Vegas restaurants launch co-op to compete with food delivery services

By: - August 24, 2021 8:00 pm
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Local restaurant owners say national third-party delivery app companies charge them exorbitant fees — upwards of a 30% commission — that cut deep into their already thin profit margins. (Photo by Chris Yarzab via Flickr, CC BY 2.0)

Tired of what they describe as the predatory business practices of Silicon Valley tech giants, a group of local restaurants have banded together to launch their own co-op food delivery service.

It’s called LoCo Las Vegas.

“This is a local solution to a local problem,” says Kristen Corral, owner of Tacotarian, who helped found the locally owned food delivery cooperative. “Do we really need billion-dollar tech companies delivering our food? It doesn’t make sense. This should be a public utility for restaurant owners.”

Companies like GrubHub, DoorDash, Postmates and UberEats have raked in profits during the pandemic, capitalizing on shutdowns that forced people to stay home and away from dine-in restaurants. But local restaurant owners say these third-party delivery companies charge them exorbitant fees — upwards of a 30% commission — that cut deep into their already thin profit margins and, partake in other shady business practices.

(Photo courtesy of Tacotarian)

Corral says Tacotarian paid $7,500 in delivery fees to these types of companies in July 2020.

For comparison, the vegan taco restaurant pays $3,500 per month for its space on Casino Center Boulevard in the popular Arts District neighborhood downtown.

“Almost double,” adds Corral of the added expense. “It’s unsustainable.”

Corral was one of the many restaurant owners who worked with local and state lawmakers to try and set parameters for the food delivery industry, which she describes as currently being “the wild west” of lax regulation. As part of those efforts, she connected with Jon Sewell, an Iowa City restaurant owner who founded LoCo in 2017 after GrubHub bought out the area’s existing delivery company and proposed doubling the commission rate charged to restaurants.

Corral connected with other Vegas restaurants to franchise Sewell’s platform and set up a version for Las Vegas. Other cities where restaurant owners have decided to set up a cooperative and take food delivery into their own hands include Nashville, Omaha and Tampa Bay.

So far, 35 restaurants in Southern Nevada have invested money to become owners of the co-op. Another 50 have signed up to use the platform. All of the restaurants involved are independent small businesses.

The cooperative started with a soft launch two months ago.

Offerings include notable and well-regarded restaurants, like HoneySalt, FukuBurger and 595 Craft Kitchen.

LoCo doesn’t service the entire Vegas Valley — at least not yet. Corral says the co-op has had to start small and build up capacity. The current delivery service area covers downtown, Spring Valley, Mountain’s Edge and the southwest. Notable areas not currently covered include Henderson and the northwest.

“We’ll cover it but it will take time,” adds Corral.

Even with its current limitations, Corral believes customers will embrace LoCo with the same excitement that restaurants have had. Many people, she notes, have had negative experiences with third-party delivery companies, such as paying $50 for a $25 order, or receiving cold or late food.

“They are fed up too,” she says. “Most people want to support local, especially if it’s better service and a better price. … (Restaurants) have had a rough year and a half, and this is a way to support us.”

Better for delivery drivers

Third-party food delivery companies have taken heat for their working conditions. The people delivering food for these companies are independent contractors –aka “gig workers” — and not subject to minimum wage, overtime, health insurance or other benefits provided to employees.

Nationwide, drivers have shared stories of making the equivalent of $2 per hour and peeing in Gatorade bottles when no public bathrooms are available.

Corral says LoCo won’t rely on exploitative business practices. Their drivers keep 100% of their tips and a majority of the delivery fee, which scales depending on factors like distance. The co-op takes $1.50 of the delivery fee to cover insurance, dispatchers, marketing and operations of the co-op.

Corral says that until the co-op gets up to full speed, they are subsidizing driver pay to make sure everyone gets around $15 to $17 an hour, which she says is the equivalent of two deliveries per hour.

“We can’t expect them to sit unpaid,” she adds. “Uber, GrubHub… They don’t mind if (drivers) sit there and wait for no money.”

LoCo drivers are also required to pass a three-hour Delivery Service Awareness course developed by the Restaurant Hospitality Industry.

“We have some of the strictest laws for food safety probably in the world,” says Corral. “Health, alcohol, sheriff’s card — there’s a card for everything. But food delivery drivers are not required to have any kind of cards, no training, nothing. But they are taking food from a restaurant and carrying it that last mile.”

Previous attempts to rein in industry fell short

In August 2020, Clark County passed an emergency order capping the delivery fee rates companies could charge. In May 2021, the Nevada State Legislature passed a similar law capping delivery fee rates across the state. But both laws only apply during declared states of emergency.

“I knew it wasn’t a permanent solution,” said Corral. “It was a Band-Aid.”

And even that temporary relief came with loopholes. At least one of the delivery services responded to the Clark County order by charging restaurants a new, separate fee set at 15%. (County commissioners responded by revising their ordinance to address the bait and switch.)

Some of the safeguards local restaurant owners lobbied for during the legislative session were also stripped from the final statewide bill. That included a proposed provision that would have required third-party delivery services to disclose on a receipt to the customer how much commission they were charging the restaurant.

Lobbyists for the delivery companies successfully argued such information is proprietary.

“They don’t want restaurants to know what others are being charged,” said Corral. “At Tacotarian, we’re paying 33%. McDonalds might be paying 3%. They don’t want everyone to know that.”

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April Corbin Girnus
April Corbin Girnus

April Corbin Girnus is an award-winning journalist with a decade of media experience. She has been a beat writer at Las Vegas Sun, a staff writer at LEO Weekly, web editor of Las Vegas Weekly and a blogger documenting North American bike share systems’ efforts to increase ridership in underserved communities. An occasional adjunct journalism professor, April steadfastly rejects the notion that journalism is a worthless major. Amid the Great Recession, she earned a B.A. in journalism from the University of Nevada Las Vegas, where she served as editor-in-chief of the student newspaper. She later earned an M.A. in media studies and a graduate certificate in media management from The New School for Public Engagement. A stickler about municipal boundary lines, April enjoys teaching people about unincorporated Clark County. She grew up in Sunrise Manor and currently resides in Paradise with her husband, two children and two mutts.