Why Can’t Restaurants Make It on Takeout Alone?

Welcome to Ask Eater, a column from Eater SF where the site’s editors answer difficult dining questions from readers and friends. Have a question for us? Submit it via this form. © Patricia Chang Hi Eater SF, Why can’t restaurants make it on takeout/delivery alone? I keep reading this […]

Welcome to Ask Eater, a column from Eater SF where the site’s editors answer difficult dining questions from readers and friends. Have a question for us? Submit it via this form.

a building with a metal bench

© Patricia Chang

Hi Eater SF,

Why can’t restaurants make it on takeout/delivery alone? I keep reading this everywhere, including here at Eater SF, but could you please do an “explainer” on why this is? Is it because they don’t “feed” as many diners without sit-down? If so, why not “flyer” the neighborhood [with takeout specials] … rather [than] have the spectacle of maskless diners a foot and a half from those of us trying to pass on the sidewalk?

Outraged by Outdoor Dining

Dear Outraged,

Thanks for the question, however unsympathetically framed. Restaurants are facing so many challenges right now, and we’d be happy to explain exactly why it’s so hard for them to survive on takeout and delivery alone, for any diners who still aren’t getting it.

Restaurants in San Francisco tend to make money in several different ways: They get diners walking in to sit down. They get small orders for takeout and delivery. And they get big orders for catering and events. Every restaurant has its own business model, and balances those options differently. But you’re asking restaurants to solely rely on one portion of their usual sales. And it tends to be the most challenging area with the lowest margins.

Many restaurants make the most on catering and events. Eater SF has heard this again and again from pie bakers struggling with canceled orders for big tech events, star restaurants losing out on private parties from big tech conferences, and hotel restaurants missing out on wedding season, and already worrying about skipping holiday parties.

Many restaurants make more on sit-down dining. Chef David Golovin from Dear Inga confirms to Eater SF that guests order more drinks and dishes, they tip better for warm service and beautiful plating, and simply expect to pay more for a full experience. “It’s the whole hospitality aspect of what we do,” Golivin says. “What is hospitality right now? What is our interaction with a guest right now? Handing off a bag with food?”

Even though it cost just as much to handcraft his smoked sausages and fermented kraut, when he attempted takeout, he had to slash prices. “You just can’t charge as much …. It was too much to swallow on to-go food.”

Many restaurants make the least on takeout and delivery. They eat upfront costs for packaging, drivers, and insurance — or rely on delivery apps that take deep cuts. Long before the pandemic, restaurants have been raising concerns that delivery apps take up to 30 percent per order. SF, Berkeley, Fremont, and most recently Oakland are now trying to cap those at 15 percent or below, but it’s an ongoing battle with powerful companies that’s far from over.

As just one example, Dear Inga has closed, reopened, and temporarily closed again, Golovin confirms. The restaurant tried takeout and delivery in June, when it received a PPP loan, boxing up its comforting smoked brisket and cabbage rolls to take home. But within a few months, they quickly realized that takeout would never cut it.

“As a medium-level fancy restaurant in San Francisco, with a huge space, it’s almost impossible.” Golovin says the restaurant was making a tenth of its usual sales. “On our busiest day, we did $3,000 in to-go orders. Our break-even is $5,000. It became very apparent it would be cheaper to go dark.”

Dear Inga joins other restaurants across the city that have tried takeout and delivery, and couldn’t find a way to make it work. The Golden Gate Restaurant Association (GGRA) surveyed 420 restaurants in San Francisco, and 60 percent said they were losing money on takeout and delivery, and 29 percent said they were only breaking even. Even if diners are ordering more on Friday nights, or throwing in some to-go cocktails, here in the bay, for the majority of restaurants, it’s not enough to make up the difference.

Yes, there are exceptions. Laurie Thomas, president of the GGRA, tells Eater SF that restaurants that were already set up for takeout and delivery, located in bustling neighborhoods, and specializing in pizza or noodles that already boxed up and travel well are doing the best. Even so, “the fixed costs of running a restaurant are daunting,” Thomas said via email. “Unless your business model pre COVID was mostly takeout and delivery, a full-service restaurant can’t survive on just a fraction of its normal sales.”

Going back to this reader’s specific suggestion, unfortunately, it seems highly unlikely that putting up a few fliers in the neighborhood is going to fix a collapsing industry. But many restaurants would absolutely agree with them that outdoor dining is problematic. Golovin is one of them, saying that he has no interest in trying outdoor dining.

He simply asks for empathy, for all of the operators who are trying to survive. “This happens to be one of the most difficult times in history to operate,” Golovin says. “Everyone is doing their best. A lot has been asked of restaurants. We have never had to deal with the safety of our workers like now …. Nobody wants to do outdoor dining. The only reason is huge economic pressure. If people had enough money, we can’t say how many restaurants would just go dark until this over.”

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