Published November 16, 2022
Think back to the year 2000. Playstation 2 was the must-have console of the year, Destiny’s Child conquered the pop charts, Bush vs. Gore battled it out in the Florida recount, and pizza and Chinese were arguably the only two options for restaurant-quality food delivered to your home.
Fast-forward to today. Ordering food online, whether that’s a quick lunchtime salad bowl, a hearty round of fried chicken for dinner, or picking up the latest food trend coming out of a local ghost kitchen, is second nature.
We all know that apps are designed to be habitual and addictive to drive customer loyalty and repeat purchases, which is reflected in popular food delivery apps’ bulging financials. For example, in Q1 2022, UberEats posted revenues of $6.9 billion, a 136% increase from Q1 2021, and Doordash shared revenue earnings of 1.45 billion, an increase of 45% YOY.
As lockdowns and physical distancing due to the COVID-19 pandemic increased customer reliance on food delivery apps, what was the impact on the restaurant industry? How do businesses use food delivery services and automation to their advantage? Will food delivery apps stay around until the end of time?
We spoke to restaurant owners to find out why they partner with third-party delivery apps, how they see the benefits to their business, and what the challenges of using food delivery companies are.
Launched in 2016, Juke Fried Chicken is a fast-food restaurant located in Vancouver, BC’s historic Chinatown. The business focuses on providing the city with 100% gluten-free fried chicken, ribs, and locally sourced sides.
“Delivery gives you a marketing platform you can’t have now as an independent operator opening something new.” –Justin Tisdall
“I used to work in a larger restaurant. It was always, like, a rainy Tuesday in February, no one would walk in, and we’d have 300 seats that were pretty close to empty. So with Juke, I thought, we have a small space, how do we generate the most revenue?
We wanted to make it easy to get into people’s houses instead of competing as a small restaurant against larger restaurants that might have more money, a bigger name, and a higher average guest check.
Our strategy was to get to the guests before they’ve even left their house. We were already strategizing what our system was going to be, how far our food would travel, what insurance looked like, how many drivers we thought we’d need… before these third-party delivery platforms came along.
Ours is a volume business. The more volume we do, the lower our labor is, and the better it is for us. We’re not limited by seats in a restaurant. Some places don’t do takeout and have 50 seats, so you can only turn those tables three times in one night. The max you can do is around 150 covers, right? In contrast, we have no limit to what we can put out.”
“We used third-party apps out of comfort and necessity. When you open, you’re an independent operator. You don’t have a ton of money or free time because everything you’re doing, you’re putting into the restaurant. So for us to really flesh out delivery is almost like adding a third part to our business, which would’ve been equally as much time to figure out. And once you’re open and the wheels are turning, it’s really hard to add a delivery model to it.
We were about a week or two in, and someone from DoorDash approached us.”
“Doordash was a new technological development that gave us an opportunity to expand our brand overnight. We created Jukes packaging — just like you have a pizza box, you have a Jukebox, which is our chicken box. And it was like, “get that green box in people’s houses!”
“We negotiated with Doordash because we know that system and model of third-party delivery isn’t necessarily sustainable for a lot of restaurants. So we negotiated really, really hard on a super low commission rate and what minimum sales would be. Also, as part of our marketing budget, we paid the delivery fee for the first X amount of months or X amount of deliveries. We had nothing to lose.
At that time, Doordash was new, and the only people in Vancouver doing any delivery would be sushi or pizza, but there were enough restaurants making food like that. So I think that’s what our bargaining chip was.”
“You have to look at it at two different periods of time: pre-COVID, post-COVID. Pre-COVID, it wasn’t always easy. Food delivery companies were new, and we were new to using them, so it took time to really work out a successful system. We worked with them on how their delivery drivers approach us and how they approach other businesses, and the best way to do that. There was a growth period to that, but then we also found that the market share’s a bit different.
We’ve been open now for six years. At first, there was one of us. Now, there are 30 other chicken competitors, and I’m sure 20 or so of them are on the same delivery apps. So we have to fight hard to maintain our market share, and we’re fortunate to do that.
During the pandemic, initially, we were incredibly worried because we didn’t know what was going to happen. But we got to work real quick and went through our whole menu. We realized we’re probably offering a little bit too much. So we cut our menu back, which helped.
Then obviously, delivery took off, and we were fortunate. We were a recognized name, we were consistent, we had a pretty good rating, and we also offered comfort food that people wanted in times of panic. Probably in a year or two, I’ll be able to look back on the first few months of the pandemic and see what the tipping point of good sales for us will be because now we have those numbers.”
“Delivery gives you a marketing platform you can’t have now as an independent operator opening something new. For example, a few years ago, we were opening a vegan business. At the time, restaurant popups were on trend—everyone was doing a two-week popup here or two weeks there.
As a new business, we needed money in the bank. So I reached out to our delivery companies and said, “Look, how about we do a restaurant popup, you white-label us, just put our name up there, say brand new free delivery, and we won’t physically open our restaurant. You guys get exclusive access to us.”
With an online popup, it was a way we could work out our steps in the kitchen. We could practice our food and get feedback from the guests. It didn’t really cost us much.”
“There’s a small recession coming up, and interest rates are increasing, inflation’s increasing… but I don’t know if that’s going to change the way people are dining at home. Humans are working more, traveling to work further than we used… All this time adds up, and I think people just want good food they can trust in times of need.”
Pizza Barbarella is a ten-year-old East Vancouver staple in the popular Fraserhood neighborhood. The business focuses on Neapolitan recipes with an NYC twist.
“If it were our way, we would not have delivery or pickup at all. We would have a dining experience, and that’s what it would be. We’re also very locally oriented, which you can’t always tell from delivery companies.” — David Laulainen
“My business partner and I really didn’t start Barbarella necessarily for delivery. We started because we wanted to create a social hub that focuses on pizza, a good vibe, and an art gallery. We wanted to create a space to bring people together where they could share food and enjoy their lives. We were focused on families and the local community in terms of having a place to go.
Of course, not everyone wants to dine in, even before the virus was a word on everybody’s tongues. So we knew we needed to accommodate people who just wanted to eat at home, and pick things up, but also in terms of delivery. So we looked at those things fairly early on, but that wasn’t why we started the restaurant.
Delivery is something that we’ve done to accommodate the market. If it were our way, we would not have delivery or pickup at all. We would have a dining experience, and that’s what it would be. We’re also very locally oriented, which you can’t always tell from delivery companies.”
“We ended up going with the standard three: Doordash, Skip the Dishes, and UberEats. Those three partners had the easiest software and made it relatively easy for our front-of-house servers to use the systems.
There is an affordability to the convenience of having food either delivered or picked up, and we’ve seen delivery apps are now trying to get into the pickup business. Previously, this has been a resident or community-driven initiative, where customers would come down to the restaurant and pick stuff up on their own.
The affordability of this structure has to do with their commissions and the costs—not just the costs that they charge us in terms of margin, but also a cost that they charge to the customer. So the food delivery apps are actually feeding off both ends.
We have tried local, Vancouver-based food delivery businesses, but the adoption or onboarding of this new system can be very time-consuming. If the app isn’t designed to be customer or user-centered, then we don’t have time for it.
Google Trends shows us that DoorDash, UberEats, and Skip The Dishes are the prominent market-holders for the City of Vancouver. Everything’s fairly equal—they all have a third of the market and who knows what the other platforms have because they’re niche.
“Late delivery is something you always hear about, and you’d expect that. But early arrival is something you don’t hear about as much. The drivers will get the ticket, and they’re supposed to arrive in 15 or 20 minutes, but then they come within five minutes, and then they go… or they come back, or they don’t show up.
The challenge is that there’s a cost to us as a business. We have to remake the pizzas because pizzas are one of those things that, after a certain time point, you can’t let it go out. So what the delivery companies need to realize is that they cost us money because of how the drivers show up or don’t show up. And that’s a cost that we have to absorb. It’s not something that we can go back to them and say, “Hey, you cost us 20 bucks of labor, food, and wastage that we have to throw away.
Apps need to be more business responsible.
Doordash recently started flagging our Hawaiian Punch pizza — our version of Hawaiian pizza with spicy capicola, hence the punch. But their algorithm decided that punch meant an alcoholic drink, therefore, our pizza was flagged. So only if you were 19+ could you buy that pizza.
These delivery companies require that any photo that you upload complies with their quality standards, but it takes them three to four days to approve a photo. The auditing system that takes forever. Sometimes it doesn’t even get done. Why are we not self-responsible for our own photographs? It’s their approach to audit and censorship that drives themselves to the wall.”
“The cost of food, the cost of logistics, the cost of everything has gone up. But, surprisingly, what it’s impacted most is the fact that we can’t get local stuff. So for us, the delivery aspect is the smallest part of our problems.
If someone’s going to continue using delivery and there’s a premium for them to do that, ultimately, that’s their choice. It doesn’t really affect us unless there’s a breaking point, but I don’t know where that line is.
Just like tipping, at a certain point, the line shifts, and I think that’s what delivery companies are trying to figure out — how they can normalize fees so that their fees seem low in comparison to something else. I think there’s a deep strategy around how to prove their worth, I suppose.
And lastly, we don’t have any control over the impact that delivery is making on the environment, other than not using it, but if we don’t use it, then we don’t have delivery ourselves.”
All interviews have been edited for length and clarity.