Food delivery services Grubhub and DoorDash made headlines last week when the city of Chicago sued them for deceptive and harmful business practices. But for one Chathamite, the litigation only confirms what he’s been saying for years.
In two lawsuits filed Friday, Chicago alleged Grubhub and DoorDash capitalized on restaurants’ vulnerabilities during the pandemic to mark up prices in violation of the city’s emergency cap on food delivery commissions.
“As we stared down a global pandemic that shuttered businesses and drove people indoors, the defendants’ meal delivery service apps became a primary way for people to feed themselves and their families, as well as support local restaurants,” Chicago Mayor Lori Lightfoot said in a news release, first reported by The Chicago Tribune. “It is deeply concerning and unfortunate that these companies broke the law during these incredibly difficult times, using unfair and deceptive tactics to take advantage of restaurants and consumers who were struggling to stay afloat.”
The lawsuit also claims that both delivery services advertised partnerships with non-partner restaurants and misled customers with “deceptively low delivery fees upfront that increased up to sixfold at the end of the transaction,” the Tribune said. The city contends Grubhub charged 25% higher for some menu items, and DoorDash 58% higher.
The allegations paint a sordid picture of unethical, big-business behavior, which comes as no surprise to North Chatham resident Wes Garrison.
“What these companies do is really devastating,” he told me. “They come in with just tons of money and undercut local competition and they’re dishonest — listing all these restaurants that they don’t actually have — and then they don’t even serve their customers well.”
Garrison is co-founder and CEO of Takeout Central (www.takeoutcentral.com), a Chapel Hill-based food delivery service with partner restaurants across the state. The company started in 1996 as Tarheel Takeout, and served mostly UNC students. Back then, third-party meal delivery services were few and far between. The company took orders over the phone and its driver network coordinated via walkie talkies.
“It was the first of this concept in this area,” Garrison said, “but not nationwide. I think the first was in Austin in around 1987.”
Three decades later, though, almost none of those pioneering food-delivery companies still exist.
“We’re one of the last older ones still in operation in the country,” Garrison said. “We’re kind of getting wiped out.”
Some delivery services dawdled as modern technology overtook them, and their collective customer bases dwindled. But Takeout has kept pace, introducing a convenient app with a smart aesthetic. The user experience is natural (I tested it out) and the company’s drivers are responsive (my food arrived within 45 minutes).
Technology isn’t the issue for Garrison, a computer scientist by trade. It’s “venture-backed Silicon Valley delivery companies.”
“Their goal,” he said of the big competitors such as DoorDash and Grubhub, “is clearly to gain as much market share as possible and put everybody else out of business. Then they can raise prices and all of a sudden they’ve won.”
Garrison — along with his fellow co-founder, COO and brother-in-law Charles Douthitt — employs 27 full-time staff and about 170 drivers from Asheville to Wilmington. The company has served Pittsboro for four years and their available partners include such local favorites as Carolina Brewery, Breakaway Cafe and O’YA Cantina.
With the pandemic’s advent, and people stuck at home, Garrison thought Takeout Central might see its coffers replenish.
“But in some markets we actually continue to do worse,” he said. “We’re doing a lot fewer orders than we used to do. In some markets, we’re doing maybe a third to 40% of what we used to do. And in some other places I’m doing so few orders I can barely staff for it.”
The problem is visibility. DoorDash went public last year and promptly raised billions of dollars. Local companies such as Takeout can’t compete with that kind of advertising fund. With most search engine queries for food delivery, Takeout Central might not appear until the second page of results — and let’s face it, who clicks to the second page of results on Google?
“But DoorDash is everywhere,” Garrison said. “If you’re looking for a specific restaurant, you’re more likely to find DoorDash. If you see their Google My Business Profile, there’s a DoorDash link there and there’s a DoorDash ad there, and Google won’t even sell us that ad. I’ve tried.”
It’s a maddening situation for Garrison.
“We’ve got great restaurant partners; I think we got some of the best local places,” he said. “We’ve got some pretty great drivers, although we’re losing some because we’re not busy enough. But the missing piece is we just can’t reach customers. And we’re not really more expensive than these big guys, although they can afford to do a lot more coupons ... But the key will be, how do we reach people and let them know there’s a local option they can support?”
So far, he hasn’t come up with an answer. With a flat $3 delivery fee and 15% service charge, Takeout Central’s pricing challenges the competition, but would-be customers don’t know it exists.
Garrison isn’t despondent, though. Nor is he convinced the “big guys” can outlast him. DoorDash has been the most financially successful of the major services in recent years, but still the company has never turned a profit, according to The Wall Street Journal. Eventually, prices will have to go up, and that’s when Garrison intends to retake his market share.
“I’m still generally pretty positive, despite all the negative things I’m saying,” he said, laughing. “And I think that if we find a way to get the word out there for people to know we’re a local company, that we do a good job, and if they give us a shot, then we don’t have to win. We just need to survive and get back our small portion of the pie.”
Reporter D. Lars Dolder can be reached at dldolder@chathamnr.com and on Twitter @dldolder.