CULVER CITY, Calif. — When Pasta Sisters first opened in 2015, Giorgia Sinatra and her family wanted to bring authentic Italian specialties to Los Angeles at an affordable price.
But it’s been tough to keep prices low as ongoing supply chain challenges and inflation drive up production costs.
“A case of chicken, before all this craziness started, was $40 to $50, and now we’re talking about $160 for the same case of chicken,” she said.
With narrowing profit margins, the fees charged by most delivery apps hit small, local eateries like Pasta Sisters even harder.
“Usually, restaurants have a kind of a 10% profit on a final ticket on a dish, and delivery apps usually charge more than 10% — that means pretty much all the profit goes to them,” she explained.
Juan Aquino, the manager of Pasta Sisters, said DoorDash charges the restaurant 13-14% and Uber Eats fees are slightly higher at 15%, but newer restaurants should expect a 25-30% charge. However, one of Pasta Sisters' partners, a new California food delivery service, Locale, doesn't charge a platform fee.
“Because we give vendors a heads up, we treat it almost like a catering order," the company’s LA general manager, Sandro Schoenhoefer explained. “So the same discounts that would apply for a catering or a wholesale account are something we expect on our end.”
Locale was born out of the pandemic. When shelter-in-place orders and indoor dining bans forced restaurants to close their doors, vendors were left with little choice but to sign on with the delivery apps.
Founders Chris Clark and Jonathan Friedland saw how tough the on-demand delivery model was on some of their favorite spots in the Bay Area. The two best friends started Locale in May 2020 on a mission to create a vendor-friendly model in a push-button marketplace.
Despite record sales, food delivery companies have struggled to turn a profit. DoorDash is the only major food-delivery company that turned a quarterly net profit during the peak of the pandemic. Uber Eats’ was profitable on an adjusted EBITDA basis for the first time last year.
Locale believes the vendor-friendly delivery model is the key to making money in the food delivery market.
“We think this is the model that delivery can actually be sustainable on,” Friedland said.
The company sacrifices immediate gratification to lower fees. Since it doesn’t function on a hyper-speed model, routes can be planned more efficiently, which is good news for vendors, customers and drivers.
It started as a simple Google Form with a handful of local partners, but it quickly grew to something more. Now, Locale partners with over 70 vendors in the Bay Area, Los Angeles and San Diego, and delivers to customers up to 100 miles away.
Friedland said they don’t follow the typical “triangle” route — restaurant, driver, customer — but maximize efficiency by batching orders. Effectively, customers can receive products from multiple local businesses, like Langer’s Deli, Porto’s Bakery and Santa Monica Seafood, in one order for a flat $5 delivery fee.
Counter to the instant gratification model of typical delivery apps, Locale only delivers on Tuesdays and Fridays.
“In e-commerce there’s three things that you can be really, really good at: selection, price and speed,” Friedland said. “And for us, it’s basically focusing on selection and price.”
Schoenhoefer knows how tough the hyper-speed delivery model can be on restaurants because he used to be a cook on the line.
“I used to work in a kitchen, and I would have tickets touching my toes,” he said. “And then you would have a separate ticket machine for other delivery services. And it was very disruptive.”
The advance notice gives vendors enough time to plan production and minimize waste while taking a load off of staff.
Before the pandemic, experts projected that the food-delivery market would reach up to $200 billion by 2025, but COVID skyrocketed the sector’s growth. McKinsey & Company found that the food delivery market value reached $150 billion in 2021.
As regulations COVID regulations started lifting and indoor dining returned, Friedland said producers had to choose between prioritizing their in-store customers or these on demand apps. Locale allows vendors to prepare orders on their own time without burdening their kitchens at peak hours.
Drivers deliver on pre-planned routes that maximize efficiency, using less gas and producing fewer emissions. And because this model is less expensive, they can pay their drivers a fair wage. Drivers earn at least $20 an hour, Freiddland said, but most routes pay $30-35 an hour. That's more than the average DoorDash Driver hourly pay in California of approximately $15.93, according to Indeed.
Schoenhoefer said they have retained over 50% of their drivers since they first started, something he’s proud of in a market that he says has “no loyalty.” Beyond the numbers, he’s proud of the community-first culture Locale creates.
On a mission to reduce waste and give back, Locale has donated over 10,000 pounds of food since they first started and recycle a good amount of their packaging.
For Sinatra, one of the biggest advantages to Locale versus other delivery services is distance. Locale delivers up to 100 miles away while others only cover a 5- to 7-mile radius.
“With them, we could really expand our business,” Sinatra said.
CORRECTION: A previous version of this story showed an incorrect title for Sandro Schoenhoefer. The error has been corrected. (July 6, 2022)