The problems started for Giles Flanagin, cofounder of Blue Pan Pizza, when Postmates marked up his menu prices 10% this year without asking his permission.
Then came issues with third-party delivery drivers. One came into his Denver restaurant demanding to go to the front of the line, and another refused to wear a mask when she entered his restaurant. Unhappy with his reactions, both then posted one-star Google reviews.
Finally, when a customer informed him that orders placed with a third-party delivery service were canceled an hour later, Flanagin demanded that Postmates, which he did not contract with, take his menus off the site. When weeks of requests went unanswered, he got the service to list his restaurant as “closed,” believing it was the only option he had left.
“The alternative is to continue taking orders until they take us down, and we were going to end up damaging our reputation,” Flanagin said. “It’s not worth it.”
Denver City Council members voted on Oct. 5 to impose a number of regulations on third-party delivery sites, including a 15% cap on fees charged to restaurants, a requirement that eateries opt in to have their menus listed and a ban on cutting drivers’ salaries because of the new rules. The rules will be in place through Feb.9, designed as pandemic-time relief.
While Councilwoman Kendra Black introduced and passed the law in less than a month, Katie Lazor, executive director of independent-restaurant group EatDenver said the growth of third-party companies has been one of the biggest topics for the sector for the past three years. That only increased this year when coronavirus restrictions closed restaurant dining rooms and hooking on with a delivery service became viewed as a necessity by some businesses for survival.
The problem, however, is that the four services that control about 95% of the market — Postmates, Grubhub, DoorDash and Uber Eats — charge fees that often are 30% for independent restaurants with limited bargaining power. Considering that profits at most restaurants are between 3% and 6%, orders through these services amount to “essentially giving away food for free or worse,” said Brad Ritter, owner of Carmine’s on Penn.
Still, because bringing any business through the door was critical to keeping restaurants alive since mid-March, so many signed up for these services despite the costs, Lazor said. And that, in turn, led to problems beyond the prices — in some cases, even for those eateries that hadn’t agreed to work with the services.
One company listed menu items that Carmine’s doesn’t even make, such as lasagna, and when Ritter’s staff told that to a delivery person calling in an order, the driver replied, “Just do whatever you can that’s close.” Another driver showed up to get an order on a scooter and attempted to put food into his pockets to deliver it, Ritter said.
Both Flanagin and Ritter said they work to explain to disgruntled customers asking why their order is taking so long or isn’t available that it was an issue with the delivery companies and their drivers, but both acknowledged that the ultimate consumer judgment falls on them.
Both also entered into brief dalliances with companies before deciding that neither the price nor the service problems were worth it, then discovered that removing menus from sites was a Sisyphean ordeal. Ritter, who is doing 31% of his business in non-delivery takeout orders now, spent weeks getting bounced back and forth in a frustrating process.
With the new rules, particularly the 15% cap, going into place on Oct. 9, Lazor said that some restaurants who haven’t considered using such services may try it now and others who have used them but not wanted to draw much business that way may market the service now. Reducing fees to 15% “is the difference between feeling like they need to offer it or feeling like they can promote it with confidence,” she said.
Even those regulations won’t be enough to get Ritter back into contract after his interactions with delivery services previously, though. He and others would prefer to explain what he considers to be a “predatory” business model to the public and hope they choose to dine in or pick up food themselves in order to help local restaurants.
“What I’m hoping is that the dirty little secret will escape so customers can get to the place where they understand the model comes at a cost,” he said.