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Upper Valley restaurant owner says delivery apps bad for business

Published: Oct. 19, 2020 at 7:10 PM EDT
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HANOVER, NH (WCAX) - There is no doubt that the pandemic has taken its toll on restaurants, and it’s also forced the industry to rethink how it does business. But one independent restaurant owner in the Upper Valley says third-party delivery apps could be hurting restaurants in the long-term.

“If I let third-party apps take over my takeout and delivery, I would lose money on every order,” said Jarett Berke, owner Lou’s Restaurant & Bakery in Hanover.

Before the pandemic, the restaurant was not doing deliveries. That changed overnight. Now, about 60% of all orders are eaten off-site. But Berke has shied away from most delivery apps. “The national average for restaurants for profit margin is about 5% -- 3% to 5% -- so you can imagine, if I am only making 5% profit on every meal I sell and they are charging 30% of revenue,” Berke said.

The 30% fee varies depending on the app, but they mostly work the same. The consumer types in a location and a bunch of participating restaurants pop up. They place an order and the meal is delivered door-to-door. According to GrubHub’s website, one of several delivery apps, the experience provides great marketing and increases sales for businesses.

“Our mission since we were founded in 2004 has been to connect hungry diners with great, local restaurants. We send nearly 650,000 orders to restaurants a day, and restaurants have received almost $4 billion in sales from orders on Grubhub so far this year,” said a GrubHub spokesperson.

So what’s the problem? “The concern to me is that these big businesses are taking so much of a cut from small businesses like mine and the technology is out there to not let that happen,” Berke said.

He is working with other restaurants in town to make their own delivery app, a local platform with shared drivers.

“They are destinations,” said Tracy Hutchins, with the Upper Valley Business Alliance, an advocacy organization that is helping with the research. “It would be sort of on a co-op model. And we are talking about how we could do that. Where we could find the funding to do it. Who would manage it.”

“To me, the hardest point would be, how are you going to get people to know it’s there and utilize it,” said Chuck Maier,, whose family is relocating to the area from Louisiana. He says they use delivery apps during their travels. “For convenience sake, you don’t know the area, you are not sure what is good.”

Berke acknowledges that he needs to meet the consumer where they are ordering, which more and more is online. “And help us to survive, not only the pandemic, but what I consider to be a revolutionary change for the restaurant industry,” Berke said.

The owner of Lou’s says he is working on a prototype that could hit the market in the next couple of months. And while issues still surround the viability of the business model, he says when it comes to independent restaurants thinking long-term, something has to change.

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