Restaurants, diners, even drivers complain about food delivery. But it's not going anywhere (2024)

As an accountant, Melissa Cross has little issue tracking her spending. But the 44-year-old Greenwood resident doesn't need to check her bank statements to know food delivery has become a significant expense in her life.

"When I tell you DoorDash lives at my house, they live at my house," said Cross, whose family orders food online more days than not.

Cross' family is among the more than 32 million people worldwide who use DoorDash every month. The Silicon Valley startup owns a majority market share of the food delivery industry, which includes the likes of Uber Eats and Grubhub, despite generating a quarterly profit only once since 2020.

Since the onset of the COVID-19 pandemic, these third-party delivery platforms have become intertwined with Indianapolis' dining scene. It’s easy to understand why: With these apps, restaurants can reach more customers, diners have more options and delivery drivers can earn extra income with flexible hours. Everybody wins — except for when they don’t.

Operating on razor-thin margins, some restaurants weigh the financial cost of delivery with the opportunity cost of missing out on customers. Delivery drivers seeking flexible work often find it isn't what they'd hoped. Even when restaurants and drivers don't feel they're earning enough, many customers feel they've paid too much. And yet, millions keep coming back to swipe and tap their next meal to their doorstep.

“People have a love-hate relationship with DoorDash,” Cross said.

How much do restaurants benefit from delivery?

A similar dynamic exists for restaurants. Third-party delivery offers a chance to attract customers who can’t or don’t want to dine in. In theory, that means more diners and more profit. In practice, however, restaurants find that using DoorDash doesn't always pan out that way.

“Don’t expect a lot of money,” said Putri Wisanggeni, who co-owns and operates Indonesian eatery Wisanggeni Pawon in Ravenswood.

Wisanggeni Pawon uses the platform’s premier plan, which expands the restaurant’s delivery radius, boosts its visibility on the app and reduces fees for its customers. In return, Wisanggeni Pawon pays DoorDash a commission fee on orders placed in the app — 6% for pickup, 30% for delivery.

That 30% commission can feel steep, especially in an industry where margins typically hover around 5-7% for full-service (“sit down”) restaurants. Many eateries raise prices on their delivery menus to partially offset commission fees, but pushing mark-ups too high risks turning away customers entirely.

Still, the Wisanggenis want to get their restaurant off the ground, so Putri and her husband, Aji, have used various delivery apps since they started Wisanggeni Pawon out of downtown ghost kitchen Circle City Eats in 2021. They now use just DoorDash.

“We are a very new restaurant and all the dishes that we have, not lots of people know them,” Aji said.

So even though individual DoorDash orders are probably not profitable for the Wisanggenis, Putri said, simply getting in front of a diner who otherwise wouldn’t think to try nasi goreng or tempeh kecap is worth the somewhat precarious investment.

The calculus changes for larger restaurants. While Wisanggeni Pawon is a three-person venture, Pier 48 Fish House and Oyster Bar just south of Monument Circle staffs around 50 people to handle crowds that flock downtown for conventions, sporting events and celebratory dinners.

Jenna Spurrier, an investment adviser for an Indianapolis-based hedge fund, has co-owned Pier 48 since March 2020. She sees third-party delivery apps as another way to outsource a business function outside Pier 48’s core strengths, not unlike the contractors who wash the restaurant’s windows or clean its fish tanks.

“I think it’s a great partnership,” Spurrier said. “If it weren’t profitable, we wouldn’t do it.”

She points to how DoorDash covers its orders’ credit card fees, which typically range between 1.5-3.5%. DoorDash also takes care of chargebacks, meaning Pier 48 doesn’t have to worry if a customer buys a large meal, then disputes the payment. To offset its commission fees, Pier 48 simply raises prices on certain delivery items, as do Wisanggeni Pawon and countless other restaurants using DoorDash. Spurrier said restaurants that complain about third-party apps likely aren’t as savvy about how to make them work.

“I just don’t think they understand properly how to integrate (DoorDash) into their system,” she said.

Spurrier recognizes that servers who process delivery meals without receiving a tip are likely not DoorDash fans. When Pier 48 servers package a DoorDash order, they tuck in a slip of paper encouraging the customer to dine in next time. While the high-profile oyster house doesn’t face the same pressure to get off the ground as Wisanggeni Pawon, Spurrier also sees its use of DoorDash as a marketing tool to encourage more customers to dine in-person or pick up the food themselves, allowing the restaurant to keep more money while the consumer pays less.

“We need to get our food out there to as many people as possible,” Spurrier said.

However, not every big-ticket restaurant has arrived at the same conclusion. You won’t see a bag of clamshell boxes coming out of Anthony’s Chophouse, where Colin Atterson has been executive general manager since 2018. Atterson, a 20-year restaurant management veteran, said the reputational hits a restaurant takes for food that doesn’t travel well often isn’t worth the extra attention delivery apps provide. Cardboard containers are great for pizza and lo mein, not so much for a medium-rare ribeye that cooks to gray in the steam of a takeout box.

When Atterson managed the now-closed North End Barbecue in Nora, the restaurant set up a pick-up window and organized part of its team to specifically handle delivery orders. North End's thoroughly smoked, sauce-doused meats traveled to customers via Styrofoam box with no worry of overcooking or drying out. But North End was specifically built to offer delivery, unlike several mom-and-pop stores that scrambled to upturn their operations as delivery took off during the pandemic.

“The small guys, they don’t have the capital to make these kind of investments, whether it’s the facility set-up or the labor,” Atterson said.

That doesn’t necessarily stop small restaurants from using apps like DoorDash, but it often means staffs are stretched thinner than usual. Like Spurrier, Atterson thinks much of a restaurant’s frustration toward delivery comes from servers packaging meals without tips.

“Everybody has to put the time in, and if they’re just doing work for nothing, that can get a little frustrating,” he said.

Despite his reservations, Atterson believes DoorDash is here to stay. Certain restaurant concepts will always dovetail with delivery.

“It’s definitely not going anywhere,” Atterson said of third-party delivery. “If anything at all, it’s going to continue to progress and grow. You’re gonna see (delivery) almost push the food industry to embrace it.”

How DoorDash has grown — and changed the way we eat

Before the pandemic, third-party delivery platforms played a much smaller, more complementary role to the food industry. But lockdowns and in-person dining restrictions left restaurants hungry for a solution, and companies like DoorDash, which stood to benefit immensely, were happy to play the hero. DoorDash’s lone fiscal quarter in the black came during the height of the pandemic in mid-2020, a fleeting net profit of $23 million.

Aside from that stretch, the company has only lost money, most recently posting a $25 million loss from January through March. But DoorDash is still valued at over $40 billion thanks to an ample pool of big and small investors. By and large, those investors' faith has been rewarded: Despite a recent dip after the announcement of the higher-than-expected loss, DoorDash’s stock has thrived over the last few years as the enterprise rakes in billions in revenue.

If a company, particularly in the tech world, can attract customers and show signs of growth, it can typically also attract investors, said Todd Saxton, associate professor of strategy and entrepreneurship at Indiana University-Indianapolis.

So far, DoorDash's staggering expenses for data storage, advertising and paying drivers have outpaced revenues. But several reputable financial forecasts have the company escaping the red within the next year as ballooning revenues catch up to the massive spending that propelled the company to the top of the food delivery market.

Eleven years is a long time to wait for consistent profits, but big-money investors have long been enamored with DoorDash, pumping it with enough capital to operate in more than 30 countries, from America to Azerbaijan. DoorDash has grown virtually everywhere it has been planted, proving that its appeal goes far beyond American fast food culture.

As Saxton sees it, there’s one obstacle that could prove to be a stumbling block for the Silicon Valley juggernaut in the future.

“DoorDash has to recognize that, yes, part of it is a tech platform, but part of it is also based on the labor force that actually does the delivery,” he said. “And that is a lot harder to scale.”

The pool of people willing to deliver food for DoorDash, while large, is still finite. The company enlists over two million couriers it calls "Dashers" to ferry meals from restaurants to customers. Without them, DoorDash's one-of-a-kind software is effectively useless.

How does DoorDash work for drivers?

In Indiana, adults with an iPhone or Android smartphone and a reliable means of transportation can sign up. Dashers work almost whenever they want — those in areas with an abundance of Dashers may need to wait or schedule ahead to dash — and earn a combination of base pay from DoorDash and tips from customers.

DoorDash calculates base pay with a proprietary algorithm that factors in the distance a Dasher travels, the time an order requires and the popularity of the restaurant. DoorDash typically doles out $2 to $10 in base pay per order. Dashers can also choose to earn a minimum hourly rate based on another, similarly opaque calculation.

DoorDash bills dashing as “a great alternative to seasonal, temporary and part-time work,” not a career. Westside resident Chad May, who started dashing earlier this year, expressed the viability of dashing full-time in somewhat simpler terms.

“Hell no,” he said. “Impossible.”

May, 52, said he occasionally feels like he’s wasting his time behind the wheel. While he said he averages $15 to $20 per hour dashing, he’s had his fair share of $5 hours. May is no stranger to less-than-desirable payouts, having spent most of his life as a line cook for various restaurants. He grew up “hanging off my grandma’s apron strings” and started washing dishes at his father’s Brownsburg restaurant, Green Street Pub, as a 14-year-old.

With decades of experience in the kitchen, May has developed a special appreciation for feeding people. But leaving a bag on someone's doorstep is a far cry from cooking them a meal.

“Except for having sex, you can’t get more intimate with someone than feeding them,” he said. “As a Dasher... I’m just delivering food someone else made to someone I’ll never see again.”

As much as May bemoans third-party delivery, though, he’s all for it. He said he knows restaurants that were kept alive by delivery when customers couldn’t dine in during the pandemic.

But May has also seen the downside of DoorDash. He’s been a cook struggling to keep up with additional delivery orders during the dinner rush. He’s dealt with impatient Dashers demanding food quickly so they can move on to their next order. And on the flipside of the exchange, he knows from experience that customers don’t always reward a Dasher’s sense of urgency no matter how rapidly the person delivers the food.

“I haven’t made much money off of tips,” he said.

Cross, the frequent DoorDash user, began dashing intermittently six years ago to earn a little extra money to supplement her income as an accountant. Tips were fairly generous when she started dashing, but Indy’s tipping culture has taken a nosedive since then, she said.

“It’s horrible,” she said. "It has legit plummeted."

For instance, Cross recently delivered a large McAlister’s Deli order for which she was tipped a grand total of 75 cents. Typically, she said, customers blame inflated food prices or incorrect deliveries for skimping on tips, although Dashers generally have no control over either.

Still, Cross is sympathetic to those reluctant to fork over a hefty tip. As a frequent customer, she’s all too familiar with missing items — she estimates roughly half of her deliveries aren’t totally correct — and the jolt of a surprisingly pricey meal. Taxes, delivery fees and tips can amount to well over $10, even on a fast-food meal for one. Cross said if frequent DoorDash users added up how much they’ve spent in fees alone, “you’ll throw up seeing how much money you’ve wasted.”

But even if customers feel they’re paying too much for meals that restaurants and delivery drivers feel they aren’t getting paid enough for, convenience still sells. In an unforgiving industry, many restaurants will take that tradeoff.

As for Cross, she's recently tried to cut back on delivery. She’s spent too much time poring over other people’s finances to let DoorDash and Instacart expenses occupy so much of hers. But she's not going cold turkey anytime soon, either.

“I don’t think there would be anything that would make me actually stop,” she said. “Now, get mad at them and not order for a while? Certainly. But I can promise you I’ll be back.”

Contact IndyStar dining reporter Bradley Hohulin at bhohulin@indystar.com. You can follow him on Twitter/X @BradleyHohulin.