Restaurants Avoiding Big Delivery Apps Have to Get Creative

One of the first things Sylvan Mishima Brackett did after the mayor of San Francisco issued a lockdown order in March was walk a few blocks to a local Best Buy to buy a phone. The chef and owner of Rintaro, a San Francisco Japanese restaurant, planned to set up a bento hotline for people to call and order thoughtfully packaged and impeccably designed to-go meals.

Everything about Rintaro, a six-year-old izakaya in the Mission District of San Francisco, is thoughtful. Food is grilled over a traditional charcoal grill; udon is handmade; Wasabi root is grown locally. Sylvan’s father, who apprenticed as a temple carpenter in Kyoto, built the space, including booths made from 100-year-old redwood wine casks and mud walls made from iron-rich red soil from Sylvan’s childhood home in Northern California’s gold country. It feels refined, relaxed, upscale, and approachable all at the same time. To translate this aesthetic to go, takeout food is creatively wrapped in compostable packaging and adorned with colorful custom labels. In May, Eater SF referred to the bento as some of the “prettiest takeout in San Francisco.”

Rintaro’s bento boxes were especially popular during the earliest days of lockdown. “In the beginning of COVID, there were not that many restaurants like us doing takeout, so we were super busy. The person on the phone was just inundated with calls,” Brackett says. Guests started to get frustrated that they couldn’t get through. One person called 60 times to place an order, only to be greeted by one busy signal after another. Even then, Brackett says he never considered signing up with a big third-party delivery service, even though the headquarters of two of the country’s largest providers, Uber Eats and DoorDash, are within walking distance of his restaurant. Still, his experience underscores how much time, thought, effort, and money is required to purposely avoid the apps.

“They’re an extractive industry that puts in a middleman which takes more or less what the profit would be, or more than the profit would be,” he says. An exceptionally successful restaurant might run a 20 percent profit, he explains. “If a third party is taking anywhere between 15 to 30 percent of the order, then that’s more than the profit of the people who are actually doing the work.”

Restaurateurs’ complaints about third-party delivery services have taken on a different urgency as we near a year of pandemic health and safety restrictions. These companies have always charged for their services; COVID didn’t change that. But as delivery became a lifeline for restaurants in distress due to dining room closures, delivery companies posted record growth. In April, May, and June 2020, DoorDash actually made money for the first time, over $20 million. Meanwhile, Uber’s CEO has promised investors the company will finally make a profit by the end of this year, largely thanks to its delivery business.

Delivery companies promise restaurants easy ordering and incremental sales. They say their huge footprint — DoorDash has 18 million customers — will bring more business. They offer sign-up promotions that reduce or eliminate commissions. The prospect of signing on, getting a tablet in the mail, plugging it in, and accepting orders is tough to resist. While DoorDash doesn’t officially share how many independent restaurants use its service, a December filing referenced 180,000 local restaurants on its platform, representing a significant portion of DoorDash’s 390,000 merchants. Delivery apps have grown quickly, reworking how we order and receive restaurant food, and how we judge convenience — the apps tout an average delivery time around 30 minutes. Larger companies justify high commissions by explaining they provide a service that would cost the restaurant time and money to operate themselves.

Brackett tried a few setups looking for the right fit. He briefly used Tock’s to-go offering, which charges 3 percent for each order, a number that Tock’s CEO has said was the absolute minimum the company could charge while keeping its own lights on. Even at that low rate, Brackett says it was costing Rintaro thousands of dollars in fees and credit card processing charges. “When you’re making negative 4 or 5 percent profit, losing another 2 or 3 percent isn’t great,” he says.

Now, Brackett only accepts delivery orders over the phone and slots them into one of three evening timeslots. Three servers have stayed on “super part time” to work as delivery drivers. The restaurant uses one driver per day to deliver between three and eight orders each night within a three- to four-mile radius, serving more or less half of the city thanks to the restaurant’s central location. Delivery costs the guest $10. For carryout, diners can place online orders through the restaurant’s website, which is tied directly to its point-of-sale system. The restaurant pays a credit card processing fee on each order, something it would pay no matter how it served customers, but online orders cost an extra 1.2 percent on top of the typical fee. It’s called a “card not present” transaction, and the higher rate has to do with the higher risk of fraud associated with processing a transaction without swiping a card. In December, this cost Rintaro about $3,000. The restaurant processes between 30 and 60 to-go orders per night.

When outdoor dining was allowed in San Francisco, Brackett says the restaurant was able to break even, or even turn a small profit, with its 26 outdoor seats. San Francisco Chronicle restaurant critic Soleil Ho recently added Rintaro’s bento to the paper’s Top 25 list, and after that, “We were quite busy,” Brackett says. “We broke even.” That’s a good week — during a bad week, the restaurant loses between $5,000 and $8,000 offering only takeout and delivery.

Since January 1, delivery companies are prohibited from listing California restaurants without explicit permission. Brackett says he used to field sales calls from delivery apps wanting to add Rintaro to their platforms, but hasn’t heard from them in a while. “I think they gave up,” he says. Looking ahead, Brackett expects to continue with bento takeout and delivery for several months or until indoor dining is reopened at full capacity and business returns. “We don’t have the bandwidth in the kitchen to do both,” he says.

A restaurant owner doesn’t have to build their own intricate delivery system or even be particularly tech-savvy to avoid the big apps. Nicolle Dirks owns the Portland, Oregon, restaurant Epif with her husband, chef Pepe Arancibia. It’s a five-year-old, full-service vegan restaurant that serves food inspired by the Andes region of South America. The pair reopened the restaurant in early May, offering takeout for the first time — but only to guests who ordered ahead online. At the time, she said, the prospect of speaking to anyone face to face was daunting. “I actively wouldn’t even accept a walk-up order. I’d point through the window to the sign that had our website and that said order online only,” Dirks said.

Two months later, she noticed a flyer from a local bicycle delivery service. “My husband used to be a bike courier in Boston. And I’m just like, yes, those are my people, that’s who we want to do business with.”

The service is called CCC PDX. “We started in 2017 because we wanted to provide a nice service for nice people to have food delivered quickly and affordably by bike! We’ve seen the way apps do it and we think it SUXXX!” the website reads.

“The couriers, the people who are doing the work should be paid a fair amount and make money doing this job,” says CCC co-owner Ponce Christie. “This was the whole reason I got into it, too, because I wanted to ride bikes and make money riding a bike. And now at this point, I want to make that a possibility for someone else.”

Since March, order volume delivered by CCC has grown nearly 1,000 percent, and the company works with about 100 Portland restaurants. At the beginning of the pandemic, CCC had seven active couriers. Now it has 40, including several former restaurant workers who lost their jobs due to COVID. Restaurants pay a 10 percent delivery charge, and the diner pays $3 to $5, depending on the restaurant and their location. CCC takes 5 percent of the order fee and $1 from the delivery fee; everything else goes to the courier, including the full tip. The company uses software developed by another bicycle messenger company that can be tied directly to many restaurants’ online ordering platforms.

“I think our goals are different,” says CCC’s Christie of larger delivery companies. “Their goal is to capture enough market share that they can put us and everyone else out of business and then raise prices to actually be profitable. Our goal is to not do that — it’s to, like, just exist. And ride bikes.”

As for why it works so well in her Portland community, Dirks says, “Smaller single-location businesses are perhaps a little bit more aware of keeping the local money in this local economy.”

The vast majority of Epif’s orders still come from its own website, placed by local and loyal guests. Thanks to what Dirks calls “multiple fortunate situations,” the restaurant breaks even. “The big one is that my husband and myself as the owners are also the ones who are doing all the work.” It also doesn’t hurt, she says, that the empanadas that they’ve always served travel particularly well.

In October, as the weather cooled, Dirks was looking for more ways to increase business. A friend suggested trying DoorDash, and Dirks reluctantly agreed. “She was like, ‘Nicolle, I know you are so averse to working with any big companies. But you can get so many new customers through these third-party apps.’”

Orders are sporadic — sometimes four or five come in one night, sometimes just one per week. Compared to orders placed for pickup and those delivered by CCC, Dirks knows next to nothing about the customers who place DoorDash orders. Once, a customer ordered through DoorDash but picked up the order themselves. “I wanted to say something when the customer picked up to be like, ‘Hey, if you ordered directly from our website, that would help us out so much more,’” Dirks says. “But I felt like I’m not in a place to tell [that to] people.”

Dirks has also learned that working with a large third-party delivery partner doesn’t mean any less work on her part. She’s taken to writing the time on every bag she packs before sending it out with a DoorDash driver. “So hopefully the customer understands that I had my food ready for you at the right time — it’s your driver that didn’t show up for another 20 minutes or half an hour.” This is also why she likes working with the local service. “I’m directly contacting Ponce via email or by phone and he’s in direct contact via open radio with his couriers,” she says. “So, any problems get solved immediately.”

In March, DoorDash temporarily waived pickup fees for restaurants. According to a company spokesperson it’s no longer offering that promotion, though pickup is offered at a reduced rate for merchants. Over the course of the pandemic, delivery companies have made other product changes, too. Restaurants on the large national platforms can accept orders directly on their own websites without paying commission fees, using a service like DoorDash to deliver the food. Of course, this requires a customer to order directly from a restaurant, not by quickly opening a mobile app. Our app-based ordering habits are tough to break: The majority of DoorDash’s business in 2020 came from repeat users, not diners who were new to DoorDash. And these companies have deep advertising and marketing pockets; DoorDash just announced its first Super Bowl ad, featuring actor and rapper Daveed Diggs and a few Sesame Street muppets. Uber Eats has run an ad campaign for months featuring Olympic gymnast Simone Biles and beloved Queer Eye host Jonathan Van Ness.

Portland, like other U.S. cities, has instituted a temporary 10 percent cap on commissions delivery services can charge restaurants, and Epif’s Dirks says she’s had no trouble with DoorDash respecting the regulation on her bill. But if the city mandate ends and commissions rise, she says she’ll close her account and work only with CCC.

At Rintaro, Brackett’s choice to stay off the apps comes down to his view on their fundamental business model. “It rubs me the wrong way in all sorts of ways. It’s white-collar versus blue-collar, it’s venture capital money versus people who are doing really hard physical work and taking the money from that.” Plus, he says, “It’s been really nice for some of the post-COVID regulars to get delivery from servers that they know.”

Kristen Hawley writes about restaurant operations, technology, and the future of the business from San Francisco.