The service is 100 percent owned by customers, restaurants, and drivers.
The COVID-19 pandemic, combined with the rise of third-party delivery companies, has been a disaster for independent operators.
David Coomer and Aaron Withers, friends connected in the restaurant industry, have watched it unfold up close. Pre-COVID, independent restaurants could stomach the 30 to 40 percent fees because delivery accounted for a small portion of business. But in many cases, delivery has skyrocketed to roughly 30 percent of sales. Fees are looming even larger, dragging concepts deeper into the red.
Unsatisfied with the startling trend, Coomer, Withers, and others began working on different business models, building pro formas, and analyzing technology. It was an effort to answer an important question—what’s sustainable enough to put money back into the pockets of restaurants?
With that in mind, the friends realized they didn’t need to discover new technology or a new platform. The true innovation is creating a more equitable and profitable model.
That’s how the group of volunteers arrived at Delivery Co-Op, a nonprofit service that’s 100 percent owned by customers, restaurants, and delivery drivers.
All owners pay a monthly subscription fee that goes back to paying drivers $10 per hour and mileage reimbursement. Delivery Co-Op operates without any service or delivery fees, lightening the burden for both restaurants and consumers. Additionally, all members receive one share of the company, making them eligible for dividends. Because of that ownership, Withers says each person is able to participate in development of the business.
“So any big decision that needs to be made or small decision, everyone has a voice to be able to say what they think,” Withers says. “There’s no board. There's no shareholders. There are co-op members who each have a share, but everyone has the same.”
Delivery Co-Op recently had a soft launch with Ouita Michel’s Family of Restaurants in Lexington, Kentucky, where drivers averaged $21 per hour, including tips. The founders say the market cap in Lexington is 50 restaurants and 50 drivers, which would cover 11,000 subscribers. If that goal was met, it would result in an annual gross profit of just over $1 million. And since it’s a co-op, those funds would return to the coffers of the owners.
With a potential runway in sight, Withers says Delivery Co-Op will approach growth in a meticulous manner.
“[The soft launch] really exceeded our expectations,” Withers says. “Especially what drivers were able to make at the end of the day. But we're starting off really slow. This is really small. It's just a handful of friends volunteering their time to make this thing happen. So right now, we're just starting with one restaurant, and we're going to grow slow.”
Coomer explains that right now, the group is working on building the next layer, like the roll out of an app for IOS and Android. The rate of growth will depend on how quickly Delivery Co-Op can acquire new consumers because it needs to reach a certain number before hiring another driver and then adding a new restaurant.
He says that marketing to potential restaurants is the easy part because Delivery Co-Op is an affordable service that provides the driver as an extension of the restaurant’s service. The team works closely with operators to make sure food is delivered with the experience that the general manager, chef, and restaurateur wishes.
“That's the easiest sell on the planet,” Coomer says.
The real focus is on customer acquisition, and Coomer notes that Delivery Co-Op is developing strategies and campaigns to that end. The efforts will be guerrilla, a method that Coomer has used with brands like A&W.
The group isn’t buying Super Bowl ads or purchasing radio spots. Instead, the co-op is choosing a more nontraditional route.
“We're going to be a little more creative and a little more community-centric, but also leaning on the restaurant partners to help because their customers want to support them,” Coomer says. “We’re seeing that with Ouita Michel’s group in Lexington. She's a James Beard caliber chef. She owns an incredible restaurant group, and her fans want to support her. Any market you're in, people love restaurants in their community. They want to look for ways that help and support, and we're paying attention to that.”
“ … These restaurant groups, their social media accounts, the newsletters, the loyalty and rewards programs they have in place are amazing marketing vehicles for the platform,” he continues.”
This year, major third-party delivery companies, particularly Uber and Postmates, have consolidated, causing uncertainty into how restaurants’ bottom line will be affected. Coomer says the mergers create the perfect platform for multi-unit brands like Chipotle and McDonald’s that need to serve hundreds of millions of people globally.
But that’s not the best fit for independent operators or those with fewer than 20 stores, he adds.
“You're feeling like you don't have the strength to negotiate those rates, and you're just going to get hit with a bigger fee just because, honestly, you're a little more to deal with for better or worse,” Coomer says. “But we think that's for better because when you have a great chef like a Ouita Michel, who is insanely particular about the to-go packaging and whether the driver has a food handler's permit and whether they have a close relationship with the general manager and the front-of-house team of that restaurant, that level of accountability is the expectation. Whereas if you're Chipotle, you're not really getting that granular into the delivery. You just need the service.”
As to when Delivery Co-Op may hit that market cap of 11,000 subscribers in Lexington, Coomer says it could be a matter of months. He describes the pro forma as a compass that helps the group move forward methodically and responsibly.
If consumer demand lines up, Coomer believes Delivery Co-Op can grow exponentially.
“Because we're also openly sharing numbers, we’re open to conversations with people that want to operate it,” Coomer says. “We’re wanting to be fully transparent in what they can expect, both good and bad. Because they're the people that will help grow this at scale, and it's something that we see long-term nationally can be as big as any of the big delivery players. It's just returning the money back to the people.”