds up not being a tip, but instead subsidizing the minimum guarantee:

Image via DoorDash.

It’s the same pay structure that made waves a few months ago for services like Instacart and Amazon Flex. Instacart wound up changing its structure and apologizing to workers. Amazon stood firmly by its policy, and it seems DoorDash has as well. If Xu’s blog post is anything to go by, it seems that rather than backpedal on its controversial model, DoorDash is just taking further steps to make sure the pay structure breakdown is 100 percent apparent — to Dashers, at least. One small step for transparency, one giant leap backwards for the ethics of the gig economy. Or as labor rights group Working Washington said in a statement to TC, “Talking about transparency is good. And admitting you pay $1/job is better than denying it. But $1 is still $1.”

So what do we do about it?

The easiest solution would be for more customers to just skip the “tip” option in the DoorDash interface and tip in cash. That’s unlikely, given how integrated digital tipping is in both our apps and our lives at this point. Plus, consumers shouldn’t have to go searching through FAQ pages to find out exactly where their tip money goes during a transaction. If DoorDash really wants to tout transparency as one of its priorities and values, it should be making clearer to its customers, within the digital transaction process, where their money goes. Leading someone to believe they’re paying a gratuity when they’re really just subsidizing a base pay is just flat-out deceptive, and it’s the sort of thing that could erode customer trust over time.

Including customer relationships in those transparency goals should definitely be a priority for DoorDash. But at the end of the day, giving Dashers a fair wage rests on the shoulders of the company itself, not its paying customers. Some, like Working Washington’s Pay Up Campaign, want a minimum pay wage for workers of $15/hour plus expenses. That’s a larger conversation that’s making its way around many parts of the gig economy right now, and it’s one we’ll likely hear more debate around in the coming months.

Even if DoorDash doesn’t adopt that policy, you’d think a company valued at over $12 billion could find some kind of middle ground between $15 minimum wage and $1 to pay its workers, and to do that without roping unknowing customers into the process. Perhaps amid plans to tackle the whole of suburbia, DoorDash should tackle how to treat the people building that empire more fairly.

What to Expect at Today’s Oversight Hearing for Third-Party Food Delivery in NYC

Today, New York City will hold its first-ever oversight hearing for third-party food delivery apps and the effect they have on local restaurants.

The hearing, set to take place this afternoon, will focus specifically on the fees Grubhub and other companies charge restaurants for use of their services. Perhaps even more significantly, as the NY Post reported recently, it could set the stage for potential government action that would impact third-party delivery operations in NYC.

Titled “The Changing Market for Food Delivery,” the hearing, held by the council’s Committee on Small Business and chaired by Bronx Councilman Mark Gjonaj, invites comments from all stakeholders in the business: restaurateurs, representatives from delivery services, and customers. Grubhub, who also owns Seamless, has already confirmed that a spokesperson will be present. There’s no word on whether people from Uber Eats, DoorDash, or Postmates will attend. The hearing starts at 1 p.m. at 250 W. Broadway in Manhattan.

Having a food delivery strategy is at this point table stakes for most restaurants. But not every business has the brand reach, money, and resources to go it alone à la national chains like Jimmy John’s or Olive Garden. For many, it makes more sense to pay Grubhub et al a fee and let them handle not only shuttling the food from restaurant to customer 24/7, but also the back-end logistics (like order processing and tracking) and even some marketing aspects.

Now, however, many are calling these fees into question. Depending on the terms of the deal and the specific delivery company (e.g., Grubhub versus Uber Eats), third-party services charge the restaurant anywhere between 12 and 30 percent of the final check on each order. It’s why you’ll sometimes see a restaurant charge a little more for an item to be delivered as opposed to eating in house. Third-party services often tout the uptick in orders as a way to offset these costs, which is fine if you’re McDonald’s but less effective if you’re the independently owned deli down the block.

Atop those fees and the concerns surrounding them come reports of late of third-party delivery services charging restaurants hidden fees, such as calls made through the dedicated phone numbers Grubhub and other service set up for restaurants. A class-action lawsuit filed in May of 2019 claimed that Grubhub has been charging for calls made to restaurants via Grubhub’s app, even when the calls didn’t result in an actual order being placed and fulfilled. While that lawsuit was filed in Pennsylvania, the NY Post reports that New York restauranteurs have made similar complaints, with some businesses being charged $9 and more for phone calls that didn’t result in orders. Calls for things like dinner reservations and general customer complaints are also being quietly charged, the Post said.

In turn, restaurants have been demanding refunds from delivery partners, only to be told said refunds are only good on orders going back 60 days (though one unnamed restaurant got a refund from Grubhub to the tune of $10,000 for charges dating back to 2014).

Will all these matters be discussed this afternoon at the hearing? Undoubtedly. Will they make a difference in how third-party delivery companies do business? It’s too soon to tell, but depending on how the discussion advances, the hearing could have serious effects on third-party delivery operations in NYC.

“There is always the potential that this hearing will lead to an investigative hearing from the public advocate, the city comptroller or the state attorney general,” Councilman Gjonaj told the Post in an exclusive interview.

Such action could result in legislation that limits the percentage third-party services can charge restaurants. Or, as the Post noted, it could require Grubhub and other companies to get “disclosed and fingerprinted” for the thousands of restaurants they work with, since NYC law requires anyone who shares revenues in a restaurant to be listed on the liquor license.

And there’s always the possibility of a ripple effect. The tone set by today’s gathering could influence whether other cities hold similar hearings, as well as what those hearings mean for the way third-party services will operate in the future across the country.

One thing is certain: the volume has been cranked up on this side of the delivery conversation, and it’s not going to soften any time soon as more stakeholders in the restaurant business call into question the line between a right and an abuse when it comes to doing business.

We’ll be keeping an eye on today’s events and updating our coverage accordingly. Stay tuned.

Dunkin’ Is Testing Delivery, Geofencing in New York City

Dunkin’ announced this morning it is now available for delivery in all five boroughs of New York City.

Dunkin’ is already in select cities in the U.S. through partnerships with Grubhub as well as DoorDash. For the NYC test market, Dunkin’ will be available exclusively through Grubhub and Seamless (Grubhub’s NYC-specific brand).

Grubhub isn’t a surprising choice here. In major urban areas — like NYC, LA, Philadephia, Boston, Chicago, and Washington, D.C. — the company is still the leader of third-party delivery when it comes to market share.

For the Dunkin’-NYC partnership, Grubhub will integrate orders directly into each store location’s POS system, a feature that’s getting more and more important with each new delivery partnership that surfaces.

But Grubhub didn’t stop there in terms of using technology to enhance the Dunkin’ deal. It also drew a geofence around each Dunkin’ location in NYC (there are over 400) in order to monitor traffic in surrounding areas and where couriers are in relation to the store making their order.

Seth Priebatsch, the head of enterprise at Grubhub, referred to this as “our ‘just in time delivery flow’” when he spoke to NRN this morning. Thanks to the technology, Dunkin’ will start a delivery order based on how far away the courier is and how large the order is. For bigger orders, Dunkin’ starts making an them when the courier is 10 minutes away; for smaller orders, the store will probably need just a few minutes to time an order with a courier’s arrival.

This geofencing method is something we’ll see more of as restaurant chains look to improve both timeliness and quality of their delivery orders. And Dunkin’ isn’t the first — McDonald’s already uses it, and Burger King pulled a well-publicized geofencing stunt late last year that wound up highlighting the value of the technology when it comes to attracting and retaining customers.

Packaging is the other aspect of the Dunkin’-Grubhub deal that bears noting. Grubhub said all couriers are equipped with insulated bags with which to deliver drinks, whether hot or cold. But it seems time and temperature are still the two major hurdles when it comes to coffee delivery, even for a chain as large as Dunkin’ (or, for that matter, Starbucks and Uber Eats). Even Priebatsch noted that Dunkin’ is currently trying to walk the line between serving a large delivery radius without making travelers go so far that the quality of the product gets diminished in the process.

While there was no news of Grubhub using anything beyond the standard insulated bag, packaging seems an areas ripe for disruption in food delivery, especially as as more and more goods like hot coffee and frozen smoothies go mobile.

DoorDash Inks Exclusive Delivery Deal With Chili’s

DoorDash’s breakneck expansion across the U.S. continues this week, with the the third-party delivery service announcing an exclusive deal with casual dining chain Chili’s.

According to a press release sent via email, the partnership takes effect immediately at over 1,000 participating Chili’s restaurants in the U.S.

Chili’s, who is something of a poster child for the fast-casual American dining scene, has been vetting third-party delivery services for some time. At the end of April, the company said it was looking for a delivery partner that could adequately cover the suburban markets, where Chili’s has a substantial presence. In that light, DoorDash seems the obvious pick, as it currently holds 30 percent of the market share in sales and is the only third-party delivery company currently operating in all 50 U.S. states (as well as in 50 Canadian cities).

But DoorDash’s ability to integrate with Chili’s existing POS system might have been the real determining factor. Chili’s, along with its parent company, Brinker Internatoinal, has been skeptical about third-party delivery services overall. Brinker CEO Wyman Roberts said back in January that his company was “. . . cautious on business model implications and significant fees, but more importantly, the impact it has on our systems isn’t great.” In the same interview, Roberts added that, “From a technology standpoint, given that so many of these third parties are really priding themselves on being experts, we’re challenging them to integrate better.”

Integrating DoorDash directly into the restaurant chain’s POS system means all DoorDash orders are sent directly to Chili’s, without a server needing to manually input the information. As well, a direct integration means it’s easier and faster for Chili’s to onboard more of its locations onto this new delivery program.

This ability to integrate almost seamlessly into existing restaurant systems may be key for third-party services in future as they rush to gain and retain customers. All of the top services — Grubhub, Uber Eats, and Postmates along with DoorDash — offer POS integration capabilities. The question at this point appears to be more around who can offer it at the best price point for restaurants, and do so without introducing a lot of disruption to day-to-day operations. Might operational efficiency be yet-another area in which DoorDash can stand out?

DoorDash raised another $600 million in funding this past May, bringing the company’s total funding to $2 billion. This came on the heels of a $400 million Series F round raised in February of 2019. DoorDash has also said that since that Series F round, its business has grown 60 percent. Pair those numbers with the company’s continued and aggressive push across North America, as well as high-profile restaurant partnerships like the Chili’s deal, and there’s reason to suspect the company could be well on its way to nabbing the top spot in the market for third-party delivery.