DoorDash is opening a shared delivery kitchen in Redwood City. What does that say about the future of the restaurant industry? | Peninsula Foodist | Elena Kadvany | Mountain View Online |

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By Elena Kadvany

DoorDash is opening a shared delivery kitchen in Redwood City. What does that say about the future of the restaurant industry?

Uploaded: Oct 14, 2019

Food delivery service DoorDash is looking to the Peninsula to test out a new concept: a shared commissary kitchen that allows more restaurants to deliver locally without the risk and cost of opening their own brick-and-mortar spaces.

DoorDash's first-ever shared kitchen and only to-go concept is officially opening Monday at 1531 Main St. in Redwood City. Under one roof, four Bay Area food businesses — Nation's Giant Hamburgers, Rooster & Rice, Humphrey Slocombe and The Halal Guys — will now be able to deliver to Redwood City, Palo Alto, Menlo Park, Atherton, Woodside, Belmont and San Carlos. People who live in other Peninsula cities can also go to the space, dubbed DoorDash Kitchens, to pick up takeout orders.

DoorDash's new shared commissary kitchen will serve the Peninsula. Photo courtesy DoorDash.

The kitchen, a bright red 6,000-square-foot building last occupied by a meal delivery service, is emblematic of shifts and tensions in the dining industry today, spurred by the growth of third-party delivery apps like DoorDash, Caviar, UberEats and others. Many Bay Area restaurants are seizing the opportunity to make more money in a profit-thin business, while others are decrying the costs that delivery poses to brick-and-mortar restaurants.

DoorDash piloted its kitchen concept in 2017. The company partnered with Little Star Pizza, which operates locations in San Francisco and the East Bay, to open The Star, a delivery-only concept in San Jose. At the time, about 20% of Little Star's revenue came from delivery and take-out orders; the percentage could jump up to 70% some nights, according to DoorDash.

"They know the power of delivery," DoorDash said in a blog post announcing the concept, which the company plans to expand across the country.

DoorDash said it was the first delivery platform in the country to launch a commissary kitchen. The model benefits both customers — it gives them access to favorite restaurants whose physical spaces are too far away from where they live to deliver — and restaurant owners, DoorDash said.

"What we've heard throughout the years is merchants are looking for new and alternate ways to help drive and grow their revenue," Fuad Hannon, head of new business verticals for DoorDash, said in an interview. "DoorDash Kitchen grew out of that."

The commissary kitchen allows restaurateurs to expand to a new market, with DoorDash handling tasks like permitting, kitchen operations, maintenance and marketing. The kitchen also requires less staff than a restaurant would.

"They're able to very quickly out of the gate develop a new market and generate new sales without having to do the upfront investment and building work that they would normally have to do," Hannon said.

A Halal Guys employee assembles food to go out for delivery from the DoorDash kitchen in Redwood City. Photo courtesy DoorDash.

The current restaurateurs have signed two- to three-year leases at the Redwood City kitchen and pay DoorDash rent. DoorDash also charges them the same commission rate as for delivery from their restaurants. DoorDash and at least two participating businesses, Humphrey Slocombe and Rooster & Rice, declined to disclose their rates.

Zareen Khan, who owns Pakistani-Indian restaurant Zareen's in Palo Alto and Mountain View, said she pays between 16% to 20% for different delivery services. Another local owner who asked to remain anonymous due to a nondisclosure agreement with DoorDash said that the company charges 25% on the restaurant's deliveries.

Min Park, the chief financial officer of San Francisco-based Rooster & Rice, said their team had spent time researching options for local cloud kitchens — shared cooking spaces for delivery-only businesses — but decided to partner with DoorDash for the benefit of a kitchen that is directly connected to an established delivery app. Rooster & Rice is a fast-casual restaurant that specializes in khao mun gai, or Thai chicken rice, with six locations in San Francisco, Pleasanton and San Jose with others on the way at Stonestown Galleria in San Francisco and Westfield Valley Fair in Santa Clara.

Park declined to share what percentage of Rooster & Rice's business comes from takeout and delivery. He said they turn off the apps during peak lunch and dinner hours because the restaurants get so busy; they don't want delivery demand to negatively affect customers choosing to dine in person.

Park has read the stories about restaurant owners blasting third-party delivery apps for contributing to the decline of their businesses. When San Francisco's Mission Pie closed in May, the owner took a stand against the impossible competition app-based food delivery companies pose for small, locally owned businesses. Last month, the owner of the now-closed Green Chile Kitchen in San Francisco said: "I honestly believe the delivery culture is really killing restaurants, and we only have ourselves to blame. When you take that large of a percentage, it's way too much."

What does Park make of comments like that?

"It's kind of like taxis," he said. "If you're not going to be able to adapt to this new delivery structure, you're going to just be left in the dust and have to close."

Some restaurants do hit a plateau where delivery ends up costing more, Park acknowledged. That's partly why they're partnering with DoorDash on the commissary kitchen — to explore a new business model and ensure they make money on each delivery no matter what.

An employee cooks rice for Rooster & Rice at the shared Redwood City kitchen. Photo courtesy DoorDash.

"It's the future," echoed Sean Vahey, co-founder of ice cream company Humphrey Slocombe. "We're getting in there early and being part of something new that's not going away."

Humphrey Slocombe has a strong customer base on the Peninsula, Vahey said, so this is an easy way for them to respond to local expansion requests. They've teamed up with Rooster & Rice so customers can add a pint of ice cream to a lunch or dinner order, and vice versa. Humphrey Slocombe also plans to offer corporate parties and special events in the Redwood City kitchen, another frequent customer request.

"If this wasn't something good for us and good for our guests," Vahey said, "we wouldn't be doing it."

As delivery grows in the Bay Area, "I want to be part of it, or at least explore it and make sure that we're not being left out," he said.

DoorDash's end goal, Hannon said, isn't a world where we only eat food delivered from restaurants that have no actual physical presence.

"At the most simple level people are eating three times a day, seven times a week. There are dozens of eating occasions in a given month for any given consumer," he said. "Delivery broadly helps augment different eating occasions.

"We don't see a world," he said, "where consumers are no longer going into brick and mortar restaurants."

Meanwhile, there's room for additional restaurant-tenants at the Redwood City kitchen, and the company will likely expand the shared kitchen concept, though Hannon wouldn't say where or when.

"When they add a new kitchen somewhere, we'd like to be in it," Park said.