The complex world of food-delivery apps

THIRD-PARTY DELIVERY SERVICES HURT LOCAL RESTAURANTS

BY DEVON JACKSON PHOTOS BY KITTY LEAKEN

2022-03-27T07:00:00.0000000Z

2022-03-27T07:00:00.0000000Z

Santa Fe New Mexican

https://enewmexican.com/article/281483574881551

FRONT PAGE

ew restauranteurs describe the future of dining out — not to mention its present — as bleakly, as articulately and as convincingly as Vinaigrette founder Erin Wade. And her Cassandra-ish warnings aren’t merely the result of the lockdowns and the lasting effects of the pandemic. More particularly, they stem from the business practices of national third-party restaurant delivery services such as DoorDash, Uber Eats and Grubhub. FAs Wade said in an email, “You will see restaurants partnering with data companies more and more — selling customer data as a side hustle. . . . You will see big companies coming to dominate even more. Our historic role in democracy and in providing public places for a populace to confront one another in the course of everyday life will be diminished.” She continued, “Our obsession with takeout has become a defining norm. Whereas ‘going out’ defined earlier generations, ‘eating in’ defines today. . . . Takeout is the culinary counterpart to ‘Netflix and chill,’ ‘doomscrolling’ and ‘binge-watching.’ It’s also perfect for ‘rising and grinding’ and eating ‘al desko’ . . . leading to something you might call the ‘airportification’ of restaurants.” “Customers,” she warned in her email, “need to think about the future we are creating by the choices we make today. What seems like fun today, like luxury, is going to feel like a prison tomorrow, like a paucity of options, an accelerating sameness. It’s fun to order delivery when you have a sweet, thriving community full of restaurants — but delivery is going to obliterate that and be the only option. Then it’s not so fun.” If that comes off as overly dramatic or piteously self-serving, consider the reality for restaurants: At the end of 2021, almost 80,000 U.S. restaurants had temporarily or permanently closed due to the pandemic; restaurant sales were down $240 billion in 2020; and lately restaurants have had to deal with labor shortages, inflation and a supply chain crisis. “It’s an incredibly high-cost, low-profit-margin business,” Sean Kennedy, executive vice president for public affairs at the National Restaurant Association, told Time last December. “In the best of times [it] only barely works if you have almost a full house for every meal service that you’re selling.” All this time, throughout the pandemic and beyond, restaurants like Vinaigrette, and almost every other locally owned eatery nationwide, have also had to fend off crushing delivery fees from Grubhub, Uber Eats, and DoorDash. “While increased delivery business has been important for many restaurants, the fees the delivery apps charged have been harmful to the viability of many restaurants,” says James Parrott, director of economic and fiscal policies at The New School in New York City. “In many cases, the fees meant that the restaurants were losing money on each delivery. There were many reports of app companies taking orders without even having a formal arrangement beforehand with the restaurant.” Most people ordering takeout from their favorite restaurants during the lockdown, and even today, probably thought that by doing so they were keeping these places alive. Sadly, if they’ve ordered through one of the national third-party deliverers, they may have been hastening these restaurants’ demise. In a piece for The Counter last June, Vivienne Machi wrote, “Commission fees can account for about 15 to 30 percent of an order’s sales, and major companies including Grubhub, have been sued for alleged sneaky practices to ramp up fees. Delivery drivers — who are considered independent contractors — earn low wages for minimal protections from the companies. Reports have revealed creatively devised schemes, like Grubhub building fake restaurant websites, or DoorDash delivering knockoff food from ghost kitchens.” Even though the pandemic led to a twofold increase in the number of people who used third-party delivery services, these companies have yet to post an annual profit. As Columbia Business School professor Len Sherman told The New York Times in late 2020, “There’s simply not enough value created in these businesses to reward consumers, couriers, restaurants, employees, and shareholders.” This has been particularly maddening for Justin Greene, who founded Dashing Delivery in Santa Fe 19 years ago. Like Wade, he’s angered by the disruption from delivery apps, which hasn’t led to massive profits for the companies or their shareholders but only to a few CEOs getting rich. He cites the millions of dollars Uber Eats lost in last year’s third quarter, the millions DoorDash lost that quarter as well, the fact that no national third-party delivery company has yet to see an annual profit and the fact that DoorDash’s CEO Tony Xu was compensated $414 million in 2020, despite the company ending the year in the red. These companies, he said, have “sullied the reputation of all delivery services.” This is something Wade sees very clearly. “Grubhub and Uber Eats are sucking millions of dollars out of local economies — dollars that represented profit by small, incredibly hardworking businesses and value added by local laborers — and into a black hole that isn’t profitable but has endless backing and cash,” she says. “It puts businesses out of work, disrupts the positive feed-back loop with local economies. And it is inherently unsustainable; you can’t be farm-to-table when you are spending more than the cost of food on platform costs, on convenience.” She adds, “You can’t make money on delivery unless you are a food factory in a warehouse with a skeleton staff.” Rob Day, owner of Santa Fe Bar & Grill, works only with Dashing Delivery. “They’re our only delivery service,” he says. “We’ve had a relationship with them for about two years now. And it’s like a collaboration. We’re in sync.” He knew about issues with the big delivery apps before the pandemic, and their behavior since only confirmed his decision not to join. But he had the advantage of loyal customers and a great location where curbside pickups are easy — and Santa Fe Bar & Grill has stayed relatively busy throughout the pandemic. But it’s that connection to Dashing, a local company, versus the disconnect with the big app companies, that really sealed the deal. “These national companies, they haven’t a clue,” he says. “We’d compromise ourselves too much to just have somebody show up to deliver our food.” George Gundry, owner of Tomasita’s and Atrisco, took the opposite tack. “When the pandemic first hit, we signed up for all of them,” he says. “As a service to our community. We’re still doing it with all of them — DoorDash, Dashing Delivery, Grubhub, Uber.” Dashing is the best of the bunch, he says, “because there’s a human being to deal with, and they just provide more service.” It’s the company local residents should rely on, he says, “but the reason we went with all of them, and still do, is for those out-of-towners who turn to Yelp or TripAdvisor when ordering food. Basically, tourists don’t know better; they mostly know by now how to use an app.” “National services,” observes Dashing’s Greene, “have a presence on the mobile devices of tourists and can attract new (albeit temporary, one-time) customers.” However, as Wade pointed out in a letter to Matt Maloney, CEO of Grubhub, “In many cases, you are not adding new customers to our base but converting old ones into Grubhub customers.” The national apps’ business model is “exorbitant, and it feels kind of usurious,” admits Gundry. “But I figured it’s also bringing us some business we would not otherwise get.” As for Dashing, they do everything the apps do and don’t do anything the apps are allegedly notorious for doing. Says Greene, “We only market locally owned restaurants. We never market non-consensually.” Dashing Delivery (dashingdelivery.com) currently works with 32 locally owned restaurants and food trucks. Greene says his order volume increased by almost 100 percent from pre-pandemic levels to the darkest days of the pandemic (around the winter of 2020–2021). “We signed up new restaurants and were able to help our partner restaurants pivot to online ordering and off-site consumption,” he adds. Dashing Delivery also coordinated and delivered more than 15,000 meals (from La Choza, Tomasita’s, Cowgirl, Santa Fe Bar & Grill and Yin Yang) to first responders over the first six months of the pandemic. This kind of community outreach isn’t really possible through the delivery app companies. For Wade, this isn’t merely a David versus Goliath contretemps. This is Amazon pushing bookstores to the brink of extinction — only this time it’s restaurants that are endangered. Worse is the possibility of doing away with everything that restaurants have come to mean to a society. This is an almost existential showdown. “There is no easy or practical way for us to stop it,” says Wade. “So that means that little independent restaurants have to defend themselves from venture capital-bloated, publicly traded behemoths. “The level of disinformation and marketing manipulation — today’s greenwashing,” she continues, “is out of control. It is so much harder to get through to customers now that some people don’t feel they have a choice.” Says Parrott, of The New School, “It is very disappointing that the venture capital firms that make the app companies possible are not more concerned with the need for business practices that are fair to the restaurants and fair to workers from the start. It reflects a level of antisocial greed that should not be permitted under the law.” Wade’s grim outlook isn’t based just on what she’s seeing in Santa Fe. In addition to Vinaigrette, she has five other restaurants in Santa Fe, Albuquerque and Austin, and two farms that grow food for the restaurants. The irony is that the people who love local restaurants tend to travel, and when even these fairly informed foodies arrive in a new city, their tendency is to turn to their phones — to an app. So what’s the solution? Wade, for one, has some suggestions — many of which will likely turn up in her Why Restaurants Matter, a book coming out in the fall. “I would have customers evaluate — outside of the pandemic — why they have become so dependent on delivery,” says Wade. “Where has their time for dining with other human beings, in a public-private space gone? Takeout had increased 500 percent from when I opened — even before the pandemic.” She continues, “I also wish we could all look at convenience as what it really is — a cost always, always paid by nature. The food movement was about fighting back against the ineluctable rise of convenience over every other thing, and it feels like in the generation in which smartphones came to dominance, we forgot. The most rebellious thing you can do today — especially young people — is to leave your phone at home and go to dinner with people you love.” “Until such time as it is clearly established that the national delivery apps can operate fairly,” says Parrott, “consumers should seek to use food service delivery businesses that treat the restaurants and delivery workers fairly, and tip delivery workers in cash whenever possible to ensure that the delivery workers receive the tips.” “In a perfect world,” says Greene, “the local jurisdictions and attorneys general would have enforced the laws and socioeconomic goals of the community.” Until perfection arrives, though, “customers should always try to buy local. Not only local restaurants — Taco Fundación versus Taco Bell — but also local delivery providers — Dashing Delivery versus DoorDash.” Devon Jackson is a writer in Santa Fe. He has written for “The New York Times,” “Outside” and “Rolling Stone” and is the author of “Conspiranoia!”

en-us