A restaurant revived (but is it?) 

Goldbelly started a fund to "bring restaurants back to life." I have questions

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Goldbelly, a company that helps restaurants ship their food nationwide, announced a new fund this week to help revive beloved local restaurants. It’s called the “local legends fund,” and its goal, per the company, is to bring 100 local restaurants “back to life.” 

So far that’s included buying smokers for Jones Bar-B-Q in Arkansas after the restaurant was destroyed by fire, but also adding them to the Goldbelly platform, facilitating nationwide shipping of its pulled pork. Goldbelly brought Nashville’s Rotiers, which closed during the pandemic due to rising rent costs, “back online” with an ecommerce store for its burgers, shipping nationwide. And in Kansas City, Goldbelly is helping Gojo Steakhouse develop hibachi dinner kits for… you guessed it, nationwide shipping. 

We’ve seen this move from DoorDash, which launched a similar program in October. Local restaurants are encouraged to reopen for delivery (that’s the actual name of the program, too). It launched with Chicago’s Krazy Hog BBQ, helping the business open a delivery-only kitchen, and later announced a similar initiative in New York City

I’m grappling with my feelings about these revived businesses. On one hand, investments from these technology platforms inject sorely needed resources into beloved businesses. On the other, these technology platforms are receiving returns on their investment in the form of increased businesses on their platforms. As part of Goldbelly’s initiative, it’s inviting anyone to nominate a local business to be considered for the program. Gratuitous lead gen? Yes. Potentially doing good for beloved businesses forced to close? Also yes. It’s complicated, you see. 

A Goldbelly representative didn’t respond to my questions about the fund, including how much money it’s hoping to disburse and how restaurants receive the help — is it cash? Free Goldbelly inclusion? Also unclear, whether or not restaurants need to maintain a presence on Goldbelly to receive a grant, though it appears restaurants that Goldbelly has highlighted as grant recipients are on the platform. 

While these individual investments are still relatively small in scale, measured maybe in the hundreds, it’s a signal of where the business of independent restaurants may be headed. It is not that far fetched to imagine a future where a small restaurant business is forced to sign on a corporate underwriter like DoorDash who invests capital in the business and in turn becomes an indispensable part of that business’s operation. DoorDash has even tested this concept with Burma Bites, the Oakland, California delivery-forward restaurant it developed in partnership with beloved local indie, Burma Superstar, to much success. I don’t think there’s a loser in the Burma Bites equation, but DoorDash is definitely a winner.

It’s hard to fault a restaurant for aligning itself with one of these services when it could be their only lifeline — and I won’t. But I am concerned about the future of a so-called independent business that has tethered itself to a restaurant technology company with its own set of priorities.


Grubhub and DoorDash sue to stop the fee caps

Here’s some news that was totally predictable: Grubhub and DoorDash are suing the city of San Francisco over its permanent caps on commissions. Per coverage in the San Francisco Chronicle, the companies call it an “irrational law, driven by naked animosity and ill-conceived economic protectionism.”

Okay! 

San Francisco was the first in the nation to levy the permanent commissions cap but is likely not the last, and the legal challenge will likely set the stage for subsequent battles. Per the Chron, “The companies are seeking monetary damages and warn in the lawsuit that the limit might force them to cut down — or eliminate completely — their operations in San Francisco.” 

We have heard this threat before! 

Let’s look at some recent history: When California instituted Assembly Bill 5 (aka AB5), which was intended to target companies like DoorDash who relied on the gig economy, the same companies replied with a hundreds-of-millions-of-dollars campaign to pass legislation of their own. Ahead of the vote, Uber had threatened to cease its operations in the state. Proposition 22 passed in California, essentially enshrining gig work for companies like Uber, DoorDash, and Grubhub. Based on the way the law is written (by the companies it serves, who paid for it), it will be very, very challenging for the state to change — it needs a 7/8ths majority of state lawmakers to make any changes to the bill. 

The reason that companies dumped so much money into Prop 22 is because the existence of AB5 fundamentally challenged their business models. Even after the gig work-friendly proposition passed, companies have lost money. (Not as much as they would have lost if, say, it hadn’t passed, but still.) 

DoorDash said that fee caps have cost it $31 million in the first three months of this year. (The company will announce its second quarter results in a few weeks, surely an updated number will be a part of them.) Detractors of the permanent caps, including former Uber Eats boss Jason Droege, have said publicly that the caps may be well-intentioned but won’t work as intended. Instead, they argue, delivery companies should be able to operate in the free market. 

San Francisco’s mayor has indicated that a permanent cap on these companies — several of which are headquartered in the city, important to note — may not be the best way forward. The ordinance could be tweaked in the future to allow third-party delivery companies to charge more for things like marketing and preferred placement within the app. DoorDash has already adjusted pricing to accommodate such a move — its basic plan, which includes a limited delivery radius and no marketing support, costs restaurants a 15 percent commission. 

A San Francisco official said that the city will address the lawsuits in court. 


Bye, Seamless

In a call with investors last week, Just Eat Takeaway CEO Jitse Groen said Grubhub’s new parent company intends to sunset the Seamless brand

If you’ve lived or worked in New York in the last 20 years, you know Seamless. It launched in 1999, and later merged with Grubhub in 2013. At the time, the Wall Street Journal described the companies as “two nationwide startups used for ordering restaurant takeout by smartphone and computer.” They processed a combined 90,000 orders per day, and were responsible for $875 million in food sales in 2012. (This is, like, delivery ancient history but ironically was the same year I started my first restaurant technology newsletter *dinosaur emoji*) 

It’s both an understandable and curious choice for a company who maintains a slew of international brands including Grubhub and Seamless in the US and Menulog in Australia. While the last few years have been spent working on rapid footprint expansion across the US, Groen said that Grubhub and its new streamlined marketing (likely including more of those national ad campaigns we’ve seen in the last few weeks) will focus on cities where the company has a stronghold — New York and Grubhub’s hometown of Chicago included. 

Recent restaurant delivery acquisitions have largely maintained separate branding — think: Postmates and Uber Eats; DoorDash and Caviar. But the streamlining isn’t unprecedented; Grubhub eventually ditched branding from San Francisco-based Eat24, a third-party delivery company it acquired from Yelp in 2017.

Still, it’ll be a significant marketing expense for Just Eat Takeaway based on purely anecdotal evidence (just google “Seamless” and look at the coverage and where it’s coming from) and also Grubhub’s own admission that the New York City market has been crucial to its success. At times during the height of the pandemic, the company repeatedly called out its business in New York, which had been affected differently than its business in most other parts of the US. This marketing challenge comes as rival third-party delivery is chomping at the bit to increase market share in every US market — Uber and DoorDash absolutely have their eyes on New York expansion as Grubhub kills what I’d argue is the most recognizable delivery brand in the city. 


New numbers

by Danielle Hyams

New habits are here to stay. People love ordering food. Despite 78 percent of diners reporting that they’re ready to eat in restaurants again, delivery and takeout ordering has held steady. In fact, a recent survey of 1,000 people by Bentobox found that roughly 15 percent of diners aged 25-49 order takeout or delivery four or more times per week. One might think this bodes exceptionally well for delivery services like UberEats, but nearly 1 in 4 respondents said that they found third party delivery apps to be overrated. 

Staff might be hard to come by, but that’s not stopping new restaurants from opening. Yelp today released its quarterly economic average report and its findings continue to be optimistic: Nearly 20,000 new restaurants and food businesses opened during April, May, and June. And in virtual brand news, 670 new delivery services businesses, like ghost kitchens, opened in the quarter. A Yelp representative did not have data readily available about how many of those openings were multiple locations of the same brand. 


Kristen, elsewhere: 

I’ve written a lot about ghost kitchens and virtual brands, because they are a huge trend commanding a ton of investment and attention in the restaurant space. There are many paths to short-term success, but I wouldn’t bet against a hospitality insider with the connections to scale brands fast. My conversation with C3’s Sam Nazarian, on Insider ($)