Food fight: the war between local restaurants and delivery giants

The sudden surge in popularity for delivery companies like Grubhub and Seamless has acted as a death sentence for some local New York businesses. (Chase Manze)

First, there was the resizing. I was too young to think anything of it. I must have been no older than seven when my family’s favorite local restaurant, then called ‘Al Dente’, cut their floor space in half. The homey, Italian eatery went from a comfortable, open expanse to two small rooms, no bigger than an EC suite. Nevertheless, it seemed neighborhood diners still filled the tables, creating lively chatter that fills the dimly lit memories of my childhood.  

A couple years passed by, and then began another change: the remodeling. The original restaurant was exactly as you would imagine a traditional, family-style establishment full of fresh pasta and oregano. All too quickly, however, half of the already small space was transformed into a large bar, leaving only seven or eight tables left for loyal customers. The menu items changed and the name we loved so much, ‘Al Dente’, was abruptly replaced by ‘Pretto’. We still frequented the restaurant, but the idolic establishment of my early memories was gone.

I was old enough to understand that ‘Al Dente’ (now ‘Pretto’) was in financial crisis. The owners knew my family well, well enough to continue to make us dishes from their old menu and warn us of the future. They were an older Italian couple, perhaps in their 60s, and they had given everything to keep the restaurant afloat. Towards the end, they replaced members of the staff, acting as hostess and server.

Still, as more time passed, we saw fewer and fewer people. Sometimes it got so bad that it would only be us and a lonesome couple coming in on a Saturday evening, the supposedly busiest time of the week. It turns out that most of their business at that point came from delivery. It was a sad reality for my family to face, but we were just glad they were able to survive.

Flash forward a couple more years, I was looking into the local news and found a short and concise article disclosing that ‘Pretto’ was out of business and had already sold their space to a French-style cafe chain. I was devastated. All those memories of celebratory dinners, friendly chats, and good food now seemed distant.

New York City is not an easy place to own a restaurant; that is a given. Small businesses like ‘Pretto,’ however, are having more trouble than ever surviving in the new age of technology. In a world where you can order food  at the tap of a button, more and more restaurants find that food deliveries account for most of their revenue, according to conversations with local restaurant owners. With rent skyrocketing every year, these places find it harder and harder to keep up, as the number of diners willing to eat-in decreases.

What many people do not know is that only so much money can be made from online orders. The vast majority of small businesses, instead of hiring their own delivery team, use third party companies such as UberEats and Postmates. The reason for this is mainly exposure. Throughout the United States, 86% of consumers use these services at least once a month and the numbers are increasing every day. Having reached 35 billion dollars in revenue in 2018, growth trends estimate annual earnings of 365 billion dollars by 2030. All in all, fewer people are going out to eat, and prefer to use food delivery service apps to satisfy their appetites.

Grubhub Inc., who merged with main competitor Seamless North America LLC in 2013, currently dominates New York City with 84.5% of the food delivery service market share. This year will be Seamless’ 20th anniversary, and there will be no end of special deals and offers.

Whether it be the coin competitor Seamless North America LLC in 2013, currently dominates New York City with 84.5% of the food delivery service market share.nvenience of not having to leave your home, not having to talk to anyone on the phone, or having your payment information saved, these apps undoubtedly make it easier for the consumer. It puts an unreasonable amount of strain, however, on local restaurants.

Grubhub, like similar companies, charges restaurants a base fee of around 15-20% on both the menu price and sales tax. It also subtracts a credit card processing fee off tips of 3.05% plus 30 cents per order. It seems fair enough until you understand that this only accounts for an appearance on their app. This base fee does not include any delivery service or sponsorship. Many restaurants that choose this option find that it is nearly impossible to find themselves in search results, often situated after 20 pages of results.

In order to have a more desirable position, restaurants often pay upwards of 30%, which is a huge sacrifice when you only take in a net-profit of about 6% per order. The price gets even steeper if you have the company actually deliver the food for you as well, adding on approximately another 10%.

To many, this may not seem unfair, as it is the restaurant’s decision whether or not to agree to these terms and continue to sign contracts with companies like Grubhub. While it is true that a restaurant could, in theory, reject such a lopsided partnership, small businesses find themselves crediting in-app delivery to upwards of 70% of their revenue. This makes leaving such partnerships practically a death sentence.

For many local restaurants, it has become a choice between signing away their business to food-giant apps or closing up shop. More and more restaurants like ‘Pretto’ cannot keep up with both rising rents and exuberant fees, and are forced to close down and leave room for wealthy commercial chains to move in.

One of the charms of New York City is the culture of small business. There is a certain comfort that comes with the care and familiarity of knowing your food comes from people within your community. There is a sense of solidarity and tradition tied to their service, and the neighborhood would not feel the same without them. In order to preserve the city we love, New Yorkers can better support local businesses by forgoing apps like Grubhub, UberEats, and Doordash, and either ordering directly from the restaurant, or better yet, eating out.

No one wants to say goodbye to their neighborhood favorites, and by helping out local restaurants, we can assure we won’t have to any time soon.