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  • I was crying every day, I was crying, I'm not I'm not even going to I'm not even a front.

  • I was crying every day.

  • I was sitting there in the kitchen crying.

  • The pandemic has crippled many industries, but restaurants have had an especially challenging

  • year.

  • Pre-pandemic, over half – 51 one percent of all food spending in America was allocated

  • towards the restaurant arena.

  • During the pandemic second quarter that dropped down to the high 30 percent range.

  • It's now around 46 percent.

  • But while dining has dropped way down, food delivery has grown considerably.

  • DoorDash and Uber Eats, the two largest delivery apps by market share, both saw their sales double

  • from the end of 2019 to the end of 2020.

  • As of February 2021, DoorDash held the most market share in the U.S.

  • by far. But some cities have other favorites, like Uber Eats in Miami and Grubhub in New York

  • City. Restaurants are relying on these delivery apps more than ever before.

  • It was fifty-fifty before the dine-in and walk-in and our personal website, obviously it took the

  • majority of the share.

  • After the pandemic, it was...

  • No, I think it's close to 80 now.

  • It's 80 percent. It's definitely 80 percent.

  • DoorDash alone delivered 543 million orders between January and

  • September of 2020.

  • The pandemic has been a huge challenge for all of us, DoorDash, the industry

  • and everyone.

  • And I think it was both a challenge as well as an opportunity.

  • And in an economy with about 9.5 million fewer jobs in February of

  • 2021 compared to February 2020, the flexibility of food delivery as a job

  • can be beneficial.

  • Of all the industries in America today, the restaurant industry has been the

  • industry that has been most impacted in terms of sales declines as well as employment

  • declines.

  • Kind of the height of the pandemic, we...

  • nearly 2 million new dashers joined the platform, which was incredible.

  • So I started full time for DoorDash in March of last year.

  • So yeah, that's how I got into – a at closing restaurant and then full time once the pandemic

  • hit. I don't know, I just really enjoyed it and the money was good as long as you're very driven.

  • And some of these guys have like three phones, you can see them.

  • It's crazy. They have three phones, one from Grubhub, one for DoorDash, one for Uber Eats.

  • It's fascinating. It's a whole other world.

  • Yeah, it's a completely different world.

  • Though the rise in delivery has provided new jobs for drivers, there have been some challenges for

  • restaurants. The delivery apps charge the restaurants fees in order to make money.

  • Uber Eats charges a one time $350 set-up an equipment fee, plus a

  • 15 to 30 percent fee for each delivery.

  • Grubhub charges a 20 percent marketing fee, a 10 percent delivery fee and a processing fee of

  • $0.30, plus 3.05 percent.

  • DoorDash told CNBC that the company doesn't disclose specific fee amounts given they vary since

  • the company offers a variety of services for vendors.

  • Delivery like for my business is 80 percent.

  • So I can understand before as a restaurant that was 30 percent delivery, taking a commission fee of

  • 30 percent for my 30 percent of delivery wasn't a lot of money.

  • But when your delivery is now 80 percent, and you're taking 30 percent of my 80 percent.

  • That's a significant amount of money.

  • The average markup is 41 to 58 percent across platforms,Gene?

  • It does Melissa and that excludes typically a 15 percent tip that they put in,

  • all three major platforms put in, you got to back that tip out.

  • These fees result in higher food prices for consumers as well.

  • There's the price of the meal you'd get if you were going physically to a restaurant.

  • This handy guide from Loup Ventures sets that price at $18.58.

  • That price usually goes up when a restaurant lists items on these apps.

  • Then there's a delivery fee, which is sometimes covered by subscriptions like DashPass and Grubhub

  • + and a service fee.

  • There's also a regulation fee which companies, including DoorDash and Uber Eats added to their

  • tally after cities like New York capped delivery fees at 15% percent.

  • We're always using these apps as a consumer and not the other

  • way around where we're like, OK, we'll pay the extra five or six bucks convenience fee, but you

  • don't see what's happening on the other side.

  • And that was mind-blowing blowing.

  • We're both engineers by education and our careers were in engineering, and then we actually met our

  • previous company where we worked as sales engineers, and then a month before the pandemic, we

  • bought Uptown Poké and we became the new owners.

  • By the time we got a feel for the way things operated with the business and making those little

  • adjustments here and there, it was lockdown.

  • After cities and states banned indoor dining in March of 2020 restaurants around the country

  • had to figure out new ways to stay in business.

  • In the pandemic environment, one of the most important components of maintaining what sales

  • there are is dealing with what the industry calls the off-premises market, and that

  • includes, for example, takeout delivery, drive-through, curbside, food trucks

  • and catering. The one thing that the pandemic has done for the industry is basically

  • accelerate more usage of that off-premises market.

  • The majority of online orders are coming from third party apps like DoorDash, Grubhub and Uber Eats.

  • An analysis from Second Measure shows that nearly half of U.S.

  • consumers have used one of these food delivery apps in February of 2021.

  • Dana and Eric started using these apps as soon as they took over Uptown Poké, a month before the New

  • York lockdown started.

  • It was a move they felt they had to make to stay relevantand in business, especially in New York

  • City, which is home to over 20,000 restaurants.

  • We feel like we're very small fish in that area.

  • How many restaurants are participating?

  • Third-party delivery companies have a base of customers.

  • Right? People are scrolling up and down trying to figure out where to order food from.

  • My restaurant is based on the working class people of New York.

  • Working class people like myself, we used their part delivery companies.

  • Now, maybe as we get familiar with the restaurant, we will start to order directly from them.

  • But there are some restaurants that are in our community that we don't know about.

  • So for us at Feildtrip, we use third party deliveries for new people to figure out who we are.

  • There's a saying in the restaurant industry, the demographics is destiny, and that's entirely true.

  • And the demographics continue to trend towards pickup and delivery.

  • Pre pandemic, over 60 percent of all restaurant traffic was off

  • premises. That 60 percent pre pandemic in the second quarter of 2020

  • actually moved up close to 90 percent and is currently edged back a little to around

  • 80 percent.

  • He's a cool guy.

  • He comes in a suit sometimes.

  • I was like, are you working?

  • He said, no it's my day off.

  • To help out businesses in the first few months of the pandemic, Grubhub suspended fees for

  • independent restaurants in certain major cities, UberEats waived delivery fees for over

  • 100,000 independent restaurants in the U.S.

  • and DoorDash offered zero commission on pick up orders and set up a $20 million merchant marketing

  • program, among other initiatives.

  • A lot of the platforms were offering some concessions.

  • There were promises of concessions, especially for New York City, but this is not something we were

  • seeing right away, which could have helped us in the beginning because the first few months of the

  • pandemic were just hitting our pockets.

  • It was difficult.

  • We were really thinking about, maybe we should close down.

  • Uptown Poké continued to use multiple third party delivery apps to widen their consumer base,

  • including Grubhub, DoorDash and Uber Eats.

  • And they noticed the amount they were paying in fees.

  • When you see your net payout, and you compare it to how much actually you made from that order

  • and they're taking 20, 30 percent, you feel like uhg,it's a pandemic.

  • Like, I wish we didn't have to pay these fees.

  • But on the other hand, you're telling yourself that we're exposed to a much larger area.

  • Hopefully because of our ratings and reviews, people will see an order from us.

  • It's a lot harder to advertise directly to get people to your website.

  • But it still, at the end of the day, during a pandemic, after a lockdown and you're trying to pay

  • rent and you see that the money is being taken away, it's taken away...

  • Yeah, and you're counting every single penny, you're becoming more in tune with your

  • finances. And you have to be because it's either or you close your doors.

  • Before the pandemic and at the beginning of the pandemic, restaurants across the U.S.

  • could pay up to 30 percent in commission fees for these delivery apps on top of other fees

  • like marketing and delivery fees.

  • DoorDash decided to reduce their fees.

  • Some cities and states put a cap on the commission fees that delivery apps could take.

  • So I'm curious to know how DoorDash feels about that fee cap.

  • Yeah, I would say that the pandemic obviously is a challenging time for

  • restaurants and local businesses and in general.

  • But some apps found a workaround.

  • It turns out that simply they're adding what is called a regulatory service charge.

  • If you look when you're checking out tonight, you'll see this.

  • So it is more expensive than you think.

  • So they can cap the commission rate, but they're like, well, you know, we're just going to raise the

  • marketing and order processing fees.

  • And we can't afford the marketing because the amount of money we put into the marketing, just for

  • one platformit's not across all platforms, it's just one platformcompletely wipes out that

  • profit margin and we're actually running negative

  • With some of these platforms.

  • Dana and Eric also say there is some difficulty connecting with customers.

  • We would want everyone to order with us.

  • The thing is that when people order directly through us, we are able to solve issues like that.

  • We're able to solve it so fast.

  • Now, when they order through third party delivery, that distance is so far, we're not even able to

  • sometimes reach the customer to resolve an issue.

  • We're not even able to maybe change something or offer them something.

  • So that's a little tough.

  • I would say I prefer Grubhub because they have that phone number, they have the customer's phone

  • number where we can call them if there's an issue.

  • Yeah, their driver's show up in a timely manner.

  • We want them to have that conversation and we'll be evolving the technology to enable more and more

  • interactions between the merchant and the consumer as we go through time.

  • But despite the expenses, the restaurants we spoke to still do need these apps and say there was a

  • positive side to using these platforms.

  • There's definitely a lot of positives.

  • And one of them is like knowing that there's a delivery guy nearby to pick up the food and we

  • don't have to have someone on staff.

  • We would need about 15 guys here at all times.

  • We looked at restaurants that that were off the DoorDashplatform and those that were on the door to

  • the platform and those that were on the DoorDash platform were 8 times more likely to still be

  • around now and ready to thrive post pandemic.

  • And that's something that we're all very, very proud of.

  • It's hard to speculate what the new normal will be for restaurants post pandemic, but there could be a

  • lasting avoidance of dine-in restaurants.

  • J.D. Power and Associates basically did a survey that said 71 percent of consumers say they will

  • continue to get food delivered from restaurants as much as they have or even more when the

  • pandemic does subside.

  • According to the National Restaurant Association's 2021 report, only about half of adults say

  • they plan to eat on premises at a restaurant or fast food place during the next few months if

  • that option is available.

  • 36 percent of adults would sit inside at a restaurant and 25 percent of adults would sit

  • outside.

  • Uptown Poké used to have space for indoor seating, but after the lockdown, Dana and Eric converted the

  • space to accommodate a larger kitchen for more off premises orders.

  • They're hoping to bring people back inside once it's safe to do so.

  • But it's not impossible to imagine a future where many restaurants only exist to deliver.

  • I feel like whenever they place an order on Grubhub or DoorDash or Uber Eats or any of

  • these third party platforms, it's distancing ourselves from them, from having that connection.

  • We're just a store on Grubhub, just like an item on Amazon.

  • In fact, many restaurants don't have any dining options, and the popularity of these ghost

  • kitchens, as they're called, is on the rise.

  • Ghost kitchens could create a $1 trillion global market by 2030.

  • You might be ordering from a ghost kitchen on DoorDash, Uber Eats or Grubhub and not even know

  • it.

  • A lot of ghost kitchens are four restaurants in one with the same staff putting out the food.

  • So you cut down on labor, you cut down on all your expenses.

  • You still be able to put out delicious food.

  • The ghost kitchen world excites me.

  • I think it's a good place for a diverse talent.

  • People that don't have a lot of money to start up.

  • And then from the ghost kitchen world, they can then open up a brick and mortar later on.

  • This is a whole new environment that is definitely a long term trend.

  • It is not a fad.

  • It doesn't mean that every restaurant operator will elect to go down this venue.

  • It just means that, in terms of how the industry has adapted, not only

  • to the pandemic environment, but how the industry will operate in the post pandemic environment

  • has changed.

  • It's important to note that while these delivery apps are much larger than any one restaurantNew

  • York City councilperson Mark Gjonaj compared it to David and Goliaththese companies are

  • actually running net losses for 2020.

  • Grubhub lost $155.9 million, DoorDash lost

  • $461 million and Uber Technologies lost about $6.8 billion

  • in 2020, though the company doesn't break down its gains or losses from Uber Eats in a usable

  • way.

  • We recognize that there is a balance for restaurants between growth and profitability, and

  • not every restaurant can afford to pay the same amounts, right?

  • Because delivery costs money, right?

  • The dasher actually has to be incentivized to do the delivery, right?

  • And so our strategy has been to offer a range of options for merchants.

  • But I understand, it's a business, right?

  • They're running a business, not doing us a favor.

  • So we kind of understand what they're trying to do.

  • That doesn't mean it isn't tough on restaurants, though.

  • It might be an easy decision for customers to use apps like DoorDash, Grubhub and Uber Eats.

  • The decision for restaurants is not so easy.

  • There is a lot to consider and it's not a one size fits all solution.

  • As a restaurant owner, entrepreneur, there's always a hesitation about any decision you make.

  • Is this right for me?

  • And what might be right for me might not be right for my peers or my friends.

  • And those are some decisions that I had to make.

  • There's more to us and there's more to other small businesses that are on these platforms, just that

  • we have to tailor ourselves a little bit.

  • If you really like the food, I would just say, you know, get to know them personally.

  • It's even though it's a pandemic, there's all these ways to reach out and get to know the

  • restaurants, and I'm sure that restaurants would prefer that, you know, over just seeing your first

  • name.

I was crying every day, I was crying, I'm not I'm not even going to I'm not even a front.