A growing number of restaurants have moved to circumvent fees by establishing direct delivery, which provides valuable customer data. For example, New York-based brand Bareburger said it now owns more than 50 percent of digital orders, up from 14 percent in 2018 and 34 percent in 2019. Others are just getting started—Panda Express announced that it will roll out direct delivery to 2,000 locations by the end of July.
Dragontail Systems CEO Ido Levanon says consumers would rather order from a local restaurant directly as opposed to a third party. The pandemic—which pushed numerous restaurants to add delivery—is accelerating the process.
“When the delivery becomes everything, you now start thinking as a restaurant owner, maybe I need to start taking the delivery business more seriously and start taking ownership over it,” Levanon says. “So I should have my own website, and now with the technology, it’s so much easier.”
Restaurants controlling their digital ordering means avoiding high fees, which in turn hurts the profitability of third-party companies.
In order to combat this loss in revenue, Alamgir says the best thing for delivery brands to do is be more transparent with customer data.
“They all have a deal that they have set up internally—we will not share customer data,” Alamgir says. “They all are friends when it comes to that agreement. So that’s the only thing holding them back. If one partner decides to go ahead and be a little more honest with their customers, I think we’ll see a company that will rise. It could be Uber Eats, it could be either of them, but they’re not showing any sign of being restaurant-friendly.”
With Uber and Postmates merging, another significant consolidation in the U.S. food delivery market is unlikely. Any additional merger would result in two companies controlling substantially all of the share. It’s reportedly a major reason why the Uber/Grubhub deal fell through, although Grubhub CEO Matt Maloney told CNBC it was because Just Eat Takeaway’s $7.3 billion deal was “dramatically better.”
Uber/Grubhub and DoorDash would’ve owned roughly 90 percent, which drew the ire of several members of Congress. A group of Democratic senators sent a letter to Assistant Attorney General Makan Delrahim and Federal Trade Commission Chairman Joseph Simons urging them to monitor negotiations and initiate an investigation if an agreement was reached.
Khosrowshahi said he doesn’t expect another big merger in the U.S., saying there’s enough room for three players to be profitable in food delivery.
“We like our position,” he said. “We’re never satisfied, but we think that this Postmates deal gets us stronger in the U.S. I think it brings a terrific brand, a really strong management team, and the opportunity to increase efficiencies. And we think that it puts us in a very strong position going forward in what is our largest market.”