Alternative delivery players challenge third-party delivery stronghold

With off-premise expected to stick long into the pandemic recovery, many restaurant operators are questioning the business model of partnering with big third-party delivery providers like DoorDash, Grubhub and Uber Eats. Seeing an opening, a growing number of alternative delivery providers are hoping to step in to break up those partnerships.

Companies like Inhousedelivery.com, Captain, Lunchbox and Black and Mobile are just a few of the alternatives positioned to capture restaurant operators who are looking for another way to market their mobile ordering and delivery services.

During the pandemic, most of the restaurant industry was forced to rely on delivery and takeout solutions as dining rooms remained shuttered. But as the months passed, third-party delivery fees upwards of 30% started to look unrealistic to some. Restaurants pay, on average, 20% fees to delivery services, though nearly one-third pay 30%, according to a 7shifts study released in January. Lawmakers in some jurisdictions adopted temporary caps on delivery fees in an attempt to help restaurants cope with the costs.

In addition, Grubhub, Uber Eats and DoorDash retained control, in most cases, of customer data in addition to fees charged to restaurants. Even customers have become aware of the negative impact on their neighborhood restaurant: In a recent survey from SevenRooms, nearly one-fifth of customers believe that third-party delivery is harmful for restaurants.

“When 5% of their revenue was through third-party delivery, it wasn't something that they needed to put their mind to, but when it grew to 20% of their orders, now all of a sudden, they're looking at the math,” Roger Avats, CEO of delivery fulfillment company, Inhousedelivery.com said. “And they're like, ‘How can I afford to give 30%? away?’  [...] Restaurants have become acutely aware that this is not something that they can make work for the long term. And the smarter ones are realizing that, even more important than the dollars, is the customer data they’re not getting.”

Inhousedelivery.com launched in October 2020 and allows operators to manage online orders, dispatch delivery drivers through the company’s driver-sharing network (or integrate their system if a restaurant has their own delivery drivers) and set up employee scheduling. Inhousedelivery.com differentiates itself from traditional third-party services by charging a flat subscription fee ($99 a month) as opposed to a commission per order, and allowing operators to control the delivery operations in-house.

At the beginning of 2021, Inhousedelivery.com launched Driversharing.com, a ride-share service that allows restaurants to share their drivers between locations and different restaurants. The drivers are sourced from external courier services and work for the restaurants directly (as opposed to a third-party parent company), but when they’re not needed, these drivers can do other deliveries in the neighborhood.

The purpose of their services, Avats said, is to allow operators to have more control over their digital offerings.

Instead of just outsourcing delivery/takeout services (along with incidentals like driver quality, consumer data and digital marketing) completely to third-party delivery services, Avats is encouraging operators to be more in the drivers’ seat.

They’re not the only company offering digital independence as an asset for operators.

Lunchbox and C3 launched a new product during the pandemic.

During the pandemic, shift-based staffing company ShiftPixy added mobile app development and “customer remarketing” tools to their technology stack, the latter of which helps navigate customers back to an operator’s website as opposed to a third-party delivery site.

Former Grubhub executive Michael Saunders launched restaurant technology platform, Captain, in 2019 — which has expanded to 34 states — and helps restaurant operators with direct ordering capabilities. Captain also aims to improve a restaurant’s web presence and search engine optimization, or SEO, so customers will be redirected to their website, as opposed to a third-party delivery site.

Offering options

The list of technology platforms and partners offering delivery solutions for restaurants in response to Grubhub/Uber/DoorDash’s growing market share keeps expanding. 

One of the most direct “digs” at third-party delivery was the launch of NotGrubhub.org by digital ordering platform Lunchbox, a company founded in 2019 that offers in-house delivery and digital marketing solutions for operators. The “Not Grubhub” marketplace of 100,000-plus restaurants — which launched in February — is searchable by zip code and address and redirects potential customers to restaurant websites instead of Grubhub (or other delivery platforms).

“The problem is that they [Grubhub] are a discovery channel but they don't act like a discovery channel, they act like your entire digital stack,” Lunchbox CEO and cofounder Nabeel Alamgir said. “The reason the restaurant industry is struggling is because they never got the memo that they were supposed to be a food company and a real estate company and a technology company.”

In response to Lunchbox’s direct attack, Grubhub pointed out that they offer restaurants free tools to help them grow their online presence beyond just a listing on the Grubhub app, like their direct order toolkit, which gives restaurants a custom ordering link to add to their website.

“Long before the pandemic, we’ve been committed to helping restaurants grow their businesses, manage their costs and improve their online presences, regardless of whether they have the capability to deliver in-house or not,” a Grubhub spokesperson told Restaurant Hospitality. “It’s critical that in difficult times, restaurants have options to build a loyal base of diners and enable online ordering — directly from their own channels or through marketplaces like Grubhub.”

But for Alamgir, these tools are not enough.

Lunchbox’s goal is for all of their clients to get to at least 50% in-house delivery. One of their restaurant partners, New York City-based casual-dining chain Bareburger, achieved 51% in-house delivery last May after launching their own app with delivery capabilities. Bareburger often uses third-party platforms to handle last-mile logistics, but the burger chain has access to consumer data and controls their customer’s online platform experience. 

In another example, in 2019, Connecticut-based chicken nugget takeout restaurant Garden Catering began noticing how much their partnerships with UberEats and DoorDash were cutting into their bottom line. Now they partner with Lunchbox to offer in-house delivery and use DoorDash Drive for the last-mile logistics. They use their own app and loyalty program to keep customers interacting with their digital tools instead of browsing third-party apps.

“The third parties become very sticky and we’re trying to put a little turpentine on it,” said Zino Carr, growth and operations specialist at Garden Catering. “Because once you’re in the app, it’s a rare customer that will leave the app to open another website to order directly. […] We hope to use the third-party apps as a marketplace and customer acquisition tool. If they’ve never heard of us, maybe they’ll try us and then download our app and we can win them over directly.”

In April, Lunchbox announced a partnership with Creating Culinary Communities, or C3 — the ghost kitchen and food hall-focused hospitality group from Sam Nazarian — to create Citizens Go: a food marketplace/aggregator where customers can mix and match orders from C3’s 200-plus virtual and brick-and-mortar brands in select cities. Like third-party delivery apps, customers can scroll through Citizens Go to see which of C3’s concepts are available nearby and the app touts itself as “free from any hidden delivery or markup fees.”

“It’s a mini marketplace: we take the power away from third-party companies and give it to the people,” Alamgir said. “We’re working on building this for malls and neighborhoods and even entire cities.”

Creating community

Not all alternatives to the “big three” delivery companies bring delivery and digital logistics in-house.

Black and Mobile is a startup third-party delivery service featuring restaurants owned by Black operators. The app started in 2019 in Philadelphia, and now targets restaurants in Black communities around the country, including Detroit, Atlanta and Baltimore, with launches in Chicago and New York on the horizon.

Much like the bigger third-party delivery companies, Black and Mobile allows customers to browse restaurants on their app, and then delivery drivers pick up and deliver the food. Their commission rates are lower than the bigger delivery companies at 15%-20% (restaurants that partner with them exclusively get a 15% rate and restaurants with other delivery partners get 20%). They work with OnFleet last-mile delivery operations company to hire drivers for their 125 partner restaurants (and growing).

Black and Mobile owner and cofounder David Cabello, left, said that he does not see himself as in competition with Grubhub, DoorDash and Uber Eats.

“I’m a disruptor: my business has nothing to do with them,” Cabello said. “We’re a small, Black-owned business serving Black-owned restaurants. I do customer support alongside my brother and mom.”

Keenyah Wiggins, owner of Shugar Shack Soul Food in Glenolden, Pa., partners with all of the third-party delivery companies. But on Thursdays she exclusively uses Black and Mobile to orchestrate her delivery needs.

Wiggins said she’d love to use them exclusively, but they’re still growing and the larger third-party delivery companies get more customer eyeballs to her page.

“I’ve been on so many platforms, as I have been growing and learning to have an accountant and relationship with my bank,” Wiggins said. “Black and Mobile isn’t just a delivery service, it gives a network and community where we can rely on one another.”

Part-time partnerships

Despite the growing number of delivery alternatives, restaurants are still finding it challenging to completely quit Grubhub, Uber Eats and DoorDash, and many — like Wiggins and Bareburger — continue to work with the big third-party players for some of their off-premise needs.

And the big players are making moves to address restaurant operator concerns.

DoorDash announced in April that they would begin offering a tiered pricing structure ranging from 15% to 30%, based on operator needs. The higher commissions come with more customer visibility, lower diner fees and a larger delivery radius. DoorDash also lowered their pickup commission fees to 6% from 15%.

“Our partners told us they needed a change,” said Katie Egan, DoorDash’s director of b2b marketing, after the tiered-pricing announcement. “We learned that operators need more flexibility and choice.”

As for the changes, Avats of Inhousedelivery.com said they are still “much too high” for many independent restaurants and the new policy of charging customers more to offset a lower fee for consumers “may end up turning off more operators in the long-run.”

“These are marketplaces and from that standpoint they do have value,” Avats said. “If you want your restaurant to be found by people who are looking for the cuisine you make, then that makes sense. But once the customer knows who you are and what you have to offer, you should have a better way of servicing that customer. You don’t contract with servers that pay 30% to deliver food to the customer in the dining room, do you?’”

Contact Joanna at [email protected]

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