Startups Offer New—Less Pricey—Food Delivery Models

The upstart services seek to enhance the relationship between customer and food provider.

February 11, 2021

ALEXANDRIA, Va.—Many foodservice operators have relied heavily on delivery while dining rooms have been closed or seating has been limited seating. But some have seethed about the fees those providers charge. Some municipalities have temporarily capped those fees, and some delivery providers are passing them on to the consumer, raising the cost of an already expensive service, reports

Recently, some startups are trying to improve tough margins by tweaking the driver pay structure, offering subscriptions, batching orders and optimizing routes. While these efforts aren’t nationwide, they are demonstrating potential alternatives to the original models.

Rene Prats, veteran foodservice operator and former Papa John's franchisee, hated the high costs of third-party delivery and the providers’ grip on customer data, which he said has turned restaurants into “vendors to their own customers.”

In April, he launched DriveKindness, a franchised delivery model, with the goal of lowering costs, providing more data and helping restaurants drive sales to their own channels. Franchisees sign on with an investment of about $70,000 and are responsible for recruiting restaurants and drivers. The restaurants partnering with DriveKindness pay a flat per-order fee of $2.22 on average and keep all customer data associated with the order. Customers pay a $4 delivery fee that goes to the driver, along with tips. 

Miami-based fast-casual Pincho added DriveKindness a few months ago, and owner Otto Otham is raving about it. “It’s amazing, it’s beautiful,” he said. “And not only from a cost perspective but also from a perspective where it’s superior hospitality when we get to work with a local company like DriveKindness versus an Uber Eats or a Postmates. We have the direct relationship with the guest.”

Pincho has used the delivery service for about a year, and it generates between 5% and 7% of sales. “We teach the restaurant owners how to get people weaned off of DoorDash and Uber Eats and Grubhub,” Prats said.

Othman predicts more models like DriveKindness will pop up. “It’s very transactional for them in the sense that they’re not charging these crazy fees for marketing, for customer acquisition,” he said.

DriveKindness launched in 366 territories in its first three months, with franchisees in parts of Florida, as well as on some Massachusetts college campuses. Prats hopes to expand nationwide and go toe-to-toe with the big players. 

Not all innovators view the giants as their rivals though. Club Feast, a Bay Area-startup, sees subscription-based delivery as the most cost-effective model. “On-demand [delivery] works really well,” said Atallah, CEO and co-founder. “But if you really think about the average person, you’re having 21 meals a week. … A lot of meals are being unserved.”

Club Feast users buy weekly credits that they can exchange for meals from restaurants in its network. Meals are $5.99 each, plus a $2 delivery fee and a $1 service fee. Restaurants provide Club Feast with four to five dishes to offer on the platform. They keep the full price of the meal and pay no fees or commissions.

The key to making the model work is order frequency, Atallah said. Right now, the average user orders eight meals a week. Though Club Feast may only make a couple of dollars on each order, “when you multiply by eight, it ends up a win-win,” he said.

Club Feast has helped Onigilly, a two-unit Japanese concept, optimize kitchen capacity. The next day’s orders are in by 7 p.m., and Club Feast does not allow diners to customize orders, which makes planning and execution easier.

Sales of its gourmet rice balls and bowls through the first few weeks have been about $500 a week for a total number of orders anywhere from five to 20 orders a day, he said. But he sees it as gravy atop Onigilly’s regular delivery business and walk-ins. 

Club Feast does not share individual customer data with its restaurants, but users can rate the dishes they consume, allowing the foodservice providers to fine-tune their offerings. Club Feast plans to expand to New York next, then move to other large markets over the next 18 months. 

“The growth and the feedback have been tremendous,” since launching last fall, Atallah said. “Literally every single month we are breaking records that we never expected.”

NACS Research last year released its landmark “NACS Last Mile Fulfillment in Convenience Retail” study, outlining the opportunity for convenience retailers to grow sales and expand customer reach. Download it free here.