In late April, after Casa Vega had been closed for more than a month, she reluctantly started contacting delivery apps. Although she had never cared for their business model — apps commonly take between 15% and 30% commission on every order — these were desperate times.
For better or worse, the apps were so overloaded with sign-up requests they didn’t have the necessary hardware (specifically, the ordering tablets) to add Casa Vega to their rosters. The restaurant had to figure out its own system. Vega now sees that moment as a blessing in disguise.
“We opened with a great demand, more than we ever anticipated. We were completely overwhelmed with orders, much more than we could possibly handle. I looked at everybody that night and said, ‘Thank God we didn’t do those delivery apps.’ It kind of saved us,” Vega says.
Casa Vega is one of a growing number of restaurants that have chosen to ditch delivery apps because of high commission rates, safety concerns or both. Although restaurants had complained about delivery apps long before coronavirus, the pandemic has intensified their issues, especially in L.A. County, where 80% of restaurant jobs vanished almost overnight due to COVID-19.
During this process, one thing became clear: Some of these companies aren’t transparent with the public about the commissions and fees they charge restaurants — and they don’t have to be.
To be fair, there isn’t one standard commission rate for delivery apps, even within the same company, which is part of the reason the situation is so confusing. Every restaurant in the United States negotiates its own contract with whatever app or apps they choose to use. If restaurants decide to use multiple services, apps often charge them higher commissions but if they sign an exclusive agreement with one app, rates will typically go down. Postmates for example, is the only app that offers delivery from L.A. hot spots Moon Juice and Howlin’ Rays, whose ordering pages feature an #onlyonpostmates hashtag.
DoorDash and Caviar made some temporary changes to relieve local restaurants during the shutdown. On April 10, both apps offered half-off their commissions through the end of May, and zero commission fees for new restaurants during their first 30 days with the service. Those relief programs ended on May 31, a DoorDash spokesperson told us.
In July, DoorDash and Caviar launched “Main Street Strong,” an initiative that allows restaurants to set up a digital “storefront” on their own website, so they can sell directly to customers without a commission. That service is being rolled out slowly and there’s already a waitlist to sign-up. The DoorDash spokesperson said although the program does not have traditional commission fees, it does have set-up, subscription and delivery fees. She declined to share those figures with us.
UberEats told LAist that at the start of the pandemic, they announced they would waive all commissions on pick-up orders made through the end of 2020 via the app. (Yes, most delivery apps also take commissions for pick-up orders.) The company also says that between March 15 and the end of April, they waived “eater-facing” delivery fees at “independent restaurants.” It was a good deal for consumers, temporarily reducing their delivery charges, but it didn’t reduce the cut that restaurants paid to UberEats.
Grubhub, for its part, offered consumers a $10 off promo around the time stay-at-home orders were first issued. Restaurants had to pick up the tab for the discount while still paying commission on the full, pre-discount cost of the order.
Joseph Badaro, who owns Hummus Labs in Pasadena, told LAist that the company repeatedly asked him to sign up for the promotion: “They’re like, ‘We’re here to help you,’ but it doesn’t do anything to help the restaurant — other than sell food that eventually will lose 30% commission.”
UberEats told LAist that since the coronavirus pandemic hit the U.S., they’ve seen self-sign ups decuple (i.e. increase tenfold; we had to look that up). If you’re wondering how much money that is, in 2019, UberEats made an estimated $337 million in adjusted net revenue. Now, multiply that by ten.
Food delivery apps, by comparison, are larger, more centralized tech companies that benefit from economies of scale. When a bunch of their clients go out of business, so what? New restaurants will open to meet consumer demand. If delivery apps don’t care about the survival of individual restaurants, it’s because they don’t have to.
During her negotiations with delivery apps, Vega says the lowest fee she received was from UberEats, which pitched her a commission of 22%.
“I was just shocked, ethically and morally, that they weren’t lowering the rates for restaurants [during the pandemic], yet they had so much business they didn’t even have the hardware to sign us up,” Vega says. “We’re not going to give 30% to companies that show no compassion for our industry at this time. It’s just crazy. We’re in a fight for our lives right now.”
Vega is far from the only restaurateur who’s fed up with delivery apps. Burgers Never Say Die, in Silver Lake, recently started charging extra on every order placed via Caviar to make up for the commission taken by the app. If you order one of their regular cheeseburgers in the restaurant or by phone, it’ll cost you $7.50 (before tax). Order it on Caviar, and it’ll cost you $9.50.
“Every time a delivery app service contacts us, I respond with the following: ‘If you can give me [a] 10% [commission deal] on every order, we can continue this conversation,'” Nee told us. “We either never hear back from them, or we get some spiel about ‘corporate’ and how they won’t let us go that low.”
Burgers Never Say Die still offers delivery via Caviar but Nee told LAist that he encourages customers to place their orders directly by calling or walking up to the restaurant.
Wirt Morton, co-owner of Tito’s Tacos in Culver City, told LAist that his restaurant’s profit margin, despite its cult following and 60-year track record, is about 3% to 4%. But the lowest commission the delivery app companies offered him was 17%.
“We would lose money on every delivery. It just didn’t make sense,” Morton says.
Instead, he and his wife, who co-owns the business, decided to start offering delivery, something they’ve never done during their six decades in business. They chose local courier service StreetSmart Messengers, which requires its delivery drivers to complete the National Restaurant Association’s food safety program. They deliver all items in “tamper-proof” packaging, according to Morton, so “no one puts their grubby hands on the food.”
It doesn’t come cheap. Customers who order delivery from Tito’s Tacos have to pay a $10 fee for delivery within a 5-mile radius of the restaurant and there’s an extra $2 to $3 per mile charge for customers who live farther away. Morton knows the steep figure means he’ll lose some customers, but he says it’s worth it to know his patrons won’t catch COVID-19 from one of his delivery orders.
May Matsuo-Rose, who grew up in Orange County, started Don Don Curry, a Japanese deli business, in 2016 in New York City. She started by selling Japanese comfort food such as curry, chicken katsu and egg sandwiches at farmers markets and pop-up events. When she moved to L.A., she rented space in a commercial kitchen near Exposition Park, planning to expand to food delivery and catering.
Of course, after COVID-19 hit, catering was out of the question. Delivery was the only way Matsuo-Rose could make a living, so she signed up with four of the apps. She offered to share details about commission rates with LAist. (Although Postmates and UberEats had confidentiality clauses in their contracts, since she has ended those contracts, she can speak freely.)
Here’s what each app was charging her:
At the end of May, Matsuo-Rose closed Don Don Curry. Relying solely on delivery apps to distribute food, she and her partner couldn’t make enough money to pay the rent on their kitchen space and keep the business afloat.
When thousands of restaurants joined delivery platforms during the COVID-19 pandemic, the competition was so intense it was nearly impossible to find newbies like Don Don on these apps. If restaurant owners couldn’t pay the extra marketing fees, like the ones Grubhub charges, Matsuo-Rose says their businesses got buried by a glut of more established restaurants.
“If you’re a brand new business, you have to market yourself just to let people know you exist.” The apps, she says, “are a necessary evil.”
Kevin Mok, who runs Mr. Obanyaki, a dessert shop in Monterey Park that sells milk tea, frozen yogurt and Tawainese wheel cakes, echoes those sentiments.
“Postmates charges us 30%. Grubhub charges us 27%. It’s a huge amount but there’s nothing we can really do about it because we need the service,” Mok says, adding that he has no other choice because he can’t afford to hire his own driver.
Mok says on a $10 dollar order, for example, he pays about $3 in commission, $1 in sales tax and at least $2 on ingredients. After paying his rent and labor costs, he says, “I’m probably making $2 or $2.50 on that order.”
“Right now, I’m able to survive,” Mok says, “but the future is pretty uncertain. I don’t know how much longer I can last.” In April, he started a GoFundMe to raise extra money to keep his business alive.
“It’s complicated because a lot of small restaurateurs are immigrants,” Matsuo-Rose says. “Some are older and don’t have the technical wisdom to use those applications effectively. I’m on several Facebook teams where they say, ‘I can’t even browse this panel to set up the menu and then take the photos.'”
On June 8, Los Angeles City Council unanimously approved a move that temporarily limits third-party delivery request fees to 15% and restricts marketing prices to 5%. In the original move, city councillor Mitch O’Farrell called the rates “exorbitant” and argued that they made them more complicated for restaurants during the current “international emergency.”
It’s not an original idea. Several cities, including San Francisco, New York, Chicago, Seattle, Washington DC and Jersey City, had already limited delivery request fees in an attempt to mitigate the pandemic in their respective culinary scenes.
The L.A. ordinance, which is expected to expire 90 days after the resumption of food in the user (this time, forever), also requires food delivery programs to provide a detailed review of all prices to customers. This includes the value of the meal, the delivery payment charged at the restaurant, any other commission or payment related to delivery and gratuity.
All primary delivery programs insist that they comply with the L.A. ordinance, however, in early July, two local restaurateurs told Eater LA that some delivery programs still give them a commission of between 25% and 30% on orders. They said that when they asked Grubhub, DoorDash and Postmates about the new law, corporations sent them generic statements, confusing messages or nothing at all.
A spokesman for Councilman O’Farrell said via email that the city is investigating restaurants lately to assess whether or not the order is being followed.
“It is my understanding that restaurants can file a written report justifying when the ordinance was violated on the delivery application,” the spokesperson told LAist. “The delivery app has 15 days from the written notice to make the necessary changes.”
If the application does not make those changes, “a civil action would possibly be initiated”. The spokesman said the city’s district attorney’s workplace is “working on a plan” for what it might look like.
Even with a limit on fees and fees, some restorers still leave third-party applications. Morton says the city council’s efforts seem good, however, a commission of 15% to 20% is still too high for him. At that rate, he thinks Tito’s Tacos couldn’t stay in business.
Other corporations don’t wait for politicians or local ordinances to save them. These are opportunities for well-known delivery applications.
At the beginning of the pandemic, Tock, a food-eating formula serving several cities across the country, was redesigned as a takeaway (and, in some cases, delivery) platform. The company is less identified than Grubhub or DoorDash, but its platform, which is an online page and not an app, has the option to go to many high-end places to eat in L.A.
Tock’s chief marketing officer, Kyle Welster, told LAist that Los Angeles is “by far” one of its biggest developing markets. More than a hundred local restaurants now use the platform. Many of them, especially those who booked weeks in advance, now offer fixed-price dinners or specials only in Tock. Beast be offers a six-course menu ‘Beast at Home’ that fits every 3 days while Republic be offers family-style dinners, the Henry Bar prepares craft cocktails for five other people and n/naka creates two-level bentos, all to choose from. Up. Wolfgang Puck told the Los Angeles Times that Tock helped him draw conclusions from the Chinese.
The site is not as easy to navigate as Big Four apps, probably because it wasn’t originally designed to be an online system. But Tock has a top merit for dining spots: his maximum basic plan rates for eating places are consistent with the $199 monthly payment plus a 2% commission on prepaid bookings. If a place to eat does not want or do not want the booking function, the commission increases to 3%, without subscription payment. For Tock’s main clientele, which consists of mid-range and high-end dining spots, where a dinner token for two prices seamlessly between $75 and $150 (non-alcoholic), this paid design is probably a reduced price compared to the top. commissions consistent with the order charged through the maximum number of third-party applications.
Unsurprisingly, one of Tock’s founders is a restaurateur.
“We are passionate about helping restaurants and, as a restaurateur, I know how it works,” Tock CEO Nick Kokonas told LAist email. He owns two restaurants in Chicago and one in Massachusetts.
Kokonas told us that since March, Tock has added around 60 restaurants per day in 28 countries, however, this is the only option for food companies.
Joseph Badaro, owner of Hummus Labs in Pasadena, took a different path. He had spent months making plans for the opening of his Mediterranean restaurant, but when the pandemic arrived, his owner allowed him to cancel his lease. So he thought he’d check it out to work, at least for a month, and it opened on April 1.
Badaro signed up for Grubhub, which kept him afloat for a while, however, he learned that he was earning about 70% of his profits through the app, and the app recovered by 30%. He started searching for features and looking at ChowNow.
“What they’re doing is simply putting an ordering platform on their site, and the visitor is the only one who pays a shipping fee,” Badaro explains.
Instead of paying a commission, restaurants pay ChowNow a constant fee. Badaro says it’s $150 a month for him. Although he still uses Grubhub for pickup (with a 15th commission), he stopped the app for delivery in July and did not look back.
“These are undeniable calculations. My sales increased, from week to week. I literally talked to each and every place to eat in my building about the possibility of signing with them,” Badaro says.
This package is part of ChowNow’s philosophy. “We’re against commissions,” CHIEF Executive Christopher Webb told LAist by email, adding that since March, the company has added more than 8,000 new places to eat to its platform. “Every place to eat in the country needs and will have to leave predatory markets like Grubhub if necessary for the pandemic,” says Webb.
San Francisco-based coffee roasting company Sightglass uses Toast, a tablet-based point-of-sale system, to process takeaway orders.
Unlike many third-party apps, Toast is transparent about its pricing. The corporate fees for restaurants are $50 to $100 according to the month to use their formula for orders and sales, either online and according to your children. Other than that, restaurants don’t pay other fees to the company. The order formula is regularly incorporated into the restaurant’s website.
For Stanley Morris, director of operations for Sightglass, the decision to use Toast rather than any of the Big Four delivery apps was a no-brainer. “With delivery companies, unless you’re doing a huge volume of orders, it’s expensive. And I didn’t see any consistent behaviors around sanitation and how they were handling everything,” Morris says.
Sightglass had spent more than a year making plans for the debut of its first outpost in Los Angeles, a 13,000-square-foot toaster plant with a 150-seat dining spot and a coffee shop to take near La Brea and Melrose. The opening day, March 14, is a success. The next afternoon, Mayor Eric Garcetti issued an order to stay at home. The place to eat had to rotate; it has become Sightglass Provisions, a boutique supplier of high-end prepared foods, farmers market products and, of course, locally roasted coffee.
When this happened, Morris was able to temporarily exercise his seven-person staff on Toast. As a component of that, all I had to do was create a menu for pickups and pre-orders, and, so, the virtual market position was born. Toast allows you to process orders without paying giant commissions or employing external delivery drivers. For fitness and protection reasons, he prefers that only Sightglass workers take care of the restaurant’s food. All other people entering the premises are checked the temperature, all parts are disinfected thoroughly and collections are made completely without contact. All of this is a component of the carefully choreographed quality formula that Morris put in position to save him the COVID-19 transmission.
But even with the immediate reorganization, Morris says Sightglass gets less than 20% of his expected earnings. “We’re just looking to get over it. In the meantime, we are becoming the most productive company possible, given the circumstances. Everyone invents this as they go,” he says.
For food corporations that don’t have the ability to hire delivery staff or create confusing ordering systems, solving the food delivery challenge can be like a top school assignment—it’s more productive to do it yourself.
Sara Valdes runs Sara Market on City Terrace with her husband, Steven. The store is a community convenience store with a little glitter. In addition to the same old M-Ms bags and Tabasco bottles, locate Kernel of Truth Organic Tortillas, herbal wine bottles, craft beer and oat milk.
The store did not begin making deliveries until May, when Sara and Steven provided a truck and began taking their products directly to an express location two days a week.
“People told us they were still a little hesitation about getting into the store, so we gave them the opportunity to pick up the truck,” Steven Valdés told us in August.
Sara’s market position truck is not like a typical food truck. He doesn’t order at the window and waits for his number to be called. Instead, position and pay for your Toast pre-order. For Sara Valdés, the most productive component is that she doesn’t have to pay commissions or rely on third-party applications.
“It’s been a family circle business, so whatever we do, we can do it ourselves,” he says.
They qualify a $5 delivery payment according to the order, a number that can remain low because they do not have to pay higher commissions. Valdés says they also use the truck to help generate profits for other businesses in east L.A. Its pickups are held at local businesses such as George’s Burger Stand in Cesar Chavez, where its consumers may be tempted to eat a pastrami burger or chili fries. Valdez needs to be consistent with the wealth percentage of community restaurants that may not have the resources to manage delivery programs or online ordering platforms.
At the beginning of the coronavirus pandemic, Valdés said the business was slow. Now, the store generates about the same profits as before the pandemic, which is not heard from others in the food industry.
“We get a lot from the community, which we really appreciate,” says Valdés. If you need your restaurants, bars, convenience stores and local markets but don’t know how, she has a tip: call them and ask.
“Just ask them: “What is the most productive order form that would be most favorable to you?” says Valdés. “I tell everyone to buy locally, to help the place, even if it’s only a gallon of milk. It’s a sale for that user and it’s a source of revenue that happens. I feel like everybody’s in the same boat, right? now, suffering one way or another. But I think as long as all the networks remain supportive, we’ll all get away with it.”
As more and more restaurants close, serve one for Dong Il Jang, Broken Spanish, Baco Mercat, Jun Won, Swingers, Here Looking At You, California Pizza Kitchen, Trois Mec and the countless small institutions that will never see their names mentioned. In a media, and the moment of a full reopening remains unclear, many restaurateurs realize that if they need to survive, they will have to reinvent their business in the long run.
“We’re not going back to what we thought the restaurant business was, maybe ever,” says Morris, of Sightglass. “You can’t make it on a few tables on the sidewalk or with just takeout. It’s sad and it hurts and it’s painful, but it’s reality.”
At Casa Vega, Christy Vega knows that she won’t be able to rely on the same business style she’s had for more than a century, but she doesn’t know what’s going to happen.
“The future of the restaurant industry is completely up in the air,” Vega says. “Sadly, I think the landscape will look much different in 2021. That said, restaurateurs by nature have amazing heart and passion. Resilience in times of chaos is second nature for us. So I still have hope.”
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