San Francisco
“It’s kind of crazy,” Chen said.
Since partnering with the San Francisco food delivery startup DoorDash 11 months ago, Mendocino Farms has seen such an enormous surge in sales that at times the restaurant has had to turn off the DoorDash app to keep up with delivery orders. Chen estimates that three of Mendocino’s restaurants alone have turned away at least $500,000 in DoorDash orders since last April because they couldn’t keep up with the demand.
Not wanting to leave any more money on the table, Chen and her business partner and husband, Mario Del Pero, have been quick to act. They’ve allocated more counter space at their existing restaurants for DoorDash pickups; they’re negotiating with landlords for more 10-minute parking spots to accommodate delivery drivers; and they’re knocking through a wall at one location to create a pickup window just for DoorDash orders. “We’ve had to go back to every store and reorganize them,” Del Pero said. “You can’t make them any bigger, but you can allocate more space to it.”
The advent of apps such as DoorDash, UberEats, Caviar, GrubHub and Yelp’s Eat24 — where users can browse a menu, place an order and have it delivered without communicating directly with a restaurant — has quickly given anyone with a smartphone (and the funds to cover the delivery surcharge) on-demand access to a wider swath of dining options.
For many restaurants in big cities like Los Angeles, app-enabled food delivery services have gone from being an afterthought to a core part of their business, with restaurateurs realizing that smartphone apps don’t cause a drop-off in dine-in customers, but instead help grow a new customer base.
Mendocino Farms, for example, saw sales increase 2 percent to 3 percent shortly after it began its partnership with DoorDash. They have continued to climb, resulting in an additional $2.5 million in revenue since the partnership began. In an industry in which margins are already razor thin, squeezing more revenue from existing restaurants without adding significant overhead is a major win. DoorDash deliveries now account for 6 percent of Mendocino’s business.
Other restaurants have noted similar upticks in sales. Burger chain Bareburger last year partnered with five delivery apps, including GrubHub and Caviar, for its West Coast flagship outside Los Angeles. In the three months after the partnerships, it saw an 8 percent to 9 percent increase in sales. In the last two months, that figure has increased to 13 percent.
Bay Area Greek restaurant Nick the Greek partnered with DoorDash two years ago and has since seen a 15 percent growth in sales.
“When it comes to restaurant economics, it just makes sense that delivery is becoming an increasingly large portion of everyone’s business,” said Allen Wong, president of LA Chinese restaurant Fat Dragon and a partner at the Sticky Rice Group. Fat Dragon primarily uses Caviar for deliveries.
The delivery business is growing so fast, it’s giving restaurants cause to rethink their expansion strategies too. “If you were to set up a new restaurant in West LA, you’d have to go through the process of signing a new lease, spend half a million dollars on the restaurant and it’d take a year before it opens. That’s pretty challenging for a lot of brands,” Wong said.
Thanks to delivery apps, restaurants can serve more customers with far lower costs by opening “ghost” kitchens without any dining areas.
“We can rent a 10-by-10 kitchen on a monthly basis and jump right in without having to spend a year setting up a restaurant,” said Wong, whose Sticky Rice Group is looking to expand to ghost kitchens that can accommodate more orders than its restaurants can handle. “That’s very enticing.”