This Startup Is Saving Restaurants From Heavy Delivery App Fees

Long before COVID-19 threatened to permanently close scores of restaurants, the industry was already under siege by the predation of delivery platforms flush with capital and charging steep commission fees.

Even restaurants that aren’t partnered with a delivery service weren’t safe thanks to shady business practices like replacing a restaurant’s phone number and charging restaurants for “phone orders”, secretly adding non-partner restaurants’ menus and redirecting business through the platform, or outright offering tweaked copies of a menu out of “ghost kitchens”.

Bay-area based startup Profitboss is pitching itself as the "easiest, fastest, and most convenient system to get back your customers from third party [services]." 

Free to restaurants, the service (which launched in 2018) lets restaurants open their own digital storefront. Profitboss CEO Adam Guild likes to compare his service to Shopify and the terms of agreement thread the same point: Profitboss, or "Placebull" deems itself a "virtual marketplace" that connects users to local restaurants.

The way it breaks down is this: The service is free for restaurants for pickup orders, and users are charged a $1.50 fee which Profitboss takes as a cut. For delivery orders, Profitboss sends orders to the API of apps such as DoorDash and charges restaurants a $7 fee, which works out to be cheaper than delivery apps’ usual fee and can be split with the customer. The idea is that both the restaurant and the customer end up saving money in fees. Uber Eats, for example, charges users at least $5 in fees (and sometimes more) on top of the food itself being charged at a premium to cover Uber’s 30 percent commission. 

"It's important to understand that part of the reason why all these third-party aggregators like DoorDash, Postmates, and Grubhub charge so much to both the restaurant and the end-user—the person actually placing the order—is because they have a lot of marketing costs associated with promoting their platforms," Guild told Motherboard. "They're spending hundreds of millions, if not billions, of dollars promoting their platforms and making sure users stick to the platform, as opposed to jumping to a competitor."

Commentators have quibbled for years over when the “food delivery wars” between competing apps would stop and the on-demand delivery industry would begin to consolidate. In a bid to retain customers and achieve explosive growth, gig companies have leveraged billions in capital to subsidize prices to attract customers from competitors. 

In DoorDash's filed documents to go public, for example, the company admits that it uses "the vast majority of our sales and marketing and promotions spend to bring new customers to DoorDash and to encourage their repeat use of our platform." That translated to $610 million spent by September 30 this year on $1.9 billion in revenue. UberEats-Postmates and Grubhub—which have near identical business models to DoorDash—have also each spent hundreds of millions of dollars this year alone on sales and marketing.

Profitboss isn’t a panacea for all the gig economy’s ills, however. While it seeks to cut gig companies out of one part of the equation and help restaurants, it also uses gig workers from Postmates and Doordash to actually deliver orders, Guild said. 

"In the world of e-commerce, Shopify has millions of merchants but most orders are actually fulfilled by Amazon fulfillment centers,” Guild told Motherboard. “In the same sense that Amazon fulfills Shopify orders, DoorDash fulfills our orders but it's just a flat fee so there's a higher profit margin there." 

DoorDash spokespeople did not immediately respond to Motherboard’s request for comment.

Guild said Profitboss can reduce the amount of time drivers spend waiting for orders while increasing their tips and overall earnings because, he claims, “customers are more willing to be generous with a gratuity and we're able to pass that entire tip to the driver.”

Still, as promising as these solutions might be, they are band-aids. So long as the government is unable to pay people to stay home or provide enough aid to restaurants so that their workers and owners can survive, restaurants across the country will continue to close and the unemployment crisis will deepen. And the fundamentals of the gig economy are unchanged: drivers would ideally get larger tips, sure, but people can’t be counted on and do things like  “tip bait” delivery drivers.

But as the gig economy continues to influence how other industries are organized—and as its most stalwart defenders threaten to take it nationwide—it’s not hard to imagine that Profitboss and other firms like it will be well-positioned to thrive in the various industries that have been or will be wrecked by the gig economy and its various investors.

“It's called Profitboss as opposed to a more consumer friendly name because it's focused on helping the restaurant maximize profitability,” Guild said. "This is just the beginning—the first wedge into the market."