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The Postmates Problem: Why Some Restaurants Are Forced to Fight the Delivery App

The independent delivery service is ruffling feathers among restaurateurs.

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In this iPhone era of ultra convenience, restaurant delivery is in the midst of a renaissance. Taco BellDunkin' Donuts, and many more are getting in the game with their own drivers, and round every bend, it seems like there's another service roaming the streets: GrubHub, Seamless, Bite Squad, Eat 24. Of these food couriers, the four-year-old San Francisco-based Postmates has particularly won press for snagging Starbucks and Chipotle among its many accounts, and just last month it reported another $80 million in funding, bringing its total valuation to nearly half a billion dollars.

Postmates is unique among delivery services in that in the 70+ U.S. cities where it operates, it will actually shuttle nearly anything (not just food) from a store or restaurant to a customer's door. In 2011, Postmates co-founder and CEO Bastian Lehmann told CBNC he was inspired by the question, "'What if you can use the city as a warehouse?'... A huge part of the mission was to give retailers in cities better weapons to fight against Amazon [shipping goods across the country], because you know what? They've been bullied around."

Sounds like a noble start, except for one caveat: Postmates doesn't ask for permission from the restaurants whose food it delivers. "Bottom line, we don't want to have delivery [at certain restaurants], and if we did, we'd do it ourselves," says Seattle restaurant owner David Meinert of Lost Lake Cafe, 5 Point Cafe, and Big Mario's. "We don't like the way Postmates represents our business, and don't trust their staff is properly handling our food." Instead of asking permission, Postmates links consumers with restaurant listings through the local search and discovery service app Foursquare, takes orders, then calls them into restaurants and sends its couriers to pick them up. Restaurants are understandably wary of that arrangement, and some in Seattle and San Francisco are starting to speak out — including to lawyers.

Postmates's "Featured" restaurants page in Seattle.

Here's how Postmates works: "Every merchant starts their journey on the platform as anonymous," says Anand Dass, Postmates's director of business development. "It's initially a conversation between a customer who wants food from that restaurant and a Postmate who has the resources and the time to go pick it up on behalf of the customer." Within the Foursquare-linked system, a consumer has the power to either search for a certain restaurant or input an address into the system. Once an address is in the system, according to Dass, it's in. Therefore, as soon as restaurants are on the app, it's not in Postmates's power to remove them — and even if it was, Dass says, it could be added back in by a customer.

Postmates then asks restaurants that have been popular on the app if they want to partner up in its Merchant Program. When a restaurant joins that program, either after being approached by Postmates or inquiring about partnership, Postmates works with business owners to tweak their presence on the app and features those menus under a city's "Featured" landing page. Postmates helps restaurants choose the menu items that travel the best and helps establish the way couriers pick up and deliver orders. Postmates then cuts the partner's delivery cost to $4.99 (otherwise it ranges from $7 to $20) and takes a commission off sales (10 to 20 percent, depending on various factors).

These other brands don’t work with restaurants without a contract, and Postmates does a huge portion of its business that way.

This Merchant Program is in line with how Eat 24, BiteSquad, and GrubHub and all its brands (including Seamless) work: They first approach restaurants to build a partnership, discuss how to market them most effectively, then take a commission off sales for their services. The difference is that other brands don't work with restaurants without a contract, and Postmates does a huge portion of its business that way.

Meinert says he first noticed Postmates last fall, when a customer complained about getting a delivery order "that was wrong and cold" from Lost Lake. "I was concerned, because we choose not to do delivery [there], as some of our food items don't hold up well in a container over time," Meinert says. "We also purposefully don't do take-out orders at certain times we are busy. Our business is centered around sit down, full-service [dining] and the bar, and we don't want the kitchen to get overwhelmed with to-go orders."

As a result, Lost Lake called Postmates and asked that it be removed from the app. It was, and Meinert thought the issue was over. This May, however, he received another complaint about a delivery order and realized that Lost Lake was back on Postmates. He called the company again, but this time was told (very nicely, he stresses) that it was impossible to take the restaurant off because of its Foursquare-linked design. In Seattle, Niko's Gyros, Tango, and Local 360 have also been unhappy with the service and asked to come off of Postmates, unsuccessfully.

A menu for a Featured restaurant.

For Meinert, it's not just that Postmates is delivering without his permission; it's that he feels they are misrepresenting his brand. Meinert says that the menus Postmates has posted for all his restaurants are incorrect, with either wrong prices or with items the restaurant no longer offers. When Meinert asked where Postmates acquired the menus, the merchant support representative told him "from a public source" online.

Dass confirmed that, and elaborated that Postmates tries to pull menus from restaurant websites whenever it can. When there are problems with the menus, he invites all merchants to call Postmates's merchant support line and says the company tries to correct issues as quickly as possible. Dass is clear that this hotline is available to all merchants on its app — whether or not they are partners through the Merchants Program. And yet, "we're a start-up, we're a small company, and we're growing as fast as we can, so we have to prioritize our resources," Dass says. "Operationally we start prioritizing [partners] ahead of anyone else on the platform." (Meinert says that although he spoke to Postmates almost two months ago, his menus are still incorrect.)

Chipotle is now a partner through Postmates's Merchant Program, but the relationship hasn't always been so amicable. In 2011, Chipotle sent the then-new company a cease-and-desist letter; Postmates ignored it and kept delivering the chain's food. "Over time that they warmed up to the idea — first of all, that there is a very persistent start-up run by a very stubborn, persistent German founder and an equally stubborn American co-founder," Lehmann told CBNC in April. "And, on top of that, we showed them that we can deliver the quality that they want."

In joining Postmates's Merchant Program, Chipotle obviously came around (the company was unavailable for comment as to why), but not all eager to partner up. At San Francisco's Delarosa, a restaurant representative said that while he doesn't oppose restaurant delivery as a concept, he wishes there was a way to opt-out of Postmates' system, since the restaurant is set up for in-store dining. According to the rep, the substantial increase in the number of to-go orders Delarosa has received recently through Postmates can crowd the door, make the wait seem longer than it is, and put extra stress on the restaurant's host.

Another challenge for Delarosa and Travis Rosenthal of Seattle's Tango is that when to-go orders are called in through Postmates, the restaurant loses the opportunity to coach guests where needed, such as pointing out that a certain pizza doesn't come with cheese on it, and explaining portion sizes and style of service (e.g. items meant to be shared family style).

"I personally took a to-go order on the phone from Postmates," Rosenthal says. "The person ordering... was surprised at a temperature question for a steak and went with medium. I told him I would not fulfill the order since we had told [Postmates] previously to take us off their site. He said that was not his department but he would tell his superiors. I then hung up the phone. Thirty minutes later a person came off the street and placed the same to-go order... Anyway, whoever placed the order got their food over an hour after they ordered it, probably received a different quantity of product then they were expecting, and had a steak that was probably cooked to the wrong temperature." When orders do arrive that are wrong, cold, soggy, or have another problem, guest complaints are often called into the restaurant or registered on Yelp or elsewhere online.

The menu for Lost Lake, which Meinert says is inaccurate.

A final concern, particularly with restaurateurs in Seattle, is Postmates's fleet of delivery drivers. At Meinert's Big Mario's Pizza, the restaurant hires its own drivers and tips out the back-of-house restaurant staff. Postmates drivers, obviously, keep everything. "The staff hates them," Meinert says. Furthermore, when Washington restaurateurs hire delivery drivers, they are required to carry food handler's permits (that is not law in California). Postmates and, as it turns out, most delivery companies, do not require its drivers to carry permits, although drivers are not permitted to open the food. GrubHub, Seamless, and BiteSquad all have partnerships with the restaurants before they start delivering, however, and claim their delivery drivers all understand the policy.

"Postmates takes away our quality control, and potentially endangers our customers."

"What if someone gets food poisoning?" Meinert asks. "Who's responsible? Postmates takes away our quality control, and potentially endangers our customers." (Meinert's general manager at Lost Lake tested out the system by ordering through Postmates one day. He alleges the food arrived in the back seat with a dog.) Postmates's terms on its website state that it is not liable if there is something wrong with the food delivered. According to David Steigman, health communications specialist for the FDA, "Postmates isn't a food establishment as defined in the food code, so it isn't under the FDA's jurisdiction."

Though Dass says he doesn't manage that side of Postmates's operation, he is not aware of a customer getting sick. He says if something did happen, Postmates would treat it on a case-by-case basis and "try to make the customer right in every fashion possible."

So where does all of this leave restaurateurs who want out of Postmates? Meinert says that Postmates couriers used to identify themselves when they called, but once he started refusing their orders, they now often don't mention Postmates. Meinert sniffs them out through a common credit card the company is using, and refuses to sell orders to representatives when they show the cards at pick up. This continues to be his strategy, but it's a lose-lose for both his restaurants (whose staff invest time and money in the food preparation), and the customers who never get their food. If the caller does mention Postmates, Meinert's staff takes the order but doesn't put it into their system, and when the drivers show up, they tell them they won't do business with them.

Meinert's latest step has been to hire attorney Kari Milone, who has concerns that "Postmates' unlawful use of [Meinert's] federally protected trademark and copyrighted materials creates a false sense of sponsorship, endorsement, and affiliation between our company and theirs," Milone says. "We intend to avail ourselves of every legal remedy and fortunately, federal trademark and copyright laws provide statutory remedies."

Postmates's promotions for Merchant Partners, as seen on Facebook. Photos: Facebook

Meinert has also sent letters to politicians urging them to craft legislation for statewide standards forbidding a third party to resell a restaurant's food without its consent. He has been in touch with the Washington Restaurant Association for support. They were not available for comment for this article, but in April, when Niko's Gyros first learned that Postmates was illegitimately delivering its food, WRA CEO Anthony Anton told Geekwire the situation was akin to "identity theft." "A restaurant's reputation is critical to their success," he said. "They have the right to choose when they partner with a company, particularly when they're using your brand to their advantage."

"We’re a pick-up service representing the customer; we’re not a delivery service representing the restaurant."

To Postmates' credit, the company is clear that its primary interest is not with restaurants. "We're a pick-up service representing the customer; we're not a delivery service representing the restaurant. There's a big difference," Dass says. Still, he confirms that Postmates drivers are trained to identify themselves when they call.

No doubt delivery is here to stay, but the question is, should restaurants have a choice if they do it through Postmates or not? Not as Postmates sees it. "If they don't want to do takeout, they should message that across their internet presence [as well as in-store], then the customers aren't going to search for it," Dass says. Unsurprisingly, he feels the better option is to "work with services like Postmates to curate the menu" with items that are prepared quickly and deliver well.

Postmates's quick success the last four years is impressive and certainly there are merchants who are thrilled to work with the company. But for those saying no, it seems ugly that there's no route to opt out. "My old menu and restaurant are still listed on Postmates," Rosenthal says. "I'm not sure what else to do at this point."