Grubhub, DoorDash and Others Deliver Restaurant Meals to Customers’ Homes and Offices

Apps that enable users to order restaurant meals for home delivery are now popular in cities around the world. Users create accounts on these apps, with payment card information as well as home address. Nearby restaurants appear on the smartphone app including complete menu information. Users make their choices; the app sends the order to the selected restaurant and dispatches a delivery courier. Delivery fees and driver/courier tips are added to the price of the food and charged to the credit card, PayPal or digital wallet account on file. Meal delivery services were a savior for many restaurants during the Coronavirus crisis. Major players in this niche include Grubhub, Seamless (which is part of Grubhub), DoorDash and Uber Eats in the U.S.; Delivery Hero and Takeaway.com in the EU; Just Eat in the U.K. and Deliveroo in the U.K, the EU, Asia and Australia. Uber’s meal delivery unit saw soaring growth during the Coronavirus, helping to offset a decline in its traditional car service.

Restaurants pay very substantial fees, usually about 15% to 30% of the total per order to the meal delivery firms. Some restaurants may elect to hire their own dedicated drivers, but this can be challenging to manage, and a well-run system would include the cost and effort of implementing order-taking technology along with hiring delivery drivers. At least 25% to 30% of a restaurant’s orders need to be for delivery in order to cover the expense, according to analysts at Boston Consulting Group. Many restaurants are opting to outsource deliveries to firms such as Grubhub, DoorDash and Uber Eats. Often, these restaurants raise their prices on meals sold through the apps in order to recoup the costs.

During the Coronavirus pandemic, more than 70 U.S. cities and states temporarily capped fees charged by delivery apps and paid by restaurants. In New York City, permanent caps were set. However, in September 2021, DoorDash, Grubhub and Uber Technologies’ Eats division filed suit against the city, stating that a permanent cap would necessitate rewriting contracts with restaurants, reduce marketing efforts and raise prices for customers.

Cheaper alternatives are providing competition for these firms such as Spread, a Manhattan food order and delivery website for that charges $1 per order and no commissions are paid by the restaurants. The big apps themselves are also taking steps to give restaurants a break. DoorDash is building websites for small restaurants, charging them a flat fee for delivery rather than a commission. The firm is also allowing restaurants to choose from three fee rates (15%, 25% or 30% in the U.S.), with varying degrees of marketing and product support. Uber Eats offers a similar flat fee service as does Grubhub.

The food delivery business model is cost intensive, and companies in this sector are innovating to increase order size. DoorDash, Uber and others are offering delivery of groceries, alcohol and a variety of household goods in addition to restaurant fare. Conversely, Grubhub, which was acquired by Just Eat Takeaway.com in June 2021, plans to focus on online marketing and delivery for restaurants exclusively. Notably, Grubhub utilizes food delivery robots on a number of college campuses in the U.S. (including the University of Arizona, the University of Rochester and Auburn University) in partnership with Yandex NV.

Starship Technologies (www.starship.xyz) has small, wheeled units in testing around the world. Starship Technologies’ robots maneuver along sidewalks at speeds of up to four miles per hour with a range of two miles, making them applicable for the last-mile delivery stage of consumer or business shipping. When the units reach a delivery address, the addressee is alerted and uses a smartphone app to unlock the knee-high robot and remove the package(s) inside. The robots can carry up to 40 pounds. By early 2024, more than 6 million autonomous deliveries had been completed. The company’s founders also started online telephony firm Skype.

SPOLIGHT: Restaurants with No Seats

The preponderance of delivery apps and services are fueling a new concept in restaurants: those with no seats for customers. In fact, customers aren’t allowed in. These kitchen-only establishments do not have the overhead that comes with seating areas, waitstaff, signage, high-traffic real estate and related costs. Instead, the kitchen cooks to orders taken by app and needs only a central pickup counter or window where interactions with delivery service runners take place.

Delivery service Grubhub invested $1 million in Green Summit Group, a startup in Chicago, Illinois, to build a central kitchen which produces dishes for nine different “virtual restaurants.” Each appears as a separate establishment with unique menus but is prepared in the same kitchen by the same staff. Former Uber CEO Travis Kalanick has launched a well-funded firm called CloudKitchens that buys relatively inexpensive commercial real estate and converts it into locations where entrepreneurs can rent delivery-only kitchen space. His firm has also launched its own delivery-only restaurant brands, such as Excuse My French Toast.

CloudKitchens’ investments are global, ranging from China and India to the U.S. and UK. Walmart’s Canada division is partnering with Ghost Kitchen Brands to offer online ordering and delivery. Creating Culinary Communities (C3) operated 800 “ghost kitchens” in mid-2022 and hoped to grow very aggressively. C3 investors include Simon Property Group and Accor S.A.

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