Upper Valley restaurants speak up, look to join forces in fight against delivery apps

  • Due to COVID-19 restrictions, Cindy Peck waits outdoors to meet someone for a delivery of two cakes for a 65th birthday party at Dartmouth-Hitchcock Medical Center in Lebanon, N.H., on Oct. 14, 2020. Working at Lou's Restaurant for over a year, Peck has been making deliveries since June. (Valley News - Geoff Hansen) Copyright Valley News. May not be reprinted or used online without permission. Send requests to permission@vnews.com. Valley News photographs — Geoff Hansen

  • Driving through Hanover, N.H., Cindy Peck makes a delivery to Lebanon on Oct. 14, 2020. On a busy day, Peck said she has made up to 30 trips for Lou's Restaurant. Customers pay a $4.99 flat delivery fee for the service to surrounding towns but Peck said she's been as far afield as Hartland for an extra charge. (Valley News - Geoff Hansen) Copyright Valley News. May not be reprinted or used online without permission. Send requests to permission@vnews.com. Valley News — Geoff Hansen

  • Due to a staffing shortage, Jarett Berke, the owner of Lou's Restaurant in Hanover, N.H., steps in to help prepare napkins and silverware on Oct. 14, 2020. Berke is waging a war against the delivery apps because they siphon off 30% of the customer's tab and he says that crushes independent small restaurants like his own. (Valley News - Geoff Hansen) Copyright Valley News. May not be reprinted or used online without permission. Send requests to permission@vnews.com.

  • Cindy Peck calls a customer to confirm a delivery time at Lou's Restaurant in Hanover, N.H., on Oct. 14, 2020. The restaurant started offering deliveries after table service was shut down in March due to the COVID-19 pandemic. (Valley News - Geoff Hansen) Copyright Valley News. May not be reprinted or used online without permission. Send requests to permission@vnews.com. Geoff Hansen

Valley News Business Writer
Published: 10/17/2020 9:32:23 PM
Modified: 10/17/2020 9:32:19 PM

When Marsha Wykes’ 15-year-old son said after dinner last week that he was still hungry, he did what a lot of teenagers do these days to satisfy an appetite. He downloaded a food delivery service app, DoorDash, and ordered a cheeseburger and Brussels sprouts — because his mom insisted he have a vegetable — from Salt hill Pub in Lebanon.

After 90 minutes passed without any sign of a cheeseburger and sprouts, they drove to Salt hill themselves. They found the order sitting on the counter getting cold and restaurant staff wondering why no one had come to claim it.

“I said we ordered it on DoorDash, and they told me they did not work with DoorDash, that some lady had called in the order but never showed up,” Wykes said.

The coronavirus pandemic has led to a surge in takeout and delivery, in many ways aided by a proliferation of apps used to order from nearby eateries — Grubhub, Snackpass, Seamless, Uber Eats and DoorDash are all available in Lebanon, Hanover and Claremont — which have extended the instant-side-hustle rideshare premise of Uber and Lyft to door-to-door food deliveries over the last few years. But a novel premise doesn’t guarantee success in practice, and mounting frustrations are leading Upper Valley restaurants to not just speak out but fight back.

Like the Wykeses’ forsaken cheeseburger, Salt hill had experienced a flurry of ghost orders in recent days, according to Josh Tuohy, whose family owns the restaurant.

“This week we started seeing DoorDash drivers picking up takeout orders from our pubs. Just days after I informed them that we were not entering into a relationship,” Tuohy explained via email.

“The issue for us was folks who’d ordered our takeout via DoorDash weren’t getting the orders and were being told by the DoorDash app that they couldn’t find any (drivers). End result being guests who did not receive their orders from us or received them after too long of a wait,” he said.

The delivery apps, which often list the menus of restaurants for delivery even when they have declined to be included on the platform, argue that they provide a helpful service to diners.

“We’re proud of the role DoorDash plays in helping restaurants connect with new customers and generate additional revenue, particularly during these tough times, and we’re eager to demonstrate the value of our platform and variety of options we provide to support our merchant partners,” Taylor Bennett, a spokesperson for DoorDash, said in an email that did not respond specifically to the snafus at Salt hill.

Some restaurateurs aren’t quite as effusive in their opinion of DoorDash and other delivery platforms; they argue the apps present an existential threat to local restaurants, just as Amazon did as it wiped out countless local retail stores.

“These companies are absolutely destroying independent restaurants,” said Jarett Berke, who grew up in the restaurant business in New York and who bought Hanover South Main Street landmark Lou’s Restaurant & Bakery two years ago. “They’re killing us.”

Berke, a Tuck School of Business graduate, said delivery apps often take up to 30% of the delivery tab’s revenue, “so that a hamburger that cost $10 means the restaurant now gets $7.”

Given that restaurants typically operate with low profit margins, especially in small towns and rural communities where there is a ceiling on what they can charge, they can hardly afford to hand over nearly one-third of a customer’s tab to an outside party.

“They say you make it up in volume by selling more meals,” Berke said of the sales pitch he’s heard numerous times from apps like Grubhub wooing his business. “But that doesn’t really happen.”

Particularly galling to Berke is that, even after he’s refused to sign a contract, some of apps nonetheless include his menu on their platform. Customers, unless they look closely enough — which is difficult on the small screen of a smartphone — at the disclaimer that the listed restaurant is not officially on the app’s platform, are unaware of what is happening behind the scenes.

In the case of a non-participating restaurant, when a customer places a delivery order on the app, instead of that order going directly in the restaurant’s point of sale system, the order is instead routed to a driver, who calls it in to the restaurant like any customer placing the order, according to Hanover and Lebanon restaurant operators.

“They’re not making any money on it,” Berke said of the apps’ “workaround” for restaurants that are not on their platform. “But they don’t care. They are doing this to gain market share, to show other restaurants to join and say, ‘Look at these orders the app gets for you.’ ”

That’s what happened to Wykes and her son’s cheeseburger from Salt hill — the order was called in to the restaurant by the DoorDash driver, who then never showed up.

Restaurants tend not to challenge the practice since they are not losing money on the orders — if they are in fact paid for and picked up — and they can’t tell whether someone calling in an order is an actual customer or an app’s driver.

But Berke said when he saw one app “copied” his menu and logo, he told them to stop or he would sue.

“They said, ‘Oh, OK. We’ll turn it off.’ But it took me calling them,” Berke said.

“This is a key time for the apps,” Berke said. “They see the pandemic as a way to grow their business.”

But Berke, a graduate of the United States Naval Academy who served in the Marine Corps for more than a decade, is not afraid to go on the attack in a war against the apps.

His idea: to organize an Upper Valley delivery service that would be cooperatively run by area restaurants — and possibly joined by other locally owned retail businesses — that would be app-based and work similarly to a Grubhub or DoorDash.

He approached Vital Communities and the Upper Valley Business Alliance with the idea, and the parties have been discussing how it might work.

“It’s still in research stage. There are several considerations before we can get something launched,” said Tracy Hutchins, executive director of the UVBA.

She praised the idea. However, “like most things (it) takes money and someone to spearhead, which is what we are trying to find. Unfortunately, I don’t see this as happening quickly for those reasons — it will be more of a long-term strategy,” she said.

Berke said a big bonus of the plan would be keeping money in the Upper Valley community.

“We can do this on our own,” he said. “When we do this on our own, it’s way cheaper for the restaurant. Thirty percent of our revenue wouldn’t be skimmed off the top and going to Silicon Valley.”

There are steep challenges in getting enough restaurants and businesses aboard in a cooperative-like delivery service, Berke acknowledged, not the least if which is figuring out how the organization would be structured and operated. And then there would be the issue of competing restaurants not elbowing each other.

“Boloco probably wouldn’t like Lou’s to put a burrito on the menu,” Berke speculated.

But with the decline of outdoor dining as winter approaches and customers wary of eating indoors as COVID-19 enters a potential second wave, Berke said delivery will be a critical factor in restaurants’ ability to survive.

And as Boloco owner John Pepper said, in the world of big fish versus small fish, the former usually ends up eating the latter.

Pepper said via email that Boloco, which has a Hanover branch, “begrudgingly” uses Grubhub and “a little less so” Snackpass. And while he recognizes “the convenience factor” the apps enable with ordering and delivery, there will be reckoning for small local restaurants.

“I think if you fast-forward 10 years, the independent restaurants will be significantly reduced and instead controlled by what are essentially data companies,” Pepper predicted. “They own the customer relationships these days. ... In order to access people who were once loyal customers, restaurants will eventually need to pay third parties, which will have the effect of favoring well-capitalized chains.”

Wykes, however, has her own solution to the restaurant delivery problem. She noted that she and her son live “only five minutes away from Salt hill.”

“Next time we won’t be so lazy,” she said.

Besides, her son will be 16 in a matter of weeks.

“Then he can go get his own cheeseburger.”

Contact John Lippman at jlippman@vnews.com.

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