New York Restaurant: We Can Do Better Without Third-Party Delivery

Third-party food delivery services have gained popularity, but a few restaurants are beginning to push back against the services' high fees and slow payment policies, according to Businessweek. Now some restaurants are beginning to find that cutting out the delivery man makes financial sense.

Case in point: Brooklyn restaurant Luz, which decided to stop using delivery service Seamless because the service was taking 14 percent of the value of each order (Seamless takes that out of the restaurant's share and isn't paid separately for delivery by the customer) and owed the restaurant as much as $20,000 for orders delivered weeks before. Luz sent a letter to regular customers encouraging them to order from the restaurant's own website instead of through Seamless.

On the first Seamless-free Saturday night, the restaurant's owner, Pedro Munoz, said Luz took $669 worth of delivery orders, down about 16 percent from a typical Saturday night's deliveries through Seamless and GrubHub, another delivery service that is merging with Seamless. But instead of paying 14 percent for delivery commissions, Luz paid $16 for credit-card processing. That means the restaurant netted $653, slightly below the $680 it might have brought in with Seamless, but also spent less on food and labor because the take was from a smaller number of orders.

"Notice that we would be roughly taking the same net amount with less work and less product out the door," Munoz told Businessweek. "And we get the money in 48 hours instead of 40 days."

That result may not be typical, even for Luz. But it's another useful data point as both restaurants and retailers try to find the sweet spots where online and mobile ordering and same-day delivery intersect. While third-party delivery services simplify the process, the costs—and especially delays in paying the restaurants—may simply be too high to be practical.

And in the case of restaurants, competition isn't likely to improve the terms for retailers any time soon—at least not on its own. For example, the Seamless-GrubHub merger was a big enough concern for New York Attorney General Eric Schneiderman that he pushed the two delivery companies to an agreement that would allow restaurants to get out of the exclusive arrangements they signed with Seamless within 45 days. That agreement also requires Seamless and GrubHub to put an 18-month hold on any new agreements with restaurants.

For more:

- See this Businessweek story

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