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Why Some Restaurants Are Cutting Ties With Mobile Ordering Apps

Third-party services like UberEATS and GrubHub bring in more orders, but don't necessarily raise profit margins

Brenna Houck is a Cities Manager for the Eater network. She previously edited Eater Detroit and reported for Eater. You can follow her on the internet at @brennahouck.

As third-party food apps continue to consume each other in the fight for delivery domination, casual restaurants appear to be doing some streamlining of their own. Restaurants like Proposition Chicken and Presidio Pizza Company in San Francisco are pulling back from order, pay, and delivery apps, Reuters reports, because they often increase costs and complicate restaurant operations.

While the restaurant owners admit that food delivery platforms like GrubHub, UberEATS, and DoorDash increase the number of orders their businesses receive, most also say that these apps increase operational headaches behind the scenes and don’t have a significant effect on profit margins. Each app requires its own hardware and software to communicate with the restaurant, causing employees to juggle multiple orders from iPads, phones, and in-store lines. Proposition Chicken co-owner Maxwell Cohen tells Reuters that not only do the apps require him to hire more staff to execute the orders, but that commission fees eat up between 10 and 30 percent of each order.

Mighty Quinn’s, a fast-casual chain of barbecue restaurants in New York City, does a bustling delivery business with the help of multiple third-party apps. Owner Micha Magid says that it made sense initially to sign on with “turnkey” services like curated on-demand food app Caviar. “It was an easy decision to join up with those guys,” Magid says, “because it was just order generation and then they were taking care of the delivery side as well.” Unlike a lot of fast-casual restaurants, Mighty Quinn’s locations have a separate service counter specifically dedicated to to-go and delivery orders.

Magid says that unlike other restaurants, Mighty Quinn’s never found using a multitude of apps to be a hinderance to operations. Despite this, the growing chain is in the process of developing its own app — launching this fall — and slimming (though not completely eliminating) down its presence on other platforms.

And while many apps developed by restaurant brands might focus on loyalty programs or pre-ordering to skip lines (like Starbucks and Shake Shack’s), Mighty Quinn’s new mobile app is different: On the consumer side, in addition to allowing consumers to order ahead and pay, it will also have delivery capabilities.

Controlling the consumer ordering platform will also help Mighty Quinn’s improve profit margins. “With the economics, it’s an easy equation to figure out,” Magid says. “If you’re generating orders organically through your own platform, you obviously save the commission fees that a third-party guy is charging. So the simple math of that obviously makes having your own ordering capabilities more attractive.”

For those restaurants that don’t have the bandwidth to develop their own mobile ordering platforms, delivery apps are making efforts to improve mobile ordering technology. Point-of-sale distributor NCR Corp is now developing tech in partnership with GrubHub and DoorDash that filters orders directly into a restaurant’s computer, and Square Inc.’s Caviar now offers a service that simplifies the ordering process by communicating directly with a restaurant’s kitchen.

One thing is for certain: As long as consumers continue demanding faster service and delivery, mobile ordering won’t be going by the wayside anytime soon.

Food Delivery Creates Tech Headache for Some U.S. Restaurants [Reuters]
All Delivery Coverage [E]