This DoorDash hack used by local food-delivery couriers is saving restaurants big on delivery fees. Here's how it works.

Relay is a delivery service in New York.

Relay

• Relay is an indie delivery fleet that was founded in New York City in 2014.
• It's using DoorDash's self-delivery service to gain delivery orders funneled through restaurants. 
• The DoorDash "hack" is increasing in popularity among regional fleets, an industry leader says.

Editors 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 the billion-dollar US food-delivery space.

Most restaurants on Relay's platform typically shun 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 instead turn to Relay, as it charges them $6 an order on average. That fee can be passed on to customers to save restaurants money. 

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

Relay is suggesting restaurants on its platform turn on self-delivery services to funnel 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 the industry leader and serves 300 million households worldwide. Restaurants also save money because they don't have to pay a higher delivery fee.

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

Andrew Simmons, the president of the Restaurant Marketing Delivery Association, said Relay wasn't alone in deploying the strategy. Other local delivery companies are starting to use the tactic as a way for restaurants to save money from "untenable" third-party delivery fees.

"The DoorDash self-delivery is a hack," Simmons, whose organization represents 550 local delivery operators in the US, said. 

Relay was founded in 2014 by Alex Blum.

Relay

We give restaurants the ability to 'operate 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 ride-hailing 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 that deadhead trip back to the restaurant." 

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

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

Restaurants who use Relay to fulfill an order generated on Grubhub, for example, pay Grubhub a marketplace fee only. That cost typically ranges from 5 to 15% an order, Grubhub told Insider.

Relay customers can pass those delivery fees on to customers, Blum said. "There's huge savings that a restaurant owner can unlock by making that switch" to self-delivery, he said.

The "appetite on the merchant 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. 

"All we do is give local independent restaurants the ability to operate like 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 leverage Flexible Fulfillment – the option to delegate some orders to in-house fleets and others to DoorDash delivery drivers on a case by case basis.

"Self-Delivery with Flexible Fulfillment is comparable in cost to other providers, with the opportunity to pass the delivery cost to customers, when tapping into a robust network of Dashers for delivery," a DoorDash spokesperson said.

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

And a spokesperson for Grubhub said it's "up to the restaurant how they want to fulfill" self-delivery. The marketplace has been offering self-delivery since its founding in 2004.

"We exist to help restaurants drive more orders online," the company said. "We offer Grubhub's delivery services to restaurants and, of course, would want to 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, the CEO of the delivery-software-management platform Cartwheel, said courier fleets on his platform were 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 "uncouple" restaurants from last-mile delivery services while increasing revenue for their businesses.  

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

Ron Flickinger, a partner at Colonel Delivery in Richmond, Kentucky, said Relay might be able to monetize self-delivery for restaurants and their business. 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 upward of 70% of DoorDash customers in Kentucky. Colonel Delivery restaurants partners that use self-delivery can't pass on delivery fees to DashPass customers. 

Flickinger said if his restaurants opted out of DashPass, it would become a Catch-22 situation. Fewer orders come in, and the DoorDash marketplace commission fee increases 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 doesn't typically result in a lower volume of orders in his regions.

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

"There's some inherent problems with it," he said. "So kudos to the companies that can figure it out."

Are you a delivery insider with insight to share? Got a tip? Contact this reporter via email at nluna@insider.com or via Signal encrypted at 714-875-6218. 

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Contributer : Business Insider https://ift.tt/YAachRi

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