The relationship between DoorDash (NYSE: DASH) and local food establishments has long been a complicated one. Though delivery apps like DoorDash helped many restaurants stay afloat during the pandemic, when many diners shifted to delivery orders over in-person meals, these apps are also notorious for charging hefty fees that seriously eat into restaurants' profits. And while DoorDash did recently overhaul its fees and introduce a new pricing model for food establishments, partnering with it is still an expensive prospect.
But DoorDash's latest move may end up hurting local bars and restaurants to a dangerous degree. And that's something that should be on real estate investors' radar.
Alcohol delivery could cause bar sales to slump
DoorDash recently announced that customers can now purchase alcohol directly through its app. On the one hand, that may seem like a positive thing for restaurants, as customers can now order cocktails and mixed drinks right to their door, leaving restaurants with bigger orders to fulfill.
That said, restaurants and bars may lose out on revenue from alcohol sales due to DoorDash's new offering. Many people who enjoy a good cocktail tend to start out ordering just one and then keep ordering drinks as the mood strikes. And sitting in a bar or restaurant in a social environment is likely to lead to a higher alcohol tab.
Those who opt to order alcohol through DoorDash, however, may be more likely to order a single drink and call it a day. And while that may be a good thing for consumers' livers, it's not great for restaurants and bars from a revenue standpoint.
Sluggish alcohol sales could lead to more closures
Many restaurants have already been forced to shutter permanently in the wake of the pandemic. That's left commercial landlords with widespread vacancies to deal with.
If more consumers begin to order alcohol through DoorDash rather than go out and drink it in person, restaurants and bars could lose out on the revenue they need to recover from the events of the past 19 months and stay afloat. The result? More closures.
Not only do restaurant and bar closures mean vacancies for landlords, but they can also drag down local property values. And they can make it tougher for residential landlords to lure in tenants. After all, it's one thing to boast of a building with seven restaurants and four bars within walking distance. If those numbers shrink by a third, it's a harder sell.
But restaurants could benefit for one big reason
Of course, DoorDash's latest offering could also end up helping restaurants and bars. Many diners don't live within walking distance of these establishments, so ordering drinks in person also means dealing with the hassle and expense of getting home safely. In situations where that's a deterrent to going out, consumers may instead order alcohol through DoorDash, thereby giving their business to restaurants that normally wouldn't get it.
But still, DoorDash's alcohol delivery option may not be the boon to restaurants and bars some might expect it to be. And that's something real estate investors should keep in the back of their minds as the partnership between delivery apps and dining establishments continues to evolve.