Fare, a new food-delivery app, is building a more equitable model — one that fosters enhanced community cohesion and shared benefits, and doesn’t include restaurant-crippling fees.
In April, we reported the story of CaterCow, a US-based food delivery business that had spent the last eight years growing nicely by linking catering companies to those working in offices. As one of its co-founders, Sean Li, told Sustainable Brands ™, COVID-19 had decimated his business, hitting revenues hard and forcing a serious rethink to stay afloat in turbulent times.
The rethink brought about CaterCow Cares, which has seen the company using its existing partnerships to send food to hospitals, rather than offices. By raising funds to deliver meals to frontline healthcare workers — and making sure local restaurants got to keep 100 percent of the proceeds — the company was on a mission to keep as many of its partners as possible alive for as long as possible.
Now, as the pandemic plays out, Li and his team are on another mission. This time, they want to help people and restaurants working across food delivery — many of which, he claims, are unfairly treated. His team’s solution, Fare, is an alternative to apps such as Grubhub and DoorDash, whose exorbitant service fees can be crippling for restaurants — which have been largely at their mercy during the pandemic.
Li says Fare, on the other hand — which was launched after just a couple of months’ of thinking and planning — has been designed to “reinvent food delivery so it’s fair and sustainable to all parties involved — including customers, restaurants, the delivery folks and the platform itself.”
“The pandemic was the trigger to making this relevant and feasible,” Li said. “Not only did we need to make a pivot as a business with no addressable market — traditional catering is obviously dead — but with more people working from home, having flexibility, and potential future lockdowns, this allowed us to think outside the box.”
At the heart of Fare — which is now servicing a variety of restaurants throughout New York City — is the concept of group ordering within communities, with people who might live in the same block ordering food as a collective.
Here’s how it works: You place an order (roughly a half-day in advance, to give restaurants plenty of time to prep) from a curated menu, along with your neighbours. The order is delivered to each household in batches within a set, one-hour time period.
There are no minimums per individual order, and Fare takes 0% restaurant commission.
That’s very different to what normally happens when you order takeout food for delivery using an app. The past five years has seen a trend for serving individuals, as soon as possible, in single journeys. In this scenario, it is largely restaurants that lose out, as Fare’s manifesto explains.
“Restaurants have historically paid commissions upwards of 30% for delivery orders. On a $20 order, this amounts to around $6. While the delivery platform clears a $2 profit in order to keep its systems online, this amount is unsustainable given the single-digit profit margins that restaurants dealt with even prior to the pandemic.”
For normal food delivery apps, the average order size is 2-3 people. With scale like that, the unit economics barely work out, Li says. Promotions to outdo the competition, government commission caps, staff payments, keeping systems online — all of this means that the 2- to 3-person order is “unfeasible as a long-term business model.”
“The food delivery world has been trending toward on-demand, and convenience is king. If you try to do the opposite, you'll probably be seen as backwards,” he adds. The likes of DoorDash, Uber Eats and Postmates are still unprofitable — they're “subsidized by a VC war chest” — but Fare is willing to be on a contrarian stance.
As Li points out: “We order packages from Amazon in advance; packages come delivered in batches to the community by one driver — so, why don’t we do the same with our upcoming meals? People are surprised to hear that all we really need is about 8 to 10 people to make it work.”
To further shake up the market, Fare is hyper-selective in choosing its restaurant partners, and intensively curates smaller menus to make sure the food is top quality and travels well — and a filter that allows diners to choose from POC-owned businesses (a feature of CaterCow’s original service), many of which have been hardest hit during the pandemic, will soon be available.
“The restaurants [we work with] have been super grateful that we’re providing them business in this environment, especially at zero commission. At the end of the day, we have a duty to our partners; and we believe no commission is the best way to actually support our local restaurants and businesses, and have them survive through the pandemic.”
As with any new venture launched in the era of COVID-19, time will tell as to whether CaterCow’s newest pivot will pay off (but it’s off and running — Li said in an email that within just a few weeks of launch, several customers have already ordered 10+ times). But in building a more equitable model that fosters enhanced community cohesion and shared benefits, Fare deserves a shot at competing in a crowded market for the long term.