While the events of the past year have brought a huge boost to restaurant delivery services as consumers placed takeout and delivery orders at unprecedented level, this delivery boom has also called attention to the strain that the model places on all parties involved. Delivery services struggle against local commission caps given the high labor cost of the business, consumers struggle against the fees piled on in response to these costs and restaurants struggle against the cost of these third-party services. While consumers’ expectation for instant convenience is not going anywhere, the leading delivery model is, at best, barely working.
This is where delivery platform Chekout comes in. Launched in New York in late March, the food delivery service allows restaurants to keep 100 percent of the sale, adding a small delivery fee and a service cost that consumers pay, which the company says is 17 to 81 percent more affordable to consumers than competing delivery services’ fees. There are currently over 100 New York restaurants on the platform.
“I think this entire industry has become a little bit chaotic, both for the restaurant and the consumer, with fees,” Chekout CEO Christopher Bruno told PYMNTS in a recent interview. “Based off the model that we have, I can tell you that there’s a lot of opportunity and a lot of liquid to be made, and then in turn, for the restaurants, [this model] brings [the profits] back to them, where they can start making money and keeping their lights on.”
The Fee Structure
Before Chekout, Bruno’s primary focus was his corporate catering company, which he “kind of took from the ground up.” The model that he used for this catering company laid the foundation for Chekout’s approach to the economics of delivery. The restaurant keeps the profits from the sale, and on top of that Chekout charges a 10 percent flat service fee, which the company retains, and a delivery fee up to $2.50, which goes, Bruno said, to a “third-party company we use for delivery,” though he “can’t mention the name for confidentiality reasons.”
So in short, consumers pay 110 percent of the menu price plus up to $2.50.
“That’s how Chekout can scale now,” said Bruno. “When companies have delivery drivers, that’s why they have to have such high fees … the cost of the delivery drivers, the insurance, everything behind that. So that’s … why everything is so fluctuating.”
Without these fluctuating costs, the company is able to scale more quickly. For the delivery service, Bruno said, “They’re still making a piece of the pie as well, so it … really does work.”
Debunking Consumers’ Widespread Misconceptions
One of the challenges that Chekout faces is communicating the need for its service to consumers, who are often under the impression that ordering from leading delivery services is a way to support local restaurants.
“A lot of consumers don’t really know what goes on in this industry, even how much they’re being charged or really how bad the restaurants are suffering,” Bruno explained. “I think that a lot of them think, you know, based off of commercials and things out there, when it says, ‘order local,’ they feel like they’re helping restaurants by ordering off platforms that charge such a high commission rate.”
He added that it “has been a challenge” to educate consumers on the burden that the leading delivery services place on restaurants, “especially,” Bruno noted, “with some of the high dollar marks that they have for marketing — it’s hard to compete with that.”
To that end, Chekout’s social media messaging emphasizes that ordering from the platform can “help save restaurants and money,” driving the point that the platform allows restaurants to retain 100 percent of their profits.
“There’s a ton of opportunity,” said Bruno. “It’s just really getting out in front of the right people and doing the right things by the restaurants.”
The Future Of Chekout
One year from now, Bruno hopes that Chekout will be in “at least in five to six different states and hopefully four to five different cities.” Specifically, the service plans to launch in suburban markets, including parts of New Jersey and Connecticut.
“A lot of people have left major cities, have either moved back with family or friends, or…the house market is really rising,” noted Bruno, “so suburbia is … a huge market for us right now.”
Sure enough, in the year ahead, consumers will likely continue to seek out delivery solutions that can be seamlessly integrated into their post-pandemic lives. PYMNTS research has found that 1 in 4 consumers have been ordering from restaurant aggregators more than before the pandemic, and that 80 percent of these consumers intend to maintain some or all of these behaviors even after contagion concerns subside.
Additionally, the service may have a chance to take advantage of leading restaurants’ new awareness of the importance of these digital channels. PYMNTS’ recent Digitizing Restaurant Payments report notes that 92 percent of the highest performing restaurants offer the ability to order using a mobile app, almost three times the share of the lowest performing restaurants, and that top performing restaurants are almost 10 times as likely as bottom performers to offer any online ordering channel. As restaurants take note of the success of these digital channels, the digital marketplace will only continue to grow.
