Dinette in East Liberty may specialize in gourmet pizza. But don’t try to find the menu on a delivery app such as DoorDash, Postmates, Grubhub or Uber Eats.
Unlike an increasing number of casual restaurant owners in Pittsburgh, Sonja Finn is fending off food-delivery companies because they undercut the very reason she opened Dinette.
“I enjoy cooking and hosting and entertaining, and I hired people who enjoy that, too,” she said. “Delivery apps are taking that away from us.”
Dinette is going against the grain: Third-party food delivery services are on the rise in Pittsburgh, with more people than ever ordering burgers, General Tso’s chicken, wings, waffle fries and even a single milkshake delivered to their door.
The market is becoming increasingly crowded, with DoorDash the latest to join the fray last April, boasting service for 1,500 regional restaurants. The company follows market leader Grubhub, which came into the area in 2011 and caters to 500 area restaurants, a spokesperson said, along with Postmates, OrderUp and Lawrenceville-based Happy Bellies. The fast-growing delivery arm of Uber, Uber Eats, entered the market two years ago this month; today it employs “thousands of drivers” and works with more than 500 restaurants in the Pittsburgh region, a spokesperson said.
Third-party delivery is changing the local restaurant landscape, especially for the city’s casual dining spots, but not always for the better.
The New York-based NPD Group reported that sales are up 20 percent from 2012, with growth coming from online orders, which were more than 50 percent of all delivery last year. It also found that the share of online orders by third-party delivery services is more than double among full-service restaurants than at quick-service or fast-casual spots. According to Morgan Stanley estimates, food delivery will consume 40 percent of total restaurant sales by 2020.
Convenience comes at a cost. Delivery companies like DoorDash may tack on an upcharge — like $1.35 onto the $4.15 price of a venti latte at Starbucks — plus a $3 to $6 delivery fee. Then there’s a tip for the driver (but no tip for the restaurant or server). Uber Eats imposes surge pricing at peak times: On a Monday night order through Uber Eats, for example, an $18 food total increased to $24 before tip.
But higher prices don’t just hit the consumer: They affect the restaurant, too, with companies like Uber Eats and Grubhub charging restaurants between 25 and 30 percent of the cost of each order. Some restaurants’ delivery menus list prices that are higher per dish than dining in to cover these extra charges.
Yet the upward trajectory of delivery continues. Pittsburghers spend more per month on food delivery — an average of $199 — than any other city besides Seattle, according to Vitagene, a California-based research company that recently conducted a study on the cost of eating out versus cooking at home to show that consumers could spend less and eat healthier if they cooked at home. That adds up to nearly $2,400 per year, putting Pittsburgh among the top 10 U.S. cities that spend the highest percentage of income on delivery, according to the study.
One reason it’s so high may be the large number here of colleges and universities, whose students are heavy users of these app-based delivery services. For others, it’s just so easy — especially for busy families.
“We get delivery one to three times a week,” said Bri Hanlon of Fox Chapel, who said that delivery is convenient since her husband often works late and they have a 14-month-old son.
On delivery nights, they toggle between Grubhub and DoorDash, “because they feature our favorite restaurants,” she said, with Social at Bakery Square in Larimer, Burgatory near Aspinwall and Smiling Banana Leaf in Highland Park among them. It wasn’t the uptick in delivery services that have increased the frequency of her family’s online ordering: It was when DoorDash entered the market last year, adding Smiling Banana Leaf to its Thai restaurant roster. “We really love that place,” she said.
The changing landscape
On a recent snowy weeknight about 5:45 p.m., BRGR — a specialty burger spot located across Centre Avenue from Dinette — had only five tables occupied. Yet the staff was busy. They were cooking and packaging nearly 10 takeout orders for customers using online delivery apps.
It hadn’t yet hit peak delivery time, like the one a week earlier during inclement weather, when BRGR saw few dine-in customers, yet brought in several thousand dollars in sales.
As more casual restaurants embrace multiple delivery options, it’s becoming common to see half-empty dining rooms around town with a staff that’s trying to keep up as they fold in delivery orders. Multiple restaurateurs said that app delivery can account for as much as 40 percent of sales weekdays and 25 percent on weekends.
Chef and partner at BRGR Brian Pekarcik said he’s worried that delivery is affecting diners’ experience in house. But he doesn’t want to hire another staffer per shift because it would cut into his profits. As a result, especially when the restaurant gets busy, it can tax the staff.
That’s true over on the North Side at Legends, too. “I feel bad for the hostess,” said Dan Bartow, chef-owner of Legends. He cites one particular Friday six months ago when “we were getting crushed.” His employees were furiously packing up takeout orders — the restaurant both ties and tapes packages because they’ve had some delivery debacles — in addition to keeping track of orders in the dining room.
The restaurant was slammed that night because one of the delivery companies was promoting his restaurant. While he appreciated the attention, it doubled the workload for staff on what already was a busy night. For this extra work, “There’s no gratuity,” he said. When there’s tipping involved it goes to the driver.
Still, Mr. Bartow said, “I feel obligated to provide [the delivery services],” to keep up with the times. And he’s had to adjust prices to deal with that 30 percent Grubhub charge. For example, antipasto is $12.95 on the delivery menu, while it’s $10.95 on the dine-in menu.
Not every restaurant is lamenting the surge in delivery services. Some are relieved to have another revenue stream in an era of increased restaurant competition, along with customers’ fickle attention as they gravitate toward what’s new.
Restaurant metrics
But how much restaurants make on delivery can vary widely according to the delivery service and the night. The 25 percent to 30 percent fee that Grubhub and Uber Eats charge restaurants cuts into already slim profit margins.
In restaurant metrics, 25 percent to 28 percent of restaurant expenses go to food costs; labor accounts for about 30 percent;, fixed costs like rent and dry goods clock in at around 30 percent; which leaves 10 percent to 12 percent net, Mr. Pekarcik said.
Yes, delivery takes 25 to 30 percent, “but keep in mind that labor is already in the house cooking for house guests,” he said.
In theory, delivery should help restaurants make more money. But, combined with the fees, he said, “there are also the cost of bags, containers, condiments and utensils” that cut into the net.
Delivery is also lowering check averages, and in turn, affecting casual restaurants’ profits and sales. Restaurants that have gone all-in when it comes to delivery aren’t selling as many starters or desserts, for example. So while dine-in plus delivery customers translate to more sales, how much the restaurant brings in per customer has gone down from, say, two years ago before Door Dash and Uber Eats entered the market.
The effect of delivery on restaurants’ bottom line is why groups like Richard DeShantz restaurants are treading carefully. Pork & Beans Downtown, said partner Tolga Sevdik, is the only restaurant among its six standalones that embraces multiple delivery options. But as a restaurant group that’s known for its bar programs, “delivery accounts for a very small percentage” of sales, at under 10 percent.
The restaurant group is testing the market with Tako, Downtown, which just recently signed on with Grubhub. Tako created a special menu with dishes that travel better than those on the dine-in menu — and for signing on, the restaurant got a break from having to pay the full 25 percent to 30 percent restaurant fees.
Aside from Grubhub offering Tako a good deal, Mr. Sevdik said, “it’s good marketing for us.”
When it comes to third-party delivery or any sort of takeout, Ms. Finn at Dinette does not see herself changing her mind.
Third-party food delivery “is not user-friendly for restaurants,” she said. Of the companies, “they’ve asked us to give what they’ve promised their customers,” she said. “And we can’t make that happen because we haven’t set up the model.”
So while delivery might pull in a few more dollars profit, “we can’t control the food, the quality, and the time it takes to get there,” she said. “So when things don’t go well, it reflects badly on the restaurateur.”
She also believes that delivery apps have created a “parasitic relationship” with restaurants.
“They’re feeding off me to make their money, but I created the main thing,” she said.
“We are using these apps because we have these phones,” she said. “But what actually makes life pleasurable is interacting with other people.”
