Food tech startups offer restaurants alternatives to DoorDash, Grubhub - Josh Loe

Food tech startups offer restaurants alternatives to DoorDash, Grubhub

  • The pandemic forced thousands of restaurants to work with third-party delivery operators for the first time. Cowen projects delivery sales to reach $63 billion in 2023.
  • But the industry quickly discovered, as did consumers and local governments, that delivery companies charged hefty profit-hurting fees that restaurants could ill-afford during a pandemic.
  • The pandemic opened the door for delivery startups and online ordering platforms to sway restaurant companies to try their cost-efficient online ordering and delivery platforms. 
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For restaurants in 2020, the economic impacts of the coronavirus pandemic have upended business models and sunk revenue and profits.  

But for third-party delivery operators like Uber Eats, DoorDash and Grubhub, 2020 was a pretty good year.

Delivery orders more than tripled, representing 10% of transactions compared to 3% two years ago, according to market research firm The NPD Group. Revenue soared and at least one delivery operator, DoorDash, briefly turned a profit during a quarter when most US restaurants were forced to rely on delivery and carryout to survive.

The pandemic highlighted the importance of having a robust digital business and it opened the door for online ordering players to promote their services as an affordable antidote to third-party delivery companies.

Read More: Restaurant insiders say well-capitalized restaurant companies will seek even more M&As in 2021.

New players know they’ll never truly beat the big delivery operators on market share, especially amid consolidation in a space that is expected to reach $61 billion in sales in 2023, according to Cowen. Instead, rival services are focusing on niche offerings such as delivering specialty cuisines and meals served by drivers trained like fine dining servers.

“Third party delivery has their hands full because there are simply too many competitors,” said restaurant industry consultant Gary Stibel, founder and CEO of New England Consulting Group.

The competition comes as third party delivery conpanies face other headwinds in 2021. 

Temporary commission caps implemented by city and state officials during the pandemic to protect restaurant profits remain intact and could be mandated even in a post-vaccinated world. 

In California, a new law goes into effect Jan. 1 that bans third-party delivery companies from delivering meals from restaurants without consent. The controversial tactic is common among Grubhub, DoorDash and Uber Technologies-owned Postmates. 

Requiring signed agreements is likely to go national.

“We are working on model legislation that makes it very clear that before a restaurant is listed on a platform, there needs to be consent,” said Mike Whatley, vice president for state and local affairs for the National Restaurant Association.

The end goal for the NRA and these startups is to give restaurants a fighting chance to survive the aftermath of the pandemic. Here are the companies helping restaurants own their digital sales:

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