Delivery orders await pickup at Raising Cane’s in Chapel Hill on Monday, April 1, 2024. | Photo taken by Ira Wilder.
Story by Ira Wilder
Four days after the pandemic was declared a national emergency, Alpaca Chicken, a Durham-based restaurant chain, began offering delivery for the first time.
The Peruvian eatery was not the only restaurant to shift its business model.
Decades ago, the delivery market was a niche sliced thinly by pizzerias. After humble growth in the 2010s, delivery accounted for less than 7% of fast-food and less than 3% of full-service restaurant revenue. Between March and May 2020, those numbers doubled and tripled, according to a recent report by the United States Department of Agriculture.
“Restaurants had no choice but to start using delivery platforms,” said Cameron Long, chief financial officer at Takeout Central. He added the market shift “saved” the restaurant industry.
Delivery services offset many of the restaurant industry’s losses as the pandemic dawned, and many experts thought the shift would be temporary. However, recent data from the National Restaurant Association suggests otherwise: a majority of restaurants reported they deliver more now than they did in 2019, and more adults in 2023 ate a restaurant-prepared meal off-site than they did on-site in a given week.
“It’s become the normal thing for a mother with two kids that are playing baseball to go home and, on her phone, sit there and order food to be delivered to the house, so when she gets home, there’s already dinner there,” said Sherie Williams, business development manager at Takeout Central.
Despite expert forecasts, customer service complaints and various fees, takeout and delivery continue to be driving forces in the Triangle’s restaurant economy.
70% of restaurants in America use a third-party delivery service, according to the National Restaurant Association. More than half of Durham County’s 716 restaurants use at least one delivery service. The most commonly used delivery services are UberEats, Grubhub and DoorDash. Many restaurants use more than one service.
Takeout Central started as a delivery service for students in Chapel Hill in 1996 and now provides delivery for 64 Durham restaurants. Today, the business serves nine North Carolina cities and has about 250 employees. Long said it offers a more localized approach (the company doesn’t serve fast food companies) as well as a fully staffed customer assistance line, a service that DoorDash and its competitors struggle to provide.
Yeshua Sanchez, general manager of Cosmic Cantina, said he prefers to work with Takeout Central because it instantly responds to customers’ issues.
“I’m going to wait on the phone with DoorDash for 15 minutes before someone talks to me,” Sanchez said.
Rae Mosher, the owner of Carrburritos in Carrboro, said she’d call and wait for an hour before speaking to a human at DoorDash.
Carrburritos is a 27-year-old family restaurant, and it was a pen-and-paper operation, complete with an analog cash register, until about two weeks before the pandemic. Mosher said it was “online ordering that really saved us during the pandemic.”
The restaurant worked with GrubHub and DoorDash for several months before stopping delivery entirely, in part because the fees cost the restaurant a percentage of each order in “the high teens.”
“It was just incredibly expensive,” Mosher said. “But, you know, that really was not the real issue. The real issue was that people would have a bad experience with the delivery system and call and complain or go on Yelp and Google and give us bad reviews because of things the delivery service had done.”
Carrburritos in Carrboro now uses Takeout Central exclusively. Mosher said she enjoys working with the service because it handles issues efficiently and it’s a smaller operation.
Carrburritos posts higher menu prices for delivery dishes, so Mosher said the restaurant gets “the same amount per burrito.”
Williams, the business development manager at Takeout Central, is a three-decade food industry veteran. She said financing a restaurant is a game of thirds: if a restaurant buys an ingredient for $1, they usually sell it for $3. One of those dollars pays for the food, one pays for overhead costs (like rent and labor) and the last dollar is split between banked profit and unforeseen costs (such as the dishwasher breaking, the price of chicken trending high or the dining room being slow).
When restaurants do takeout, that middle dollar is cut out almost entirely, leaving a restaurant more room for profit instead of paying wait staff, much-needed relief amid a local food labor shortage. DoorDash reported 64% of its merchants said their profit margins would have been lower without using its service.
DoorDash’s cheapest advertised commission rate charges a restaurant 15% per order. Restaurants have a few options about how to pay that commission: pass it to its customers as a fee, raise its menu prices or absorb the cost.
“[Restaurants] are in an impossible place,” Long said. “They have to choose between paying the fees, raising their menu prices or losing volume from their customer base. So, they kind of feel squeezed in three directions.”
Cosmic Cantina opts to pass its delivery fees to its customers. The Cantina can afford to do this without alienating its customers as most of its business is from foot traffic, and only 20% of its revenue is driven by delivery.
“We definitely want to be an option for someone that’s going to get delivery anyway,” Sanchez said.
Sanchez said the Cantina’s commission fees are reduced below the typical minimum 15% because of competition and negotiations. A spokesperson for DoorDash said the company does not comment on the specific terms of any partnership deal but confirmed several factors are considered when negotiating partnership terms, of which commission rates are just one component.
Sanchez said, through these reduced fees, Cosmic Cantina manages to make the most of its revenue per dish whether it’s sold in-house or through a delivery service.
“This is really the only way that we can make a profit from delivery,” Sanchez said in writing. “If we had to pay the fees, our profits would be minimum.”
DoorDash dominates the online food delivery market, despite earning 1.05 out of 5 stars from the Better Business Bureau in customer reviews. Bloomberg Second Measure reported in February the company accounted for 67% of the food delivery industry.
“It’s hard to compete with DoorDash, you know, even as bad as they are, people are just creatures of habit,” Williams said. “They’re just used to it. Even if the service is bad, they’re just used to it, and they just accept it.”
A DoorDash spokesperson said the company is working to improve the speed of its resolutions. Further, the company is working to incentivize high-quality deliveries.
Zwelli’s, a Durham eatery that recently moved to Brightleaf Square, stopped offering delivery entirely due to a “quality issue of food upon delivery,” Zweli’s Inc. Director of Operations Karina Stong said in writing.
Multiple customers in Durham and Chapel Hill shared headaches they’ve had with corporate deliverers — missing sides, receiving someone else’s order, marginal refunds — but the most overwhelming complaint was the lack of customer service infrastructure.
After a costly experience and negative customer service reviews, Alpaca stopped working with DoorDash, even though it temporarily cost the restaurant a bit of delivery income, Williams said.
Sanchez said Cosmic Cantina’s biggest delivery problem is the cloudy translation between the kitchen and the customer.
“We can’t control, for example, how long our drivers are gonna take,” Sanchez said. “Sometimes we are overwhelmed with orders, and now, we have too many orders on busy game days. You know, obviously, we’re on our own schedule, and the delivery drivers are on their own.”
Long thinks part of the reason that DoorDash is struggling with customer service is its algorithmic pricing, the practice by which DoorDash pays its drivers. Orders to be delivered are pinged to its many drivers, who sit in idle cars, waiting for a nearby pickup.
“It’s trying to pay as little as possible to a driver based on what that driver will accept,” Long said. “It’s like instantaneous supply and demand.”
In comparison, Takeout Central has a more standardized pay system. Brian Rosenzweig, a former Takeout Central driver and a reporter at The Herald-Times, said he made about $100 during a typical three-hour dinner shift, which would only cost him about $10 in gas.
DoorDash has never reported an annual net profit. However, the company’s core restaurant business “is profitable,” according to the DoorDash spokesperson. The company’s losses stem from expenses such as an advertising campaign that the company said reached 94% of the U.S. population and continued investments in non-restaurant expansion.
DoorDash and its competitors might be propping themselves up on near constant promotions as they continue to invest in a rapidly growing market, Long said.
Erica Boey, a senior at UNC-Chapel Hill, said that, unless Uber Eats has a promotion greater than 40% off, she doesn’t bother ordering takeout. The service is easy and convenient, but the expenses can rack up quickly without a discount, she said.
One Charlotte-based reporter shared a screenshot of a $13.99 pizza from Marco’s turning into a $28.59 meal after taxes, fees and a $4 tip.
Delivery services, though costly to both customer and kitchen, continue to ride a pandemic-baked high that may never come down.
“There’s certainly a demand for delivery. There’s customers there,” Sanchez said. “So, more than anything, that’s why we do it.”
Ira Wilder is a senior from Henderson, North Carolina. He majors in journalism and media, and public policy. He is a Morehead-Cain scholar and a reporting intern for NBC News Group.
