As the use of food delivery services surged during the pandemic, some restaurants have struggled to cope with the fees imposed by large companies like DoorDash, UberEats, GrubHub and Snackpass.
Over the course of the last two years, delivery services have provided an opportunity for citizens, whether contagious with COVID-19 or concerned about exposure to the virus, to patronize local restaurants from their own homes. As of last week, Yale began distributing tens of thousands of dollars worth of vouchers from GrubHub and UberEats for isolating students. As restaurants have dealt with lockdowns and capacity restrictions, delivery services have offered businesses an additional source of revenue.
“It’s a trend everyone was moving toward, but the pandemic itself has sped up that process,” said Harry Singh, the owner of House of Naan. “During the pandemic, these apps allowed restaurants to make their food easy and accessible to the customers and people sitting at home.”
Naitza Diaz, the operations manager at Sherkaan, an Indian restaurant located across from Ezra Stiles College, noted that Sherkaan was forced to transition to primarily or entirely takeout at certain points during the pandemic. Today, even as restaurants have opened, orders through third party apps still make up over a third of orders at Sherkaan.
At the beginning of the pandemic Sherkaan began delivering food on its own to keep up with delivery orders and to keep staff employed. Using its own drivers also allowed the restaurant to cut down on the fees charged by delivery services.
According to Diaz, the fees range from platform to platform, but may take a commission of 20 to 30 percent of the final sale. Diaz added that “those fees are pretty high, especially in an industry where it’s not a very high profit to begin with. Those fees can kind of make or break you.”
Singh concurred with Diaz, saying that, in order to stay alive, “restaurants have no choice but to upcharge their food products.” He noted that “in the end, it just impacts the consumer.”
As delivery services, “a necessary evil” as described by Diaz, have become a prominent and seemingly permanent facet of the restaurant industry, restaurants have taken creative solutions to ease the burden of their fees.
According to Diaz, other restaurants have cut their menus, replaced some cocktails with a less expensive liquor or made their dishes cost less. Others have even attempted to reshape the city’s food delivery market by starting a local service, Nosh Haven.
Founded in 2019 by restaurants on the shoreline around New Haven, according to the Nosh Haven Chief Development Officer Stephen “Finn” Yaeger, Nosh Haven is a restaurant-owned delivery service that aims to offer its service at the lowest cost to everyone involved.
“Our model is built on creating true partnerships with restaurants and communities,” said Yaeger. “Because our goals are … to change the industry and create a sustainable way for restaurants and businesses to deliver quality to both in-house and off-premise guests.”
Although Sherkaan was approached by Nosh Haven, it declined the partnership, citing concerns about the sustainability of the lower fees and the much lower usage of Nosh Haven compared with other services.
Unlike Sherkaan, House of Naan has joined the new service. After six months with Nosh Haven, Singh pointed out that the platform charges lower fees, does a better job working with restaurants and prevents New Haven corporations from being held hostage by larger corporations.
Singh told the News that even small fees can seriously harm local businesses in the long run. He cited GrubHub, noting that they charge a “marketing fee” to the restaurant. The higher the fee paid by the restaurant, the higher the business is listed on the app’s interface. Singh also noted that restaurants that pay lower fees may not be reimbursed for mistakes made by GrubHub drivers.
“Because there are more customers consuming through GrubHub,” Singh said, “restaurants are kind of stuck because if we are not on the GrubHub app, we are losing out on business, but we are forced to pay percentages based on what GrubHub wants. … It’s not about what’s fair. … It’s what GrubHub wants, and if we do not follow their rules, then we will be pushed to the curb.”
In response to the concerns raised by Diaz, Yaeger said that Nosh Haven has continued to grow by word of mouth, maintaining margins with which they are comfortable.
“Nosh has had a nice strong growth,” Yaeger added. “Honestly, I don’t look at other platforms as threats; they absolutely have millions of dollars in marketing to secure guests and businesses only to overcharge and under deliver.”
To date, Nosh Haven has partnered with 32 restaurants in New Haven.