For almost two decades, Jade Garden has been a go-to dim sum spot in Seattle’s Chinatown-International District. The restaurant is owned and operated by Eric Chan and his family, and it’s been open every single day for 17 years running, through the economic recessions and booms that have coursed through Seattle since the turn of the century.
So on March 16, when Gov. Jay Inslee shut down all restaurant dining rooms to curb the spread of the coronavirus, closing was never an option for the Chans.
“This restaurant is the lifeline of my entire family,” Chan said. “We count on this restaurant. We have to weather this.”
Some restaurants closed for the stay-home order. But the Chans, like numerous other restaurateurs, tried to get through the dining room shutdown by pivoting to takeout and delivery.
For many, like the Chans, the switch has involved two equally unpalatable scenarios: Assume the daunting task of in-house-delivery and commit to the corresponding financial investment, time commitment and logistics issues; or partner with one of the many third-party delivery apps around, but part with up to 30% of revenue per transaction. It’s such a big issue that even the city of Seattle has tried to step in; last month, Mayor Jenny Durkan’s office capped food delivery app commissions at 15%.
As we near the two-month mark of the dining room closure, a look at how some of these restaurants have fared offers a glimpse into the challenges many dining establishments are facing in a city that loves to eat out but has been asked to stay home. While some have eased into the transition, incorporating new technologies and repositioning staff to deliver food, the pesky-yet-tantalizing shift has proved to be a particularly trying venture for others.
Mark and Brian Canlis of the storied eponymous restaurant were perhaps the first Seattle restaurateurs to pivot to delivery, and they never even considered third-party apps as an option, Mark Canlis says.
“The whole point was to save jobs,” Mark Canlis says. “If I don’t use my team to do delivery, I’m just using my kitchen crew.”
Still, even for an iconic establishment such as Canlis, that shift wasn’t easy. Restaurants, even fine-dining ones, operate on such thin profit margins that moving to delivery adds costs regardless of whether you partner with third-party apps or deliver food yourself.
“We’re already a company bleeding cash,” Mark Canlis said. “To partner with a delivery service would have been prohibitively expensive.”
Instead, the Canlis brothers bought route-mapping software to optimize deliveries and worked with reservation and management system Tock to bring their dinner and community-supported agriculture boxes online.
It’s working, Canlis says, but “it’s not wildly profitable.”
Technology also helped Rainier Valley restaurant and food truck Buddha Bruddah transition smoothly to in-house delivery.
Owners Mark and Andrea Mizer pivoted more nimbly than most because their existing web hosting platform, BentoBox, also offered an online ordering system. This, coupled with their food truck staff’s experience with driving around the city for work, helped the Mizers get their in-house delivery system up-and-running within six days.
“We literally are surviving because we have our own deliveries,” Andrea Mizer said.
But many restaurants don’t have the technological wherewithal and staffing to do that. Jade Garden wanted to do self-delivery, but couldn’t afford to buy software to ease the transition.
Still, Chan tried self-delivery anyway. Business at Jade Garden had been slow even in the lead-up to the dining room shutdown — something Chan chalks up to “the whole stigma” of the novel coronavirus originating from China.
“I bit off more than I could chew,” Chan said. “My gas was crazy, I’m not familiar with certain areas, I only have two drivers. How many orders can you fulfill with two drivers?”
Jade Garden’s self-delivery stint lasted three weeks. Chan still does the occasional delivery on a case-by-case basis, but now customers can either pick up the restaurant’s dim sum or get it delivered via UberEats or DoorDash.
“Pick your poison,” Chan said. “Either you don’t take any orders and struggle, or you take orders and they take some of the sales.”
Delivery apps prosper
As restaurants flounder trying to navigate their new normal amid a pandemic, third-party delivery apps have prospered.
According to UberEats’ recently released first quarter report, the company’s orders rose 40% year-over-year, and its network of restaurant partners grew by 70%.
In an early May letter to shareholders, GrubHub touted “record new diner acquisitions,” with active diners up 24% compared to the first quarter of 2019. In March and April — which corresponds with the coronavirus’ spread through the U.S. — GrubHub added as many new restaurant partners as it did in the entire second half of 2019.
Through a spokesperson, DoorDash declined to share figures.
In techtown Seattle, the proliferation of delivery apps is no surprise. At Spice Waala on Capitol Hill, delivery orders fulfilled by third-party apps accounted for about 35% of business even before the coronavirus hit Seattle.
“We have a close, loyal follower base, and we see the same names every day, every week,” says Uttam Mukherjee, who co-owns Spice Waala with his wife, Aakanksha Sinha.
Now, that number is closer to 50%, and Mukherjee knows he needs the apps to stay in business.
Yet, a week into the dining room shutdown, Mukherjee made an impassioned plea on the popular Seattle Foodies Facebook group asking people to avoid using delivery apps if possible and opt for takeout instead.
“Shifting the business model of a restaurant towards more delivery drastically changes the economics of that restaurant, while takeout keeps it closer to what dine-in economics would be,” Mukherjee wrote in the post.
Rachel Antalek, who owns Byen Bakery in North Queen Anne, says she considered adding delivery before, but only pulled the trigger with UberEats and Postmates after the dining room shutdown.
Whether it’s UberEats, DoorDash, Caviar, GrubHub or Postmates, the apps generally work in similar ways. A restaurant signs up with an app to get access to an easy, already built ordering system. They benefit from the app’s marketing and get the ability to adjust pricing and delivery zones in real time, a loyal and wide-ranging customer base, in-your-pocket convenience and a stable of vetted delivery drivers. However, the price for these services is steep. Before Durkan’s emergency order capping fees at 15%, restaurateurs complained that many of these unregulated app-based services were charging up to 30% on commission for each transaction.
The apps can also present logistical challenges for restaurants. Ballard-based Porkchop & Co opened in April 2014 and partnered with Caviar that summer. However, the restaurant had already acquired a steady enough stream of loyal customers that Caviar only brought in “a marginal part of our business,” owner Paul Osher said.
“I know a lot of other restaurant owners were much more dependent on it for driving sales, but it’s always been an icing on the cake kind of thing,” Osher said.
In February, as the coronavirus was beginning to take hold in the U.S., Osher started worrying about a potential economic slowdown and added DoorDash as a delivery option. Now, he takes orders via phone, email and Instagram direct message, in addition to online orders from Caviar and DoorDash. Orders from the two apps account for about 30% of business, but managing them is time-consuming.
“A lot of our sales come in from 9-10 a.m., and when we’re trying to manage our limited inventory while making sure we’re not overselling on the apps, it can get a little hairy,” Osher said.
Who pays for what?
In the past couple of months, many apps introduced what they touted as coronavirus relief measures for restaurants.
DoorDash and Caviar waived commissions on pickup orders, and charge restaurants no commissions for 30 days on new customers. Similarly, UberEats has waived delivery fees, waived commissions on pickup orders, and reduced commissions on restaurants that use their own delivery people. According to a March 13 news release, GrubHub temporarily suspended “collection of up to $100 million in commission payments from impacted independent restaurants nationwide.”
Still, some of these things sound more generous than they are.
For instance, as Mukherjee pointed out in his March 22 Facebook post, UberEats waiving commissions on pickup orders doesn’t help him much because the majority of customers who order via UberEats want their food delivered.
Kevin Huang, DoorDash’s vice president of merchant strategy and operations, declined to address specifics on how many people opt to pick up and whether there’s been an increase in the number of restaurants using the service.
“Generally speaking, we’re just focused on helping,” Huang said.
Also, “no delivery fee” for the consumer does not mean no commission charged to the restaurant. According to UberEats spokesperson Stephanie Sedlak, commissions charged to restaurants are how these companies pay bills, everything from “running the marketplace and doing background checks” to marketing to customers, payment processing and dispatching technology.
“You think that’s just money that we’re pocketing, but it’s well known we’re not a profitable business,” Sedlak says.
To try to help, cities such as Seattle, San Francisco, Washington, D.C., and Jersey City have capped commissions charged by third-party apps. New York and Chicago are contemplating similar caps.
Seattle’s commissions cap is “absolutely huge,” Mukherjee says. “It’s the difference between ‘break even’ and ‘profitable’ for us.”
Still, he worries the cap might annoy the apps and compel them to pull out of Seattle. If that happens, “we would literally start losing thousands of dollars a week,” Mukherjee said.
That scenario seems unlikely. In the three weeks since the cap was introduced, DoorDash, Postmates, UberEats, Caviar and GrubHub continue to deliver in Seattle.
DoorDash’s Huang declined to comment on whether the company will stay in Seattle despite the commissions cap.
Sedlak confirmed last week that UberEats will not pull out of Seattle due to the cap on commissions. Instead, to recoup costs, Sedlak says UberEats is considering raising delivery costs and service fees that are paid by customers.
“Ultimately, that’s hurting the restaurants at the end of the day, and that’s also hurting the couriers,” Sedlak said.
Representatives for Caviar did not respond to requests for comment.
The other end of the curve
Ultimately, restaurants that have found most success with the takeout/delivery model have either had deeper pockets than their competitors, or more diversified means of reaching customers.
Pagliacci Pizza has been delivering pizza since 1993 and has now ramped up its delivery operations, but it’s always counted on a four-legged business plan: catering, dine-in, pickup and delivery.
“The dine-in and the catering business is gone,” said co-owner Matt Galvin. “So we’re trying to make up for all that lost business.”
To drive sales, they’re also trying new things. For instance, weekly “community giveaways”: With purchase of a pizza, Pagliacci includes a specialty food item from another local company — such as cookies from Hello Robin, cheese sticks from Beechers, or yogurt from Ellenos.
For many restaurants, the delivery experiment has underscored how delicately the whole ecosystem is balanced.
Jade Garden has tried and done everything you’re told to do to succeed as a restaurant. It’s open all the time, the family works 12-hour shifts, they attempted in-house delivery, have tried taking orders and delivering to a central pickup point, and have caved and partnered with third-party apps. Yet, even though they’re doing a decent amount of sales, they’re still only just barely surviving.
One unexpected cost — such as when vandals smashed the restaurant’s window shortly after the dining room shutdown — could tilt the balance against them.
Eric Chan says he “fell to the ground and cried” when he found out it would cost $2,000 to fix the shattered window. He decided to wrap the remaining windows in plywood. Yet, just like the patchwork delivery experiment, that’s only a temporary fix to a bigger problem.
Correction: Before the mayor’s office instituted a 15% cap on third-party app commissions, restaurants had to part with up to 30% of revenue per transaction. A previous version of this story’s opening incorrectly stated that restaurants part with up to 30% of profit per transaction if they partner with delivery apps.