Why this Seattle deli ditched third-party delivery services: ‘I don’t want them anywhere near our food’

The Schmaltzys crew, pre-social distancing. Co-owner Jonny Silverberg is on the far left. (Facebook Photo / Schmaltzys Delicatessen)

Jonny Silverberg, co-owner of Seattles Schmaltzys Delicatessen, remembers his breaking point. It was on a Wednesday, not long ago. A customer called saying that the items she ordered were not in her delivery. She demanded a refund.

I looked up the order, the 43-year-old recalled. And it turned out it was through GrubHub and the driver made the wrong order for her. And thats the order they picked up.

But when Silverberg explained this to the customer, she got angry and said she didnt care. She still demanded a refund. I said, I cant do that for you,’ he said. I told her, You paid GrubHub.’

It was at that point, Silverberg said, hed had enough. The third-party delivery services might be necessary for some restaurants and fast-food franchises especially during the pandemic but they were proving to be a nightmare for Schmaltzys.

So for the final month of deliveries with every third-party service, Schmaltzys included this letter with every order:

This letter went out in every single Schmaltzys delivery order.

Many of you are shocked to learn that we arent affiliated with these companies, thats how good their false advertising is, the letter read.

Complaints about third-party delivery services have echoed across the bar and restaurant industry. Companies such as DoorDash, GrubHub, Postmates, and UberEats dont bear any liability when they screw up an order. Late food, cold food, or wrong food and its the restaurants that get the unhappy customers and bad reviews.

Moreover, many third-party delivery services scrape the internet for restaurant menus and post them on their own websites without first asking managers or owners. If the delivery service gets anything wrong such as posting an old menu or outdated prices its the restaurant that carries the liability. Sometimes its even worse than that.

We got a bad review from a delivery driver who thought the food was taking too long, Silverberg said. I am done with it. For us, I dont trust it. If that person doesnt work for me, I dont want them anywhere near our food.

But since the arrival of COVID-19, its been hard to keep them away. Delivery food business more than doubled during the pandemic as governments approved stay-at-home mandates, as remote work and school expanded, and as in-restaurant dining disappeared in places.

Lately, however, the worm appears to be turning. A recent study questioned the the long-run sustainability of the pandemic-fueled growth in delivery sales if in-person dining recovers when pandemic restrictions lift.

Uber Eats saw revenue climb 28% sequentially in the first quarter and the number of delivery merchants grew 76% year-over-year. But coming out of the pandemic, we want to go to restaurants more than Ive ever seen, noted CNBCs Jim Cramer. People dont want delivery if theres a restaurant.

Meanwhile, DoorDash stock has been called overvalued and GrubHub is looking at a modified driver compensation model. And California recently banned these services from posting menus without consent.

A GrubHub spokesperson confirmed that Schmaltzys has been removed from its marketplace. Were developing tools that make it easier for restaurants to claim their menus or request to be removed from our platform, a spokesperson said. If a restaurant would not like to be included on Grubhub, they can reach out to us at restaurants@grubhub.com.

According to company statistics, there are more than 300,000 restaurants on GrubHub in more than 4,000 U.S. cities. GrubHubs first quarter revenue spiked 52% to $551 million.

Silverberg said he understands why some restaurants play along his place did too, initially. In 2019, he and his wife Jessica had just parlayed a successful run with their blue food truck Napkin Friends into an actual Ballard deli, Schmaltzys.

A few months later, the pandemic hit. Everyone in the bar and restaurant industry needed to find some way to stay afloat.

If it works for you, stick with it, he said. But for him, the headaches proved too much. It took months for him to convince GrubHub and other delivery services to remove his menu from their websites.

This is the way it works with GrubHub: An online customer finds the food they want from the place they select and order through the third-party website. If the company is unaffiliated with GrubHub a process the industry calls non-partnered a driver will call in the order themselves, show up, and pay for it with a company credit card.

Likely, the delivery service has billed the online customer already. The business model targets the margin between what the driver paid and the additional add-on fee for the delivery. With a partnered restaurant, the split is negotiated with the restaurant in advance and there is a formal arrangement about service quality.

That delivery fee also has been the subject of some consternation. Both Seattle and the state of Washington capped those fees during the pandemic.

Cactus, another Seattle restaurant, encourages customers to order delivery directly from its website to avoid those fees that it says increases prices by 20% compared to take-out or in-store rates.

Eating Cactus at home is a great option during this pandemic, the restaurant says on its website. But the reality of getting food delivered to your home presents additional costs that arent built into our regular dine-in or pick-up pricing structures.

With the non-partnered places such as Schmaltzys, the item sells to the driver at full price but there is no recourse for bad delivery service. GrubHub and other third-party delivery services has conceded the use of non-partnered restaurant menus is a problem. But in the low-margin, highly competitive world of online food delivery, if one does it they all follow suit.

The online customer, however, only thinks they are dealing with the restaurant, a business model Silverberg calls deceptive.

Working with delivery services increased his volume and stress but not his profit, he said. Bringing in more money doesnt mean Im making more money.

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