Delivery here to stay for restaurants as pandemic fades

OAKLAND, Calif. — Last fall, as the weather cooled and coronavirus cases began to rise, May Seto, owner of Grand Lake Kitchen, refurbished a used pizza oven and started a takeout and delivery pizza business out of an extra kitchen where she had cooked for catering and private events.

Now, one of Grand Lake's two locations serves as a hub for couriers picking up the restaurant's cafe fare and pizzas. Seto also has plans to rebuild the entryway at her other location to provide more space for the flocks of delivery drivers picking up food.

"We might rearrange the front of the restaurant a little bit, and keep delivery in mind as if it's here to stay, because it is," she said.

Delivery services such as DoorDash and Uber Eats became a lifeline for businesses during the pandemic. Restaurants learned the logistics of dealing with them — rearranging kitchens and stockpiling takeout containers in abandoned dining rooms — and reluctantly accepted delivery fees that cut into their already thin profit margins.

Some of those changes are beginning to look like they may become permanent. In a recent JD Power and Associates survey, 71% of consumers said they would continue to order delivery as much or more than they had during the pandemic.

In markets that reopened earlier than most places, including Florida and Texas, as well as Australia, DoorDash said its order volume slipped about 20% from the height of the pandemic. Uber Eats also had dips as communities reopened, but its revenue still grew 230% annually in the first quarter of this year.

Something similar is happening in places such as San Francisco. As lockdown orders eased this spring, Laurie Thomas, co-owner of two restaurants in the city, said deliveries declined. But as San Francisco began to more fully reopen in June, Thomas' DoorDash orders climbed back up.

There is little question the pandemic was a boon to online delivery services. In the first quarter of the year, DoorDash processed 329 million orders, a quarterly record for the company, it said. DoorDash estimated that it would process $9.4 billion to $9.9 billion in orders during the second quarter of the year, after processing $9.9 billion in the first quarter.

If delivery is here to stay, restaurant groups are pressing for ways to deal with it financially. Thomas leads the Golden Gate Restaurant Association, an industry group that has lobbied to cap the fees charged by delivery companies, while allowing them to charge additional fees for marketing services. Early in the pandemic, many cities placed emergency caps on the fees that delivery companies could charge restaurants. But many of those orders are set to expire. If fees return to pre-pandemic levels, delivery will become unaffordable, business owners said.

Last week, San Francisco's board of supervisors voted unanimously for a permanent cap on delivery fees, limiting them to 15%. Similar measures are under consideration in Chicago and other cities.

"We can't have a system where people are being charged upwards of 30% of their sale to survive," said Ahsha Safai, a board member who co-sponsored the legislation.

DoorDash and Uber Eats have responded to the emergency caps by revamping how restaurants pay for their services and tacking on local charges. In April, DoorDash gave restaurants the option to pay a 15% fee for basic services, and the option to pay higher fees for marketing and other services. In some cities, including Chicago, DoorDash charges customers a $1.50 "Chicago fee."

"Most restaurants want to meet customers where they want to be," Payne said.

To make sure customers stick with them, DoorDash and Uber Eats have quickly expanded their delivery offerings.

"A lot of the Uber Eats users that were primarily using the app to order food are now moving and sticking to other parts of the business," said Pierre-Dimitri Gore-Coty, senior vice president for delivery at Uber.

DoorDash's Payne said, "One of the consistent trends has been that, as they get more convenience, consumer expectations go up, not down."