Restaurants relied on delivery apps during pandemic but many can’t keep up with fees

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Customers want delicious food at reasonable prices in a timely manner, but small businesses are often left picking up part of the tab. Photo by Lauren Lemos.

Over the past two years of the pandemic, food delivery apps like Postmates, DoorDash, and Grubhub have become a primary way for people to “eat out,” and the trend doesn’t appear to be changing anytime soon. In addition to being convenient for customers, takeout and delivery has been a lifeline for many restaurants. But these third party delivery apps also have their downsides, raising questions about whether tech companies are thriving at the expense of small businesses. 

Delivery apps collect up to 30% per order from small operations like Wax Paper, a shop in the Chinatown and Frogtown neighborhoods of Los Angeles that names its sandwiches after public radio personalities. Over the past year, Wax Paper has become one of the top sellers on delivery app Caviar. Owner Lauren Lemos asks, “How is something done so simply over the internet warrant such high service fees to the customer and restaurant?” 

Lemos talks to Evan Kleinman about her complicated experience with third-party delivery apps.

More: Clickbait restaurants: Ghosting the traditional delivery model  

The following interview has been edited for length and clarity

KCRW: When it comes to third-party food delivery apps, you and many other restaurant owners have talked about how you can't live with them and you can't live without them. What do you mean by that?

Lauren Lemos: It’s very true. Phone orders are pure chaos. You experience a lot of things like telemarketers, people calling and canceling, not showing up, changing something on their order, maybe you miss a call on call waiting. You can't really service your customers to the fullest unless you have a dedicated person answering the phones, nor can you really offer delivery unless you have a great insurance plan. 

You kind of reach an impasse where you have to sign up for these apps, because they allow you to take orders online and cut out that middle chaos. What happens is, it works for a long time, and it's convenient for the customer, it's convenient for us. And then you start to look at your profit and loss and you realize it's not working so well for you. So you start to try to negotiate the terms, prices conditions, and that's where it gets really sticky and weird.

You're paying 30% to the apps when you just make a profit of 10%.

When you think about it in a very simple form, 30% on a $100 order [is] $30. Thirty dollars could be a couple dishes. It could be, really, a check. A whole meal. And it begs the question of why something like an app, which is so simple in that you open it, order something, boom, it's done — how does that warrant such high service fees to the customer and the restaurant? Where does that money go? 

It's hard to accept that when you read the news and you learn that this is a company that's valuated at a billion dollars, and did really well during the pandemic, and sold their shares for more than they offered. I think it's really complex. Obviously, it is a business like ours, where it has employees and people that need to be paid, but there's a lot of big question marks.

Which delivery apps does Wax Paper currently work with?

We're exclusive to DoorDash/Caviar. We originally signed up with Caviar about five years ago, but over the pandemic, DoorDash bought Caviar. They had two entirely different customer bases and they didn't want to lose customers, so they kept the platform names separate. However, the companies are DoorDash. So we're on Caviar and DoorDash.

Lauren and Peter Lemos signed up with delivery service Caviar five years ago, but at the start of the pandemic, the company was acquired by DoorDash,  a platform that features larger chains like McDonald’s. Photo by Aaron Farley.

Are the issues with each of them the same? Did you ever feel like you prefer to work with one rather than the other, and why?

In the beginning, when we signed up with Caviar, it was small, local places. You couldn't find McDonald's [or] large restaurants on there. The platform itself was managed like a restaurant. It was sold as that, too — “The people that work with us have worked in restaurants … we have a general manager, we have great and fast phone support.”  Aside from commission, it was a great service to work with. 

The issues really started happening when DoorDash bought Caviar. … So we started working with a new app, a new platform. We had no training. We couldn't have people in-house to train us because we were in a pandemic, and it just sort of crumbled from there. To say that I don't like to work with either of them right now would be wrong, because I am a partner of theirs. That's what they call their customers, partners. But there is a big conversation to be had, for sure.

You recently posted on Instagram about Caviar running promos that made the price of your sandwiches on the app lower than if they bought sandwiches directly from Wax Paper, which in a way is like competing with you. How does this work and how do these promotions impact small businesses?

It's important to mention that everyone enjoys a discount, everyone enjoys a competitive price, right? In my past, working with these services, promotions were rolled out with prior notice — “This is how it's gonna work. This is who is going to pay for it,” etc. This particular promotion happened to come at a very interesting time, which [was] when I started talking to our representatives about peeling back from the service. And this promo was not run by me as a partner. 

I was working the register, and all of a sudden we got a blast of Caviar tickets. It really bothered me because it was very obviously targeted at our product. And I noticed that it gave the customer $3.50 off one of our sandwiches. And at the bottom of the receipt it said, “This is a promotion paid for fully by Caviar at no cost to the partner.” But that's simply not true, because we pay commission on that order. So there is a cost to us. And that lit a fire in me. I'm no stranger to impulsive honesty, and posting [on Instagram], and being transparent with our customers, and this was just, enough is enough.

Were customers supportive of you?

Yes, incredibly. I did have a few people asking questions that were challenging. Breaking that fourth wall and showing you the ugly of what happens behind the scenes is something that I experiment with a lot and [that] I'm just not shy about, because I feel like hospitality and food is like a staged play. It really is about performance. Every single day we go out, we're giving you a unique performance of what we have to offer. And we're doing it to the best of our abilities and we want you to enjoy yourselves. 

But taking my business owner hat off, having food made for you and delivered directly to your doors, you don't have to leave your computer, you don't have to leave your kids — this is a whole new luxury in addition to going out to eat. And it comes at a cost. The question right now is, who absorbs this cost? Who is responsible for this cost? I had a lot of customer support, and we constantly have customers saying, “What is the best way to directly support you?”

DoorDash recently ran a promo which offered a discount on Wax Paper’s signature sandwiches, in essence competing with the restaurant it delivers from. Photo by Lauren Lemos.

Have you ever tried having a dedicated person to do nothing but take phone orders?

We haven't tried that. We're such a small business. I've crunched the numbers …  they just didn't really seem to make much sense for us. 

Have you had other issues with third-party delivery apps, like fraud, tech glitches, or safety concerns?

Absolutely. When we first opened and were taking phone orders, we would have Postmates or GrubHub drivers come in to place orders. And I was really confused because we hadn't signed up with any of these services. They would show me their phone and there would be a Wax Paper order on there. Well, sure enough, I jump on and see our menu on Postmates or GrubHub. It wasn't an approved menu. Prices were wrong. Descriptions were wrong. Important allergy information was wrong. 

In order to get off of those platforms that were more or less profiting off of our menu, and we hadn't signed any contracts with them, I had to email cease and desist [letters]. It was crazy. And I had to do that every single year. … Safety issues? Absolutely. We've had drivers who are very angry that they're there early for their pickup order and have to wait. We have had many choice words thrown our way.

Several cities, including LA, San Francisco, and New York, capped commissions and credit card fees that third-party delivery apps can charge restaurants. Did this make things better? Is it just temporary?

Yes and no. Taking our commission down because it was mandated by the city at one point, of course we were grateful for. Did we see that as a nice gesture from the platform that we work with? No, because they had to do it. What ended up happening was when the rates went back up, we weren't informed. So it was never discussed where our rates were at. It was helpful for some time. When it came back, it was just like, “Okay, here we go again.” It throws your [profit and loss statement] off, it throws your margins off, it throws everything off.

What's the way forward for restaurants and delivery apps? Do you think that dynamic can get better? Or is this delivery model fundamentally broken?

I really don't know. For us, they are invaluable. But in order to remain as a business for themselves, and for restaurants to remain in business, there has to be hard, hard negotiation. There has to be a lowering of rates. So until those commission rates come down, or the app performs at 100% … I don't see a great future ahead.

What is the best way for people to support you?

However you come to order our food, you're supporting us. We don't want you to feel guilty if you find us on an app and you order us. What I do as a diner is check the website of the restaurant first, see if they have online ordering, and I order through there. If it's out of the radius and they direct me to Caviar/DoorDash, then that's the route that I go. Or, I order and go pick up. The number one way you can support a restaurant is order ahead and pickup.