Mali Maeder
Who’s really paying for your pizza delivery? These upstarts want to make online ordering a better deal for restaurants

Last mile

In October, I wrote about the plight of New York City’s small restaurateurs, who are using various means (both on and off the record) to wrest their customers back from the online ordering behemoth, Seamless.

Since that story was published, a new front has emerged in the small restaurant revolution—one that promises to deliver food to the masses without depriving restaurants of profit. Urban dwellers, meet the take-out vanguard.

Missed our first story on Seamless? Read it here.

Shake Saleem has a plan to save New York City’s restaurants and, along the way, save New York City itself. His theory: Restaurants are sinking under the weight of commissions they pay to Seamless, Grubhub and Yelp’s Eat24, which dominate the food order and delivery business, and their demise would spell disaster. “If all these restaurants, one by one, are gone, our city becomes one big mall. This is truly where New York is headed,” he says.

To head off that grim scenario, Saleem, whose given first name is Sheheryar, has come up with Recourse, hoping to turn the city’s restaurant order and delivery business on its head.

But relying on New Yorkers to pitch in and save the city’s restaurants may be a bit too optimistic, says independent industry consultant Bob Goldin. “People talk about wanting to help small business more than actually helping them,” he says. “I think they’ll figure if I’m ordering from them in the first place, I’m helping them.”

The grip of Seamless and Grubhub on the market is tight, Goldin says, and customers gravitate to them out of habit or in response to aggressive marketing. Of Recourse, he says: “It’s too much homework, too much mental gyrations for the consumer.”

On the other hand, Recourse is a “great deal” for restaurants who handle their own deliveries, says Bonnie Riggs, restaurant industry analyst for The NPD Group. “It’s unique. It’s competitive,” she says.

People talk about wanting to help small business more than actually helping them.

But Recourse holds no edge over Seamless, since it too leaves restaurants with the headache and cost of actual deliveries, which they often contract out to a third party, says Riggs. “If they have a third-party provider, the restaurant is paying mightily for that, and so is the consumer.”

Nonetheless, customers are willing to pay for delivery. In a nationwide study Riggs conducted, customers told her a flat fee of $5 per order was reasonable and that they preferred a set sum over a percentage.

Vin et Fleurs, like many of New York City’s 24,000 restaurants, uses Seamless, Grubhub and to a lesser extent, DoorDash. But Seamless charges her a 27 percent commission per order, and DoorDash, like similar delivery services, allows for no control over what condition the food is in when it arrives at a customer’s door, Lane says. But deliveries are only a single-digit percentage of the business at the small restaurant, which serves mostly locals and tourists who stay at two nearby boutique hotels. And Lane is not all that anxious to increase deliveries (which are typically handled by a dishwasher).

“I would like people to leave their houses and put their clickers down and come into my restaurant and sit down and have a glass of wine and enjoy the experience,” she says. “We have a really beautiful space, and we make money on wine, not food,” she adds.

But restaurant deliveries are a fact of life in New York City, which Goldin calls “the take-out and delivery capital of the world.”

Saleem should know. He was the first employee Chicago-based Grubhub hired to launch in New York City in 2008. He went on to help launch GrubHub in Los Angeles. His Pakistani-born parents ran a grocery store in northern New Jersey, where he says he learned firsthand what the arrival of large box stores and chains can do to small businesses.

He incubated a luxury food delivery system with an investor for two years before parting ways and recently worked as a waiter at the upscale Eleven Madison Park restaurant for inside experience.

Recourse will target the best restaurants in each Manhattan neighborhood, especially those that are integral to the city’s history, identity and culture, Saleem says. “I want this brand to be as New York as New York can be,” he says.

With rising rents and tough competition, restaurants can have a short life span in New York. Last year, 53 restaurants closed and 80 closed the year before that, according to Zagat, which follows the industry and compiles restaurant ratings and customer reviews.

“If we deplete the restaurant industry, we’re depleting our culture. We’re depleting our people,” says Saleem, whose voice grows more animated as he expounds on the peril facing New York City.  “Our neighborhoods are going to be lifeless.”

Taking a not dissimilar approach, the ordering platform called Slice has assembled some 6,000 local pizzerias nationwide in an effort to compete with giants Domino’s, Pizza Hut and Grubhub, says its founder Ilir Sela.

To do so, Slice aims to bring pizzerias into the digital age, where they stand to make a lot more money. A customer ordering digitally orders more food, Sela’s research has found. A typical pizza order by telephone is $15 to $18 but digitally reaches about $30, he says.

Slice hopes to harness the collective power of its partnered restaurants on the buying side as well, organizing bulk purchases of items they all need such as pizza boxes and menus, Sela says. Its approach is looking at pizzerias across the country as “in business for themselves, not by themselves,” he says.

To participate, restaurants pay a flat $2 per-order rate. Customers order via Slicelife.com or the Slice app. Slice takes it from there, sending the orders to the pizzerias, processing payments, and handling customer service and marketing.

Passing the delivery cost directly to the customer, as Recourse plans, might well backfire, says Sela, who started New York-based Slice six years ago. “It will drive the consumer to order from the platforms that don’t charge the customer,” he says.

Head over to @techcrunch and check out the video walkthrough of our app! #Slice #Pizza

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Recourse’s 77-cent fee per order may rise to $1. It will charge restaurants a $99 joining fee that will rise to $200 if they want a tablet to handle orders. Slice plans to launch with 40 restaurants, reaching 200 in the first quarter of 2017, and topping out at 500, beginning in Manhattan and later reaching into the city boroughs of Brooklyn and Queens.

Discounts to lure customers will be covered by the participating restaurants. Other enticements might include introduction of exclusive Recourse-only menu items. “This is the feeling that I want everyone who orders through Recourse to know–you’re making a difference here,” Saleem says.

To him, the industry is the only one that provides jobs to newly arrived immigrants, unskilled laborers, students, artists and untold numbers of people who go on to do something entirely different with their lives.

“It all started at a restaurant,” he says.