NEW YORK—Since the beginning of the pandemic, New York City restaurants have complained about the fees that third-party ordering and delivery platforms, such as Grubhub and DoorDash, charge them, reports the Wall Street Journal. But now restaurants are increasingly finding a way around the issue by avoiding the delivery companies and assuming ownership of the process themselves. They say the benefits go beyond the potential savings on third-party fees.
“It’s having a direct line of communication with our customers,” said Jon Sherman, chief executive officer of Sticky’s Finger Joint, a chicken chain with several locations in the city.
A burgeoning industry has emerged of technology-focused companies that help restaurants create, manage and market their own online ordering platforms. Two examples are Lunchbox, which says it has seen 700% growth in its business over the past year, and Traiilo, a company that focuses on Latino-owned restaurants and other food and drink-related retailers. Another New York firm is BentoBox, which is best known for helping restaurants develop their websites but can also assist with ordering platforms.
Most of these companies bill a monthly charge for their work instead of per-order fees, as third-party ones do. At Lunchbox, the average monthly cost is $300, according to Nabeel Alamgir, the company’s CEO. The third-party fees can surpass that amount with as few as eight orders each month. In the pre-pandemic era, third-party fees to restaurants could often equate to as much as 30% per order, according to restaurant-industry professionals. The companies can also charge separate fees to customers.
The New York City Council passed legislation last year that temporarily limits the fees to restaurants to 20% - 15% for delivery, 5% for other charges—to help restaurants during the pandemic. Although dining establishments can now serve customers indoors, they must contend with a state-mandated capacity limit of 50%, and many say they are still heavily reliant on delivery.
What’s more, restaurants can’t connect directly with customers when diners go through third parties, whether it is to promote a future offer or correct a mistake with a previous order. However, restaurants admit that many customers are simply accustomed to ordering through third parties.
While no one expects to see the end of food-delivery providers, there are new ways those providers are getting the job done. In New York, an electrically driven fleet of foldable cargo carts is quietly laying the groundwork for a California startup's vision of the future of grocery delivery, reports GroceryDive.com.
The compact containers designed and owned by Los Angeles-based URB-E are propelled by battery-powered bicycles expressly designed to tow heavy loads. They can each haul 800 pounds of goods for a fraction of the cost of using a conventional van, said Charles Jolley, CEO, URB-E. The blue carts are designed to be maneuvered through a typical grocery store, and 20 can fit into a single parking space when not in use, according to the company.
"The idea is you load [bags] straight into this cart, and when it's time for them to be delivered, a bike comes up and they go off and do the deliveries," said Jolley, adding that to minimize idle time, riders leave an empty delivery cart behind when they pick one up. URB-E currently has about 1,800 containers circulating in New York.
URB-E believes that using small electric vehicles instead of trucks with gasoline or diesel engines to bring grocery orders from stores to customers will boost margins for retailers. The firm's bikes, which are equipped with 750-watt mid-drive motors and can travel up to about 12 mph, can each transport up to four times their own weight in cargo, Jolley said. His goal is to reduce the cost of a delivery from between $5 and $10 to as little as $2 or $3.