Hartford Business Journal

14 Hartford Business Journal • June 29, 2020 • www.HartfordBusiness.com By Sean Teehan steehan@hartfordbusiness.com C onnecticut restaurants have been forced to make major changes in recent months amid the coronavirus pandemic, but one issue still haunting many eateries is whether they should offer delivery services, and if so, what's the best way to do it. Since Gov. Ned Lamont's ban on in-person food service was imple- mented in mid-March, many restau- rants have adopted online ordering services, but delivery has been a big- ger challenge, one that's been eating at local restaurants for years. The advent of mobile apps like Uber Eats and DoorDash has made deliv- ery services more widely available to small restaurants, but their use comes with high fees — as much as a 30% commission — making them imprac- tical for some. Other restaurants have installed their own in-house online ordering and delivery systems, but they too can be costly and come with their own challenges. It's a predicament local restaurants must figure out quickly if they want to survive in the age of coronavi- rus, which has devastated the industry (as many as 30% of restau- rants could close permanently this year, according to one estimate) and forced more consumers to choose pick up and delivery. German online market research firm Statista projects online food delivery, which has grown 20% in the last five years, will garner $26.5 billion in revenue in 2020. "[Online ordering] was probably more of a trend a couple years ago, but it's become the norm now," said Scott Dolch, executive director of the Connecticut Restaurant Associa- tion. "Now it's about relevancy and how you stay at the top of [custom- ers'] minds through this pandemic." World of Beer in West Hartford is using delivery apps like Uber Eats and DoorDash, which are provid- ing important name recognition, but aren't a moneymaker, said Matt Sousa, a regional manager for the Florida-based restaurant and bar chain that has a West Hartford loca- tion in Blue Back Square. Even though World of Beer makes little to no money from third-party- enabled delivery orders — for which it pays a large commission — it could help generate new customers who visit the restaurant in-person in the future, Sousa said. "It's an exposure thing, especially in the times of COVID," Sousa said. "I'm running on every [third-party delivery] platform there is." World of Beer gets up to 20 delivery-app orders per day, Sousa said. The restaurant doesn't up- charge to make up for the near-zero profit it makes from those orders, because that would create the im- pression that World of Beer charges outrageous prices, Sousa said. But the restaurant does place flyers in delivery-order bags that encourage customers to dine in at the restau- rant or order takeout from World of Beer directly over the phone. "If you're working on slim margins, there's nothing to be made after that," Sousa said. "I don't think the consumer knows the full extent of it." Dolch said many of his members have expressed concerns about the fees delivery apps charge and he's encouraged app-delivery companies to be more transparent about com- missions, and work out agreements so that all parties can make a profit. "If our restaurants don't survive, your business doesn't survive," Dolch said of the delivery-app industry. "Help- ing them survive this pandemic is key." App makers respond to crisis In response to the pandemic — which forced Connecticut restaurants to stop all in-person dining from mid-March to May 20, when they were allowed to open for outdoor dining — some larger app companies have made adjustments to their pay struc- ture, and offered to increase their promotion of restaurants. DoorDash didn't charge indepen- dently owned restaurants commission from mid-March until the end of April, and charged half of its usual 20% com- mission for all restaurants until the end of May, according to the San Francisco- based company. It also earmarked $20 million for merchant marketing programs, the company said. Uber Eats, which charges a 30% commission, appears to have offered more modest perks. It didn't charge customers a delivery fee when the pandemic shutdowns began, and is giving restaurants the option to be paid daily rather than weekly. But the apps' financial shortcom- ings aren't the only pitfall, said Phil Barnett, who co-owns Wood-n-Tap Bar & Grill, a Connecticut casual dining chain with nine locations. When a res- taurant is dealing with a third-party delivery service, it doesn't control how Food to Doorstep As more people order takeout, CT restaurants wrestle with making food delivery profitable Food delivery facts 60% of U.S. consumers order delivery or takeout once a week. 31% say they use third-party delivery services at least twice a week. 34% of consumers spend at least $50 per order when ordering food online. 70% of consumers say they'd rather order directly from a restaurant than via a third-party app. Source: Upserve Matt Sousa, regional manager of World of Beer in West Hartford, said his restaurant uses food-delivery apps to build name recognition, but it's not a profitable service. World of Beer in West Hartford receives up to 20 orders per day through third-party apps. HBJ PHOTO | STEVE LASCHEVER HBJ PHOTO | STEVE LASCHEVER

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