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Daily news and analysis about the food tech revolution

third-party delivery

Hey, Delivery Companies: It’s Time to Make Social Distancing Profitable for Restaurants, Too

To delivery or not to delivery? That question, asked frequently nowadays, just got more complicated in the wake of the World Health Organizing (WHO) declaring COVID-19 a pandemic.

Food tech expert and Modernist Cuisine’s former technical director Scott Heimendinger left a tweet yesterday that not only highlighted the issue but also underscores how complex potential solutions are:

https://twitter.com/seattlefoodgeek/status/1238118335427923970?s=20

Restaurants operate on absurdly thin margins during the best of times. Overhead costs like labor, inventory, rent, equipment, card processing fees, and a litany of other deductions all eat away at these thin margins. Now businesses are seeing sales nosedive as more and more consumers opt to stay home instead of going out to eat. For example, in the Seattle area, where the first U.S. deaths from coronavirus occurred, some restaurant sales have dropped as much as 40 percent. As the number of cases throughout the country rises, there could be a ripple effect, particularly in crowded urban areas like NYC, Boston, San Francisco, and other cities.

You’d think delivery would be the answer to this problem of declining foot traffic. After all, you order delivery from Joe’s Pizza or wherever, and you manage to feed your family without leaving the house while putting money in the restaurant’s coffers, right?

Well, it’s a little more complicated than that. Third-party delivery services like DoorDash, Grubhub, and others are, to borrow, Heimendinger’s word, “notorious” for gutting restaurants with hefty commission fees which are sometimes as high as 30 percent of each transaction. However, most small and independent restaurants still use these services for delivery because they lack the resources to manage the entire delivery process (drivers, marketing, technical logistics) themselves. So more customers staying home because of COVID-19 could translate to more delivery orders, but that won’t necessarily improve restaurants’ bottom lines.

Third-party delivery services are also known for ethically questionable policies around how they treat the folks shuttling the food from the restaurant to the consumer, from sketchy tipping policies to fighting legislation that would reclassify these gig workers as employees and give them access to health benefits and paid sick leave. 

Heimendinger  addressed this in another tweet, asking followers, “Are you aware of any delivery services stepping up to change their fee structure to help restaurants retain more of their revenue during the #COVID19 crisis?”

And in fact, some of these services have made moves in that direction. All of the major services have or are readying contactless delivery features, which limit the human contact between drivers and customers. Uber, DoorDash, and Postmates have been in talks to set up a fund that would compensate drivers affected by COVID-19. Independently, Postmates has also launched two different funds: one to cover medical costs for drivers affected by COVID-19 and the other to temporarily waive commission fees for new merchant partners operating small restaurants.

There is no guarantee that any of these measures will be able to adequately protect workers. At the same time, I agree with Heimendinger that local restaurants need consumers’ support at a time when foot traffic will continue declining as social distancing becomes more widespread. 

I don’t believe there are any easy answers to this issue. If we double-down on delivery orders, we help pay workers’ wages, but we’re also only reinforcing an unsustainable business model that is decimating local restaurants. If we forgo delivery as well as dining in, we’re also helping decimate local restaurants.

The onus is on the delivery companies. DoorDash, Grubhub, and others need to be waiving or at least reducing restaurant commission fees right now. More of them need to help cover medical expenses for checkups and provide paid sick leave so that drivers who aren’t feeling well and potentially infected aren’t out making the rounds and possibly infecting restaurant workers and customers. At least some delivery fees for customers should be waived, as those premiums add up quickly and make restaurant meal delivery out of reach for lower-income families. Finally, delivery services need to accelerate the availability these changes now if they want to avoid playing the villain yet again.  

Postmates Launches Funds for Drivers and Restaurant Partners Affected by COVID-19

Postmates is launching two new programs this week meant to assist the delivery service’s drivers and restaurant partners impacted by COVID-19, according to an announcement from the company.

The company has set up the Postmates Relief Fund, which will cover the cost of medical check ups for its driers and couriers regardless of whether they have been diagnosed or quarantined. As of right now, drivers who have made at least one delivery in the last two weeks in any of the following states will be eligible for a credit from the fund: Wash., Ore., Calif., Nev., Utah, Colo., Ariz., Texas, Neb., Wis., Ill., Ind., Fla., Ga., Tenn., N.C., D.C., Penn., N.Y., Maine, Mass., and N.J.  

In the same announcement, Postmates also noted it is launching a pilot program that will temporarily waive commission fees for new merchant partners operating small restaurants. The idea behind the move is to give these smaller businesses a boost at a time when foot traffic to restaurants is down due to COVID-19. According to the announcement, “This Small Business Relief Pilot will waive all commission fees for businesses that are not currently delivering on the platform and operate in the City of San Francisco, but want to expand into on-demand delivery to help drive revenue as on-premise dining is impacted.”

Postmates has said it will “potentially” take this program to other cities in the U.S. as well.

Both of these efforts come just days after we learned Postmates as well as Uber, DoorDash, and other gig economy companies are in talks to see how they can band together to set up a potential fund to assist drivers/couriers infected by or quarantined with the COVID-19 virus. 

Some of these services, including Postmates, have also taken measures like implementing contactless delivery features to limit face-to-face human interactions. DoorDash joined that list this week, saying on Monday it is testing features for contactless delivery that will be launched soon. Uber, meanwhile, said it will compensate drivers — for both rideshare and Eats services — who can’t work for 14 days because of coronavirus diagnosis or quarantine.

With cases of COVID-19 on the rise in the U.S. and more employees now being mandated to work from home, we’re likely to see further demand for food delivery in the coming weeks. Stay tuned . . . 

Postmates, Instacart Join No Human Contact Delivery Efforts in the U.S.

Food delivery service Postmates today announced what it’s calling Dropoff Options, a function that lets customers choose how they want to receive their deliveries. According to a company blog post, users can “choose to meet their Postmate at the door, as they have before, meet curbside, or go non-contact and have deliveries left at the door.” 

Postmates customers order their meals as usual then select their delivery method during the checkout process (see image above).

The post itself doesn’t mention coronavirus, but it doesn’t have to. Around the world, delivery services now offer various forms of this contactless delivery, where couriers and customers have no physical contact and in some cases don’t even see one another face to face. 

The bulk of the efforts so far have been in China, where the outbreak originated. Restaurant chains and delivery services — Ele.me, Meituan, McDonald’s, and KFC, to name just a few — are working together to limit the amount of human contact that happens during food delivery dropoffs. Drivers and couriers must wear masks, have their temperature taken, and disinfect their hands and delivery bags before and after each run.

South Korea’s top two delivery services, Baedal Minjok and Yogiyo, have also seen an uptick in food delivery orders and requests for couriers to leave packages on the doorstep.

Stateside, Postmates isn’t alone in its efforts to introduce more contactless delivery. As Business Insider noted, Instacart has also implemented contactless delivery with a service called “Leave at My Door Delivery.” The grocery delivery company told BI that it has actually been testing this service for several months and decided to make it available to all customers after seeing a “surge” in demand for it.

With “Leave at My Door Delivery,” Instacart customers can opt to have their grocery orders left at their doorstep during the designated timeframe for their order. 

Other food delivery companies, including Grubhub, DoorDash, and Uber Eats, have not yet implemented any kind of contactless delivery for their operations.

These new services from Postmates and Instacart so far only address the issue of one human getting close to another. They do not yet address steps like disinfecting the insulated delivery bags couriers use or taking workers’ temperatures — actions that are as much about the safety of drivers and couriers as they are about customers. One Instacart worker told the Financial Times that the company still wasn’t providing items like hand sanitizer or disinfectants. While Instacart’s new contactless delivery is “a step in the right direction,” it doesn’t “reduce our overall risks of exposure because most of our risks we actually encounter while shopping,” the worker said. 

Instacart workers in particular are exposed to more germs because part of their job involves moving around a grocery store, touching a shopping cart, and picking up items from shelves. But all gig economy companies should be factoring in the safety of their workers as they implement contactless delivery services.

Which is where the robots may come in. My colleague Chris Albrect has written more than once, we live in a time when delivery robots and driverless vehicles are actually available. Undelv has already said it would make its driverless delivery vans available to deliver food, medicine, and other supplies to quarantined areas. And as Chris pointed out, rover bots like those from Starship or Kiwi “could be an easy humanless way to deliver meals and medicines around the clock in densely populated areas.” I would add drone technology to that list of possible solutions.

Granted, outsourcing delivery jobs to drones would eat into gig workers’ pay. As well, a number of regulatory issues around autonomous delivery vehicles have yet to be addressed, which limits how widely these technologies can even be used. But whether by robot, masked workers, or some other solution that’s yet to be thought of, the contactless delivery method will get way more popular in the next few months — and probably alter the food delivery landscape for good in the process.

Applebee’s Is Planning Ghost Kitchens for Delivery and Takeout Orders

Applebee’s just became the latest restaurant chain to hop the ghost kitchen bandwagon. In an interview with Nation’s Restaurant News, Steve Joyce, CEO of Applebee’s parent Dine Brands, said the company was “experimenting” with the concept.

To be honest, the development isn’t terribly surprising. At the end of 2019, we predicted that ghost kitchens would become “the norm” for larger restaurant chains, since they not only to help them fulfill more delivery orders but also to let them reach areas of the country where they might not have a brick-and-mortar presence. Chick-fil-A is a good example. The company has expanded its presence in Northern California — where it has few brick-and-mortar stores — by renting space in DoorDash’s Redwood City ghost kitchen facility. Doing so lets the chain reach a potentially wider audience without having to invest the time and money into building out full Chick-fil-A locations.

Dine Brands’ Joyce suggested his company is looking into a similar strategy for Applebee’s, telling NRN that he’s hoping to use ghost kitchens to increase Applebee’s presence in “underserved cities,” particularly those in the Midwest. He also said the company was looking into different kinds of ghost kitchens: operating its own as well as partnering with third-party kitchen providers. 

My crystal ball tells me Applebee’s probably will team up with DoorDash to realize at least some of its ghost kitchen ambitions. The chain already has a national delivery partnership with the service. Renting out space in DoorDash’s ghost kitchen facility could greatly expand Applebee’s presence in the California Peninsula area, where currently it only has a few locations.

As for the rest of the country, Applebee’s would have to partner with another provider. Kitchen United has open locations in Chicago, Southern California, and Phoenix, and has more facilities in the works. Zuul Kitchens is currently focused on the NYC area, as is Kitopi. 

Whether restaurants should be betting their entire off-premises strategies on VC-backed ghost kitchen facilities is a debate for another day (stay tuned). For its part, Applebee’s has said it is looking into a combination of ghost kitchen types, which means it isn’t going to rely solely on third-party providers. Glancing a moment into the longer-term future, that’s probably the smartest bet right now for big restaurant chains.

Week in Restaurants: More Legislation for Food Delivery In Store, Unlimited Coffee From Panera

Between hanging out with the Basque Culinary Center folks earlier this week, flying over the Atlantic, and making it back to NYC just in time for The Spoon’s Customize event, I’ve had limited time to go in-depth into restaurant tech. That means this weekly roundup is as much a catch-up session for me as it is for you. And there’s a lot to catch up on this week. Read on for a few notable news bits from around the web this week. 

Panera Launches Unlimited Coffee Subscription

In what’s likely a move to entice more customers to its loyalty program, Panera this week launched the MyPanera+Coffee subscription service. Membership can only available by signing up for a MyPanera loyalty/rewards program then adding the $8.99/month (plus tax) subscription service to your account. Those who do can walk into a Panera every two hours and refill their mug, regardless of its size, without incurring any additional charges beyond the monthly fee. The same goes for iced coffee and hot tea, too.

NYC Introduces Six Bills to Regulate Food Delivery

The New York City council introduced a series of bills this week that aim to regulate the third-party food delivery industry. Six bills in total would would regulate different areas of delivery. Restaurant commission fees, third-party services’ control over menu pricing, erroneous charges to restaurants, tamper-evident packaging, and special licenses for delivery services are just some of the issues the proposed legislation addresses. (Read the full breakdown here.) If one or more of these bills are signed into law in NYC, the impact could have a ripple effect across the delivery industry in the rest of the country.

Yum! Brands to Phase Out Polystyrene Packaging

The parent company of Taco Bell, Pizza Hut, and KFC is getting onboard with saving the oceans. This week, Yum announced it will stop its use of polystyrene packaging globally by 2022. Right now, the material is used mostly for side dishes on delivery/takeout orders for Yum Restaurants. Yum hasn’t yet said what it will replace polystyrene with, but that phasing it out will eliminate 100 million foam containers per year across the company’s restaurant portfolio. 

Grubhub’s Subscription Program Is a Bid to Boost Customer Loyalty

Grubhub today announced the launch of Grubhub+, the food delivery service’s answer to a subscription service that offers members more rewards and free delivery on many orders, according to a company press release. 

A $9.99/month membership to Grubhub+ includes free unlimited delivery from restaurants participating in the new subscription service. (Grubhub hasn’t named specific ones yet.) A subscription also gets you unlimited 10 percent cashback deals, priority assistance when dealing with customer service, and dibs on exclusive perks and access to local events.

Grubhub+ is the company’s latest effort to win customers over with more rewards. Last year, the company launched the in-app feature Perks, which offers users more ways to earn loyalty points from restaurants via deals only available in the Grubhub app.     

Right now, anyone can sign up for a free 14-day trial of Grubhub+. And in what’s also a bid for customer loyalty — something of an elusive concept for third-party food delivery right now — Grubhub is also offering an extended 30-day trial to “diners participating in any other food delivery subscription program.” DoorDash, Uber Eats, and Postmates all offer subscription services. DoorDash even partnered with Chase bank recently to give certain cardholders subscriptions to the service, giving it access to a potentially even large pool of subscribers. 

There is no guarantee any of this will ensure customer loyalty for any third-party delivery service. Customers tend to chase deals, hopping from app to app in search of promotions, giveaways, and discount items. On that point, Grubhub isn’t slacking, as it grew its network of restaurants to 300,000 in the fourth quarter of 2019.

Some of those additions were controversial, though. Earlier this month, the company received widespread criticism for its practice of adding restaurants to its platform that have no formal agreement with the service. (DoorDash and Postmates do the same thing.) And that’s only one controversy of many the service has been at the center of in the last 12 months. So Grubhub might be doing all it can to have the most restaurants in the network, but it’s pissing owners and customers off in the process, which won’t exactly build loyalty.

But, as I said above, customers tend to chase deals, and if Grubhub can offer a better subscription package than its competitors, it could win more loyalty despite its many current controversies, present and future.

Lunchbox Raises $2M to Simplify Omnichannel Ordering for Smaller Restaurants

Lunchbox, a relatively new entrant to the restaurant-tech scene, just announced a $2 million seed round for its software that simplifies restaurants’ task of managing orders from multiple sales channels. The round was led by Primary, 645 Ventures, Salido founder Shu Chowdhury, and Ananda Gala. This is Lunchbox’s total funding to date.

Restaurants pay a monthly fee for Lunchbox’s software, which bundles order processing, loyalty program capabilities, delivery dispatch, marketing, analytics, and more into a single package. The system is meant to address an issue businesses currently grapple with as more and more technology makes its way into restaurants: how to process and fulfill orders coming in from multiple sales channels. Off-premises dining now makes up more than half of all restaurant orders, which has led to more loyalty programs, mobile apps, self-order kiosks, and other customer-facing technologies. But with those many order channels comes an increasingly fractured tech ecosystem for restaurants. 

In materials sent to The Spoon, Lunchbox points out the limitations of this setup: software systems that don’t talk to one another, extra devices, expensive setup and monthly fees, to name a few. Partnering with a third-party delivery service simplifies some of this, but as is well-documented, small and mid-sized restaurants struggle to pay the hefty fees Grubhub and DoorDash charge for this simplification. 

Those smaller businesses are exactly the restaurants Lunchbox is targeting with its platform. “We’re trying to empower everyone,” Lunchbox co-founder Nabeel Alamgir told me over the phone, adding that more than half of the hundreds of thousands of restaurants in the U.S. are smaller chains and independent restaurants. “My favorite restaurant groups usually [only] have three or four restaurants,” he said. “We’re trying to sign up the clients we want to visit.”  

Currently, the company counts Gregory’s Coffee, David Chang’s Fuku, and Northeastern yogurt chain 16 Handles among its clients. NYC chain Bareburger, which Alamgir was formerly the CMO, is also a client.

To use the Lunchbox platform, restaurants pay between $200 and $600 per restaurant per month. Those restaurants with fewer than 10 locations also pay a $10,000 setup fee. That sounds hefty until you compare it to another system Alamgir cited (name withheld) that costs over $1 million to onboard and $156,000 to use monthly.

And bypassing omni-channel ordering isn’t really an option for restaurants nowadays. Off-premises orders are expected to drive the majority of sales for restaurants over the next decade. At the same time, the ability to personalize these experiences will soon start separating the winners from the losers. Helping restaurants without the deep pockets of large chains juggle these expectations and removing some of the headache from the process is Lunchbox’s main mission right now.

The company will use the new funding to expand and add more restaurant clients over the coming months.

Week in Restaurants: Domino’s Might Win Its Fight Against Third-party Delivery

Greetings from the far reaches of Newark Liberty International Airport. I’m off to Madrid to check out the the Hospitality 4.0 Congress for a few days. You should be finalizing your travel plans as well — to NYC, specifically, where you can join us next week for The Spoon’s daylong Customize event. We’ll be discussing food personalization and what that trend means for your diet, your kitchen, and your restaurant orders. Don’t sleep on this one. Grab one of the few remaining tickets here.

In the meantime, here are a few more restaurant-related stories from around the web this week.

Domino’s Stance Against Third-Party Delivery Is Paying Off

Who can possibly stand up to third-party delivery’s mission to dominate the restaurant industry? Domino’s apparently.

The pizza chain is at this point as famous for its in-house delivery policy as it is for its pies, and on its Q4 2019 earnings call this week, the Ann Arbor-based company announced same-store sales growth of $3.4 percent, while its stock jumped 25 percent. In other words, its anti-third-party-delivery stance isn’t killing its business, at least not yet. On the call, Domino’s CEO Ritch Allison did note that the company is still seeing a lot of pressure from third-party services. “As we look back on the quarter, it does appear to us that while we see continued headwinds in delivery that are difficult to forecast, aggregator pressure appeared to level off on our delivery orders in Q4, while carryout traffic was outstanding during the quarter, as our strategy to grow that business continues to pay off.“

Waitr to Lay Off 2,300 Drivers

Troubled food delivery service Waitr will lay off 2,300 delivery drivers in its home state of Louisiana, according to a notice filed with the state’s labor department. This announcement comes just a couple weeks after the service announced it would reclassify drivers as contract workers and pay them per delivery rather than per hour, as the old model dictated. The layoffs are effective April 6. A Waitr spokesperson said impacted drivers will be able to keep working as contracted drivers.

The Cheesecake Factory Is Finally Taking Yelp Reservations

Ever visit a Cheesecake Factory on a Friday at 7 p.m.? You’re lucky if you wait only an hour to get a table. Until now, that is. On a call with investors this week, the company announced it has partnered with Yelp to start offering limited seating reservations, meaning a certain number of tables will be set aside for reservations throughout the week.

This isn’t the most earth-shattering news out there today, but it does point to the work restaurants are currently doing to make the front-of-house experience more efficient and hopefully increase dine-in visits from customers. “One of the biggest hurdles for our guests can be our long wait times,” he said. “So we’re hoping this additional convenience will encourage guests who are more pressed for time to dine with us,” president David Gordon said on the call.

Week in Restaurants: Regulators Are Coming for Delivery, Denny’s and Yelp Team Up

Happy Valentine’s Day, food techies. If you haven’t run away to Las Vegas yet to get hitched at a Denny’s, there’s still time.

But speaking of Denny’s, the chain announced a new pilot with Yelp this week. Elsewhere in the restaurant world, Subway is now using Olo’s technology to handle delivery orders, and if you want more intel on the demise of Zume’s vision for mobile pizza kitchens, read on.

Yelp Pilots a New Feature to Measure In-Store Visits

Yelp this week launched Yelp Store Visits, a metric meant to help restaurants and other stores measure how online activity on Yelp drives customer visits to physical locations. The opt-in tool is available to businesses with multiple locations and meant to help them increase foot traffic to their physical stores. The company also introduced Showcase Ads, which lets multi-unit brands highlight special deals and promotions via video ads to Yelp users. Denny’s piloted both tools in 2019 and saw positive results. 

Subway and Olo Partner for Integrated Delivery

Subway announced a partnership with Olo to integrate digital orders directly into its POS system, making it easier for the sandwich chain to process and fulfill off-premises orders coming from multiple sales channels. With Olo’s technology, orders coming from third-party services like Grubhub or Postmates go directly into the restaurant’s main POS system, removing the need for an employee to manually input the information into the ticket stream and lowering the risk of human error when it comes to order accuracy.

Regulation Is Coming for Third-party Delivery

It’s no secret that people are getting fed up with third-party delivery services’ Wild West tactics. Now regulators are stepping in, proposing legislation meant to check some of the practices companies like DoorDash and Grubhub employ that often don’t seem to benefit anyone but themselves. This week alone, California and Rhode Island introduced legislation, and Nation’s Restaurant News rounded up a few more states that are also taking third-party delivery to task, which could change the way the model operates in future. Read the full list here.

Inside the Fall of Zume’s Robot Pizza Delivery

Zume, a startup famous for its pizza-making robots, made headlines in January when it announced it was laying off 360 staff members and facing challenges securing more funding from investor Softbank. What happened to the once-promising startup? An article from Bloomberg Businessweek goes into the details of the startup’s evolution and how it landed in its current predicament.

California Wants to Stop Restaurant Delivery Apps From Holding Customer Data Hostage

A bill introduced this week in California would require third-party food delivery platforms to share customer information with restaurants, according to The Sacramento Bee.

Assembly Bill 2149, also known as the “Fair Food Delivery Act,” would authorize DoorDash, Grubhub, and other delivery services to share a customer’s information with the restaurants from which they order. That includes the customer’s name, email address, phone number, and delivery address. Restaurants could request this information from delivery services once per calendar year.

While applicable to both restaurants that have contracts with delivery services and those that don’t, the bill in part at least seems aimed at the latter. There’s a growing outrage brewing over delivery services offering food from restaurants that haven’t a) given their consent and b) signed a contract with one of these services. The practice has already sparked legislative action in Rhode Island, where a proposed bill would make it illegal. If that bill gets signed into law, other states could follow with similar legislation. 

In California, Assemblywoman Lorena Gonzalez, who introduced Assembly Bill 2149 this week, cited in a press release the need to “level the playing field” for smaller, independent restaurants “being taken advantage of” by Big Tech. 

California Restaurant Association CEO and President Joe Condie echoed Gonzalez’ statements: “Technology giants aggressively entering the foodservice space—whether deliberately or not—are eroding the customer’s relationship with the restaurant,” he said in the press release.

Assembly Bill 2149 comes on the heels of the much-publicized Assembly Bill 5, which reclassifies gig workers as employees and requires companies to provide health insurance, paid time off, and other benefits they wouldn’t normally be on the hook for with contracted workers. The bill passed into law late last year, and has (surprise, surprise) gotten pushback from tech companies. Uber and Postmates filed a lawsuit in December claiming AB5 was “unconstitutional.” That bid was rejected this week. 

Delivery services and other gig economy companies will in all likelihood speak out against Assembly Bill 2149, too. But with delivery orders expected to drive the majority of restaurant sales over the next several years, and with reports predicting 70 percent of those orders will come from third-party services, measures that protect restaurants and workers and keep Big Tech in check is more important than ever.

That includes restaurants’ relationships with their customers, which is what Assembly Bill 2149 aims to protect.

“Restaurants shouldn’t fear losing their customers when they don’t agree to the conditions of some multi-million dollar food delivery app,” Gonzalez said. “This bill will put the power back in the hands of small business owners in California.”  

Rhode Island’s Proposed Bill Would Ban Delivery Services From Listing Non-Partnered Restaurants

Rhode Island legislators have introduced a bill that would ban the likes of Grubhub, DoorDash, and Postmates from listing non-partnered restaurants on their sites without prior written consent, according to Restaurant Dive.

The bill was scheduled for consideration on Tuesday evening. If passed into law, food delivery services would be fined a civil penalty of up to $1,000 each day they were not in compliance. Restaurants would also be able to bring legal action against the delivery service.

According to WPRI Eyewitness News, the bill came about when the Rhode Island Hospitality Association (RIHA) approached House Judiciary Committee Chairman Robert Craven for solutions to combat third-party delivery sites’ controversial practice of listing non-partnered restaurants without their knowledge or consent.

DoorDash, Postmates, and Grubhub all follow this practice, arguing that it helps local businesses attract more customers, and at a cheaper price point, since non-partnered restaurants don’t pay a commission fee for orders. 

To put it lightly, restaurants don’t necessarily see the practice as beneficial. The recent showdown between Grubhub and San Francisco restaurant Kin Khao resurfaced the point that restaurants’ reputations (and therefore, business) can suffer when a third-party site promises customers delivery and/or pickup orders the restaurant can’t actually fulfill. Case in point: Kin Khao is a Michelin-starred fine-dining restaurant. It’s food is meant to be experienced in the actual restaurant, not from a plastic takeout box. It was listed on Grubhub’s site without the owner’s knowledge or consent, and thanks to a technical mix up with another Grubhub restaurant, customers were led to believe Kin Khao would deliver.

That’s one example among many, and more restaurants are getting vocal about their feelings on the issue. “If we don’t know that the food is traveling 20 or 30 minutes out to a customer, we can’t prepare it accordingly,” one owner told WPRI. “If there’s a mistake made, we can’t rectify it. So for us, it’s about having control of the customer experience to make sure it’s of the quality and caliber that we want.”

The RIHA said it has received multiple complaints over the last year from Rhode Island restaurants that have been listed to third-party delivery sites without their knowledge or consent.

If the proposed ban goes into effect, other cities and states could follow with similar legislation, most likely major metropolises like San Francisco and New York, which are already cracking down on the Wild West tactics of third-party food delivery.

Will the Restaurants Themselves Be Third-Party Delivery’s Biggest Opponent?

A while back, I wrote that third-party delivery services like DoorDash and Grubhub are engulfed in a massive fight now against all manner of opponents, from government regulators to investors worried about profitability to the force that is social media. But in the wake of fresh controversy, these delivery companies’ strongest opponents might actually be the restaurants themselves. 

Restaurants’ need to push back against delivery services was (once again) brought to light recently when San Francisco restaurant owner Pim Techamuanvivit, who owns Michelin-star restaurant Kin Khao, left the following tweet:

Techamuanvivit went on to explain how she discovered that Kin Khao was listed on Grubhub and its subsidiary brand, Seamless, despite the fact that the restaurant has never offered delivery or even takeout. After all, it is a Michelin-star joint.

An excellent article from Wired goes into the full details on how Kin Khao got mixed up with a virtual brand that operates out of one of Reef Technology’s ghost kitchens. (It was a technical error.) But the bigger point, as Wired underscores, is that Grubhub had listed Techamuanvivit’s restaurant in the first place, without her knowledge or consent, and that doing so is actually a common practice Grubhub started some months ago.

Essentially, Grubhub identifies non-partnered restaurants — that is, restaurants with which it doesn’t have a contract — that are popular in a city, creates a page using the establishment’s menu and basic information (pulled from public sources), and has orders sent directly to Grubhub. Grubhub then figures out how to actually get the order, which usually involves sending a driver to retrieve a pickup order. However, in the case of a high-end restaurant like Kin Khao, which only offers dine-in service, that tactic clearly doesn’t work.

Many restaurants have voiced concerns over this practice. Steven Sorensen, general manager and partner at The Farmhouse at Jessup Farm in Colorado, had a similar experience to Techamuanvivit’s, even though his restaurant had “routinely” declined to partner with Grubhub. “Our food is not designed for that app,” he told the Coloradoan. “It’s designed to be enjoyed immediately in the restaurant.” 

Another restaurant owner, this one from Ohio and going by the handle @ThaibyTY, tweeted that Grubhub had listed incorrect information about their business and incorrect menu items and prices:

Other services like Postmates and DoorDash follow a similar practice. The argument is that listing non-partnered restaurants widens third-party services base of restaurants and and is a way to drive more delivery orders to local restaurants.

But this practice of listing restaurants without their consent is just one of many griefs with delivery businesses are getting louder about.

Grubhub has for some time now also been dealing with a controversy around charging restaurants “bogus” phone order fees. The service announced a new phone-order system in January (which NYC regulators immediately labeled “insufficient”), but according to the NY Post, the service has yet to refund the majority of its restaurant partners on those erroneous fees.

That service, along with Uber Eats, was the center of an oversight hearing in Manhattan last year that called into question the commission fees delivery services extract from restaurants, usually 20 to 30 percent of each transaction. Caps have also been proposed for these commission fees.

DoorDash isn’t off the hook, either, given the controversy last year around how the service tips its workers, a point that’s the center of a lawsuit filed by DC Attorney General Karl Racine.

I wrote back in December that, for at least the first half of 2020, we should expect the already messy food delivery space to get even messier “get messier, raise more questions, and incite more regulatory battles as it progresses towards normalization.”

But maybe it shouldn’t normalize, at least not in its current form. Maybe this latest controversy should instead encourage more restaurants to vocalize their concerns around the unregulated, unsustainable beast third-party delivery is becoming, and in some cases, take further action in order to become a legitimate threat. Techamuanvivit, for her part, is promising legal action against Grubhub and has encouraged other restaurants to do the same.

Litigation is tricky, though. In-N-Out Burger famously tried to sue DoorDash in 2015 but the case was dismissed two months later in a confidential settlement. What the industry needs to see are examples of such lawsuits going to trial and their outcomes forcing changes in how business gets done between restaurants and third-party services. There are no guarantees that will happen.

There are arguments out there that if restaurants don’t like the way these third-party services operate, they shouldn’t use them. That angle might have held water two years ago. Now, off-premises orders are expected to drive most restaurant sales over the next decade, which means delivery is practically mandatory for many restaurant types. Unless you’re a restaurant like Kin Khao, where delivery doesn’t make sense for your brand, most restaurants have to contend with marketing costs, paying drivers, and managing the technical logistics of on-demand ordering. Often the cheapest way to do that is to use third-party services, which may handle the heavy lifting of delivery operations for the restaurants but which are also largely unregulated and as of now face little accountability for their business practices.

Whether Techamuanvivit’s Twitter takedown of Grubhub and possible forthcoming lawsuit can inspire others in more precarious positions (those restaurants who feel they need the partnerships with third-party services), remains a question.

Meanwhile, talk of consolidation among third parties continues, and worry from investors over profitably continues to threaten the model. Coupled with growing concern and louder voices from the restaurants themselves, it seems more likely that something big is going to give very soon. And it should. Otherwise, everyone loses in the long term.