Dive Brief:
- CaterCow has launched a commission-free food delivery service called Fare in New York City, according to a press release.
- Instead of providing individual small deliveries, Fare groups orders within communities, neighborhoods and buildings to deliver in one batch.
- Office workers and apartment residents pick through a curated menu of gourmet meals that travel well, order in advance and receive their orders at their door within a set time frame. There are no minimums per individual order.
Dive Insight:
Given the pushback third-party delivery providers have received from restaurants and cities for high commission rates, a concept like Fare could be a game changer in the segment if it takes off. Much of restaurants’ criticisms of food delivery services is that some can charge as high as 30% on commissions, which makes it difficult for delivery to be profitable, especially during the pandemic.
Cities from Seattle and San Francisco to New York have issued caps on commissions, sometimes reducing them in half as a way to help restaurants struggling to stay in business. While these caps are largely temporary given the current crisis, it shows a growing desire to regulate the food delivery business and could give rise to alternative commission-free models.
Fare only charges delivery fees to the consumer, which start at $3 and go up from there depending on how much is ordered, and the restaurant receives the entire order amount. Fare said in the press release that providing large deliveries can create enough cost savings to not need to charge restaurants commissions. Its pilot program, which launched in early June, retained half of its customers with some ordering 10 times already, according to the press release.
Other startups are working on ways to reduce costs to restaurants. ChowNow, which partnered with Instagram in April to add Order Food buttons directly on the app, charges a monthly fee instead of per-order commissions to restaurants. Spread, which launched in 2020 in New York City, doesn’t charge restaurants a commission, instead only charging restaurants ad fees when the restaurants want to reach new customers. Restaurants keep 100% of their repeat orders, according to its website.
Fare does have its limitations. It is only available to a select group of consumers and only one restaurant is available each day with a menu of a handful of items. But if it proves to be profitable and the menu is expanded to include other restaurants, it could start to impact one of the largest delivery markets in the country.
