Online services fuel a shift in takeout ordering

There's been a shift in how restaurants satisfy their patrons' taste buds. The consequences are both sweet and sour.

Eat24, GrubHub, Seamless, Delivery.com and a growing list of smaller online ordering services have changed the way people order takeout and delivery. Instead of dialing a restaurant, hungry souls go online, or open a smartphone app, to order their next meal. Competition to sign up restaurants and customers is fierce. The companies constantly update their social media accounts, hand out coupons and even advertise on porn sites to stand out.

As with many other industries, e-commerce and social media are changing how restaurants — which are often among the smallest of businesses — make money. The ordering companies offer great exposure. They sign up thousands of customers, pick up the tab for coupon-code promotions and have built websites and apps that make ordering simple. But not everything is so sweet.

The companies take up to 20 percent of each order. With some of the services, the more that a restaurant pays the higher it appears in their listings. And restaurants have to wait to get paid. Most services send one check a month. That translates into a longer wait for cash to cover bills. But restaurateurs say that so many people have switched over to using the services that they're forced to join to stay in the game.

CAN'T LIVE WITHOUT 'EM

When New York restaurant owner Steve Galanis was approached in 2001 by Seamless to join, he declined. Back then, Seamless was used by businesses so employees could order food at work, sometimes on the company's dime. Cinema Brasserie had a strong delivery business. Galanis didn't want to give up a percentage of his sales.

Three months later, regular lunch customers stopped ordering from his restaurant because their employers started using Seamless. That's when he joined.

Now, Cinema Brasserie pays Seamless about 12 percent of each order. "You have to," Galanis says. "If you want to do business with certain companies you need Seamless."

AG Kitchen uses Seamless and Delivery.com. Its takeout business doubled after signing up, says Jeff Salamon, the general manager. He's trying to convert new customers to come into the New York restaurant. He slips notes into takeout bags of frequent online customers offering free dessert if they dine in. It worked on one customer who ordered online four times a week. "She now comes in once or twice a month with her friends," Salamon says.

Grub, a Los Angeles restaurant not to be confused with GrubHub, does the same, sending customers a handwritten note and a $10 discount to dine in.

Grub joined GrubHub earlier this year. Its lunch business was already busy, delivering to film writers and producers who work in the area, says owner Betty Fraser. She chose GrubHub because it connected the restaurant with a delivery service. That saved her from having to hire additional staff.

GROWING INDUSTRY

The recipe has encouraged more players to enter the field with slightly different business models. OrderUp, launched in 2009, targets smaller cities and college towns like Boise, Idaho and Lawrence, Kan. FoodToEat, launched two years ago, enlists New York food trucks and restaurants, and charges the eateries just 10 cents per order.

Another sign of growth: The industry is starting to consolidate. Seamless, first launched in New York, joined forces with Chicago-based GrubHub in August, merging their members and restaurant clients into one company named GrubHub Seamless. The brands continue to run their websites and operate separately, for now. Company spokeswoman Abby Hunt says the combined company is looking for ways to improve the experience for restaurants that sign up. Together they cover about 500 cities in the U.S. and London. Although in some smaller cities, they may only have a handful of restaurants. Last year, orders through GrubHub and Seamless totaled about $875 million in gross food sales, and combined revenue of more than $100 million.

EDGY MARKETING

Since the companies are similar, many try to differentiate themselves by being quirky, fun or irreverent. Seamless plasters ads in New York's subway cars and stations. GrubHub asks its Twitter and Facebook followers to come up with funny captions for cartoons. Eat24 posts one-liners on its Twitter feed and blasts weekly emails to customers.

Eat24's emails are a must-read, say Silver Spring, Md., roommates Dani Lager, 27, and Sharon Rosenblatt, 25. A favorite was on avoiding bear attacks. Eat24's advice: Stay home, and — of course — order food. "Fact: There are no bears in your home," it said.

Jokes aside, the best part of Eat24's emails are the treats at the end. Each one comes with a coupon, often for $2 off a $10 order. If Lager and Rosenblatt order from the same restaurant, they do it separately so that each gets a discount.

Eat24 tries to set itself apart with edgy advertising and places ads on porn websites because it's cheaper. "We don't have a lot of money to spend on marketing," says Chief Marketing Officer Amir Eisenstein.

The company also pays to be featured in rapper Snoop Dogg's smartphone app Snoopify. With the app, users can decorate their photos with cartoon stickers of sunglasses, necklaces, an Eat24 branded chef hat and marijuana. "We cater to everyone," says Eisenstein, and that includes "people who have munchies and smoke."

He's not worried about associating Eat24 with porn and pot.

"We don't discriminate," he says. "Everyone has to eat."