Food Tech Startups Offer Alternatives to DoorDash and Grubhub

ALEXANDRIA, Va.—The coronavirus pandemic of 2020 has upended foodservice business models and sunk revenue and profits. But for third-party delivery operators like Uber Eats, DoorDash and Grubhub, 2020 was a pretty good year, reports BusinessInsider.com.

Delivery orders more than tripled, representing 10% of transactions. That’s compared to 3% two years ago, according to market research firm The NPD Group. Revenue soared and at least one delivery operator, DoorDash, briefly turned a profit during a quarter when most U.S. foodservice providers had to rely on delivery and carryout to survive. The pandemic highlighted the importance of having a robust digital business and opened the door for online ordering players to promote their services as an affordable substitute to big delivery companies.

New players know they'll never truly beat the big delivery operators on market share, especially amid consolidation in a space that is expected to reach $61 billion in sales in 2023, according to Cowen, a full-service, independent, middle market investment bank. So, competitive services are focusing on niche offerings, such as delivering specialty cuisines and meals served by drivers trained to be fine dining servers.

The competition comes as third-party delivery operators face other headwinds in 2021. Temporary commission caps were implemented by some city and state officials during the pandemic to protect restaurant profits, and more could be mandated even in a post-vaccinated world. 

In California, a new law went into effect Jan. 1 banning third-party delivery companies from delivering meals from restaurants without consent. The controversial tactic is common among Grubhub, DoorDash and Uber Technologies-owned Postmates. Requiring formal, signed agreements between foodservice operators and delivery services is expected to go national.

"We are working on model legislation that makes it very clear that before a restaurant is listed on a platform, there needs to be consent," said Mike Whatley, vice president for state and local affairs for the National Restaurant Association.

The end goal is to give restaurants and other foodservice providers a fighting chance to survive the aftermath of the pandemic. Here are some of the companies helping restaurants own their digital sales:

Chowbus, via a sophisticated mobile ordering platform, serves more than 4,000 independent restaurants from 27 cities in the U.S., Canada and Australia. The company also bundles meals so customers can order their favorite milk tea from one restaurant and their ramen from another. The company says its fees are much lower than competitors, because “we're only successful if the restaurants themselves are successful.”

Crave Collective opened its first culinary-focused ghost kitchen facility in in Boise, Idaho. It houses delivery-only restaurants created by well-regarded local and national chefs, such as World Pizza Champion Tony Gemignani and award-winning chef Michael Mina. It distinguishes itself by bundling meals and employing its own fleet of uniformed drivers. Proprietary tech allows customers to mix and match dishes from any of Crave's 16 restaurants. When drivers deliver food, they make suggestions about what meals or daily specials customers might want to try in the future. The white tablecloth approach has helped boost business beyond projected expectations, and the group plans to have 10 more Crave-branded ghost kitchens by 2022 in rapidly growing cities, such as Salt Lake City, Dallas-Fort Worth and Denver.

Lunchbox provides digital tools to independent restaurants and small chains, who can’t afford their own tech departments. Lunchbox's omnichannel services include online ordering, loyalty programs and email marketing for clients looking to build relationships with customers, and clients pay anywhere from $200 to $300 per month. Currently, Lunchbox is testing “mini-marketplaces” to promote delivery for multi-unit restaurant operators.

Slice, which offers delivery and online ordering services for pizzerias, has grown from serving 4,000 locations to 14,000 in 2020. That's just 3,000 less than the number of Domino's locations worldwide. Unlike third-party delivery companies that don't share consumer data, Slice provides customer data and insights to operators so they can optimize sales. The service charges a flat fee of $2.25 per order, whether it's one pizza or 10 ordered from the Slice app. That’s equivalent to Slice taking about a 6% cut based on the average order size of $37.

Toast is a $5-billion POS provider that launched Toast Delivery during the pandemic as an alternative to third-party delivery companies. It allows restaurants to offer on-demand delivery "free of unpredictable, high-percentage commissions," the company said. Instead of charging a commission fee, Toast charges a flat rate of under $8. When compared to fees charged by delivery aggregators, Toast estimates that a restaurant processing $5,000 in delivery can save about $600 per month by using its service. Restaurants are not required to use Toast POS systems to use Toast Delivery. All guest data is captured and shared with restaurant owners. 

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