Delivery Co-Op: A Solution to High Fees from Popular Food Delivery Apps

Delivery Co-Op: A Solution to High Fees from Popular Food Delivery Apps

Over the last year, food delivery apps have been a staple for business owners and their customers when ordering food from their favorite restaurants. With more people stuck at home due to shelter in place restrictions, it's not surprising that the revenue from popular food delivery apps more than doubled. But, that revenue growth was not parallel with that of local restaurants due to high commissions and fees from every order placed through these delivery apps.

You may think that ordering through these food delivery apps is a great way to support your local restaurants, but the average 17% commission fee, in addition to the charge for delivering food, leaves little profits for restaurant owners. In a "normal" world, these fees are not detrimental to a local restaurant, but in a COVID world, food delivery apps have accounted for more than half of the business generated by these restaurants. Not to mention, many food delivery apps charge an additional 5% credit card processing fee and additional fees for better placement in searches on the app! Food delivery apps also trick customers with hidden fees and altered menu pricing which ends up costing you more money for the food you love.

A Lexington, KY-based company called Delivery Co-Op was established in August of 2020 as an alternative to businesses who wanted to provide food delivery services throughout the pandemic without having to pay steep fees. Different than other food delivery services, Delivery co-op has a subscription-based model with restaurant owners in mind. The way the business works, subscribers pay a $25 monthly fee that allows for unlimited fee-free food delivery from restaurants participating in the co-op. Restaurant owners pay a flat quarterly or monthly fee to be included in this program, with no additional sales percentages tacked on. Drivers are hired by the co-op and receive a $10 hourly wage and receive all tips. Health insurance is also provided to drivers who work for the co-op for at least three months, with additional profit-sharing opportunities after working for the business for one full year. Delivery Co-Op was created to help business owners, which is why the business redistributes 20% of profits from the co-op back into participating restaurants and employed drivers.

After less than one year in operation, the Delivery Co-Op currently has 6 full-time drivers, about 400 monthly subscribers, and 7 local Lexington restaurants in participation. The goal of the business is to eventually launch in key cities throughout the country, like Miami, Louisville, and Washington D.C. but are seeing increased interest from restaurant owners and customers in the Louisville, KY, and Dayton, OH areas. Currently, owners Drura Parrish, David Coomer, and Aaron Withers have an interest in growing both regionally and locally but have a restaurant waitlist for the program of 30-40 local restaurants. The co-op will cap out at a total of 50 restaurants per delivery co-op region allowing growth to pay drivers’ salaries. As of the end of February 2021, the food delivery service has provided 1,150 total deliveries, accounting for more than $48,000 in gross revenue. The co-op is also experimenting with food delivery robots, that will assist drivers with food deliveries to close by buildings and residences.

"As a collective, local restaurants and drivers who power our nonprofit cooperative work together and earn together to serve the community as equitable owners of Delivery Co-op."

The focus is simple, helping locally-owned independent restaurants that are struggling amidst the pandemic. As more people subscribe for the service, more drivers can be hired, and more restaurants can be allowed into the Delivery Co-Op. If you're in the Lexington, KY area, you can download the app to get started supporting local restaurants!

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