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This DoorDash hack used by local food delivery guys saves restaurants from hefty delivery fees. This is how it works.

This DoorDash hack used by local food delivery guys saves restaurants from hefty delivery fees.  This is how it works.

Relay delivery service

Relay delivery service

Relay is a delivery service in New York.Relay

  • Relay is an independent delivery fleet founded in New York City in 2014.

  • It uses DoorDash’s self-delivery service to get delivery orders routed through restaurants.

  • The DoorDash “hack” is gaining popularity among regional fleets, an industry executive says.

Editor’s note: This story was originally published in September

Relay, a go-to food delivery service for hundreds of independent restaurants in New York City, has operated in the Big Apple for nearly a decade — long before DoorDash and Uber Eats took charge of America’s billion-dollar food delivery space.

Most restaurants on Relay’s platform typically avoid DoorDash and Uber Eats, CEO Alex Blum said, because they don’t want to pay up to 30% in fees to use their services. Indie restaurants turn to Relay instead, as they charge them $6 per order on average. That fee can be passed on to customers to save money at restaurants.

Now, Relay is trying to save mom-and-pop restaurants even more money through a secret strategy that involves using self-delivery services offered by delivery apps like DoorDash and Grubhub. Self-delivery is intended to allow restaurants and chains such as Jimmy John’s or pizza shops with in-house delivery fleets to carry out orders on their own.

Relay suggests that restaurants on its platform turn on self-delivery services to send those orders directly to the company. Blum said the strategy allows restaurants to have the “best of both worlds.” Restaurants can increase sales because delivery marketplaces reach millions of customers. DoorDash, for example, is an industry leader serving 300 million households worldwide. Restaurants also save money because they don’t have to pay a higher delivery fee.

“I certainly think it’s an untold secret,” Blum said of the practice. “The way we look at this is we’ve just saved that merchant thousands of dollars — on average, like $40,000 a year per location.”

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Andrew Simmons, the president of the Restaurant Marketing Delivery Association, said Relay was not alone in implementing the strategy. Other local delivery companies are starting to use the tactic as a way for restaurants to save money from “unsustainable” third-party delivery fees.

“DoorDash self-delivery is a hack,” said Simmons, whose organization represents 550 local delivery operators in the United States.

Relay

Relay was founded in 2014 by Alex Blum.Relay

We empower restaurants to “act like a Jimmy John’s”

Blum, a former tech recruiter, founded Relay in New York City in 2014 to solve inefficiencies he observed in restaurant delivery.

The company’s algorithm is set up much like a relay race, where couriers pick up an order from a restaurant near their last delivery location. The system is similar to that of apps like Uber, which ping drivers to pick up a rider near where they just dropped off another customer.

“The efficiency is created because we will route a driver to pick up an order closest to the last drop off,” Blum said. “We eliminate the deadhead trip back to the restaurant.”

Restaurants with higher order volumes can also negotiate lower fees, Blum said.

And by implementing self-delivery tactics with apps like Grubhub and DoorDash, restaurants can save even more money, Blum said.

For example, restaurants that use Relay to fulfill an order generated on Grubhub only pay a marketplace fee to Grubhub. This charge typically ranges from 5 to 15% per order, Grubhub told Insider.

Relay customers can pass those delivery fees on to customers, Blum said. “There are huge savings that a restaurant owner can unlock by switching” to self-delivery, he said.

“The appetite on the grocery side for self-delivery is through the roof and growing exponentially” as more restaurants learn about the potential for savings, Blum added. Relay serves restaurants in New York, Philadelphia, Washington, DC, Miami and Chicago.

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“All we’re doing is giving local independent restaurants the opportunity to operate as a Jimmy John’s,” Blum said, referring to the chain’s independent fleet.

For their part, Grubhub, DoorDash and Uber Eats say restaurants are free to choose how they use self-delivery.

DoorDash, which launched self-delivery in 2020, said restaurants using the service can also take advantage of Flexible Fulfillment — the ability to delegate some orders to internal fleets and others to DoorDash delivery drivers on a case-by-case basis.

“Flexible Fulfillment Self-Delivery is comparable in cost to other providers, with the ability to pass delivery costs on to customers, when they utilize a robust network of Dashers for delivery,” said a DoorDash spokesperson.

Uber Eats, which launched self-delivery in 2018, said: “Self-delivery is intended for merchant partners who want to use their own delivery people.”

And a Grubhub spokesperson said it’s “up to the restaurant how they want to fulfill” self-delivery. The marketplace has offered self-delivery since its foundation in 2004.

“We exist to help restaurants get more orders online,” the company said. “We offer Grubhub’s delivery services to restaurants and will of course be their first choice, but self-delivery restaurants can choose how they want to fulfill their deliveries.”

Some indie fleets can’t make the math work

Alex Vasilkin, CEO of delivery software management platform Cartwheel, said fleets on his platform are starting to ask more questions about self-delivery options offered by third-party apps.

He said indie fleets like Relay’s saw an opportunity to “decouple” restaurants from last-mile delivery services while increasing revenue for their businesses.

However, some delivery companies have not been able to make the math work.

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Ron Flickinger, a partner at Colonel Delivery in Richmond, Kentucky, said Relay may be able to monetize self-delivery for restaurants and their businesses. But “I will tell you that here in Kentucky that’s not necessarily the case,” he said.

The main problem, he said, is DoorDash’s DashPass program, which offers members free deliveries and is used by more than 70% of DoorDash customers in Kentucky. Oberst Delivery restaurant partners using self-delivery cannot pass delivery fees on to DashPass customers.

Flickinger said if his restaurants opted out of DashPass, it would be a Catch-22 situation. Fewer orders are coming in and the commission fee on the DoorDash marketplace is increasing from 8% to 12%.

Blum agreed that DashPass complicated matters with self-delivery. But he still advises Relay’s restaurants to opt out of DashPass — a move that typically doesn’t result in lower order volume in his regions.

RMDA’s Simmons said some kinks to self-delivery needed to be worked out. But the “notch” is worth looking into if it can save restaurants from paying higher third-party delivery fees, he added.

“There are some inherent problems with that,” he said. “So kudos to the companies that can figure it out.”

Are you a delivery insider with insights to share? Do you have a tip? Contact this reporter by email at [email protected] or by voicemail at 714-875-6218.

Read the original article on Business Insider

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