PHOTO JAMES YEAR/THE DAILY IOWAN

By Katharine Carlon
katharine@corridorbusiness.com

Iowa restaurants are struggling to stay alive, with at least 1,000 expected to shut down permanently before the COVID-19 pandemic enters the history books, according to the Iowa Restaurant Association. But in something of a cruel irony, the companies that deliver their food to hungry customers are reporting record growth as many continue to shy away from on-premises dining.

“We’ve seen an explosive increase in demand and our growth is up considerably,” said Adam Weeks, co-founder and managing member of locally owned and operated CHOMP Delivery, which serves the Iowa City, Coralville, North Liberty and Cedar Rapids areas – adding the business boost, which comes as partnering restaurants languish, has been “bittersweet.”

“A lot of businesses are suffering as our business is exploding,” he said. “On the other hand, it has felt good to bring some revenue to businesses that really need it … especially before the [Paycheck Protection Plan] kicked in.”

CHOMP’s super-charged growth began in March almost as soon as restaurants were ordered to close except for takeout and delivery as part of an emergency order issued by Gov. Kim Reynolds. Though restaurants have since been allowed to reopen at reduced capacities, demand for delivery has remained brisk.

Mr. Weeks said establishments that were previously uninterested in using home delivery services for fear it might not match the quality of in-person dining, including Iowa Chop House and Saint Burch Tavern, have signed on. Meanwhile, the company has made new inroads into the Cedar Rapids market, which it entered late last year.

CHOMP has added about 40 new drivers since this spring, and now employs more than 100 in the Corridor, with plans for even more hiring as the service expands its geographic reach. Topline revenue is also up, Mr. Weeks said, despite “a lot of incentivizing and philanthropy,” including offering weeks of free delivery in partnership with economic development organizations including the Iowa City Downtown District and the Iowa City Area Business Partnership.

“Back in March, we didn’t know if we were going to continue to be able to operate, but as it played out and rapidly took off, we started to anticipate having a lot more hours and onboarding a lot more drivers,” he said, adding that as a result of the incentives, “The number of orders delivered skyrocketed quickly.”

CHOMP’s local competitors are seeing similar growth. Chicago-based Grubhub reported revenue of $459 million in late July, a 41% year-over-year increase over the same period last year.

“The strong trends we observed in April persisted throughout the quarter with year-over-year [number of orders] accelerating each month,” Grubhub President and CFO Adam DeWitt said in a recent shareholder report. “With that strength continuing in July, it is becoming more clear that the current environment has advanced the secular shift toward online food ordering.

Uber Eats also had a strong second quarter, with Uber reporting its delivery business is now bigger than its signature ride-hailing service. The delivery side saw gross bookings more than double to almost $7 billion, while bookings for ride services fell 75% over the same period last year due to the pandemic.

“[O]ur delivery business alone is now as big as our rides business was when I joined the company in 2017,” Uber CEO Dara Khosrowshahi said on a conference call with analysts and investors. “We’ve essentially built a second Uber in under three years.”

For many consumers, the pandemic marked their first time ordering delivery that was not pizza. Nearly 20% of respondents in a recent Forrest Research survey said that they had ordered restaurant delivery for the first time as a result of the COVID-19 outbreak, and many experts believe pandemic-related behavior patterns will stick long after the danger has passed.

“I believe we’re witnessing a much more profound shift in consumer behavior that will last well beyond the pandemic,” Mr. Khosrowshahi said. “Consumers are quickly becoming accustomed to the magic of having anything delivered to their door in half an hour, much like the magic of having a car show up in a few minutes.”

The DISQO Consumer Confidence Study, a shopping behavior poll of more than 10,000 consumers conducted weekly since March, suggests regular meal delivery is likely to indeed become a long-term trend. According to the poll, the reopening of restaurants across most of the country has boosted in-person dining by 292% over the last several months. Yet takeout and delivery have remained strong after peaking in May. In July, 49% of people surveyed had ordered food in the last week, and more than 70% said they planned to do so in the next two weeks, mirroring results from late June.

Mr. Weeks said he also expects business to continue booming, particularly with cold weather season approaching and many restaurants still only comfortable with outdoor seating for on-premises dining, including Oasis Falafel and Hamburg Inn on Iowa City’s North Linn Street. Even restaurants offering indoor seating can utilize only a fraction of their dining areas due to social distancing requirements.

“It means the delivery aspect becomes even more important as they lose outdoor seats,” Mr. Weeks said.

Mr. Weeks pointed to Amazon, which for years delivered only books before diversifying into products from clothing to furniture and electronics, with purchases often arriving on customers’ doorsteps within 24 hours.

“I think this [crisis] has catapulted our industry,” he said. “I can only imagine the growth trajectory is going to continue going very vertical.”   CBJ