The coronavirus pandemic has hammered a number of industries, and restaurants are certainly struggling immensely. Between closures earlier in the year and limited operating capacity at present, many food establishments are having a hard time bringing in the revenue they need to survive. And if things don't improve, another 10,000 restaurants could close before 2020 ends.
In fact, the one thing that may be saving restaurants these days is delivery service -- an option many customers prefer to takeout because it's not only convenient, but it also allows them to truly minimize contact with others. And in this regard, third-party delivery services like
GrubHub (NYSE: GRUB) and DoorDash (NYSE: DASH) have been a lifeline for some restaurants -- namely, those without the capacity to accommodate a large uptick in delivery orders themselves. But are these delivery apps a boon to restaurants, or are they only making an ongoing crisis worse?
Delivery apps: A mixed bag
On the one hand, delivery services help restaurants reach a wider customer base. But there's one glaring problem: They're extremely expensive. Some of these platforms charge restaurants an astounding 30% per order. And given that restaurants are already operating with slim profit margins, that's a blow many can't afford.
Since the pandemic began, restaurants have grown increasingly reliant on delivery to stay in business. As of July, there was a 27% increase in restaurants using third-party delivery services compared to mid-March. But the convenience of these services comes at a cost many restaurants can't afford right now as they struggle to stay in business until restrictions ease and they're able to welcome customers at full capacity.
To be fair, some delivery services have offered new restaurant clients reduced fees during the pandemic. But many still can't afford to pay any sort of fee in light of the ongoing crisis.
Getting by without third-party partnerships
Restaurants eager to conserve cash may have options that don't involve signing up to work with third-party delivery services. For one thing, eateries can look at bringing on additional staff for deliveries, which may prove more cost-effective if order volume really is up and concentrated to a few key neighborhoods. Another option is to explore local delivery services. Some cities have their own networks in place that charge far less than big names in the field like DoorDash do.
Finally, restaurants can meet customers in the middle by offering curbside order pickup. A big reason many people favor delivery these days is to avoid going into a restaurant, period. Allowing customers to pull up, pop open their trunks, and collect their food could be a good solution to facilitating orders while avoiding hefty fees.
Right now, restaurants need all the revenue they can bring in to survive. The fear among real estate investors is that too many close, commercial landlords will have a whopping vacancy crisis on their hands. Furthermore, small business closures are just plain bad for communities, leading to job loss and, in time, decreased property values.
The Millionacres bottom line
A lot of people stand to lose out if restaurants don't manage to survive the pandemic. While working with delivery services may be a smart move for some food establishments, a large number may be better off seeking money-saving alternatives at a time like this.