As their tactics change in their competition against the giants of the food delivery industry, two Richmond-area operators have struck a deal to join forces.
Earlier this spring, local food delivery firms ChopChop and LoCo Richmond merged. The two company names are both still around, however co-owners Chris Chandler and Daquan Woodberry said it’s likely ChopChop will be their main brand.
Chandler started ChopChop in early 2018 as an alternative to the likes of UberEats and GrubHub, offering lower fees to restaurants. LoCo was launched about three years later by Woodberry, a local private chef and former owner of West End breakfast spot RVA Cafe.
The merger coincides with a change in how the two firms are competing with national players like DoorDash and UberEats. Despite bringing in additional customers, national delivery firms have become burdensome for some local restaurants due to their high fees.
Whereas ChopChop once competed with the national players by seeking exclusive delivery contracts with restaurant groups or trying to get customers to order through ChopChop directly, the merger has allowed Chandler and Woodberry to negotiate deals with those larger competitors.
Now at 34 restaurants around town, customers can place orders through the likes of DoorDash and UberEats but the delivery is handled by ChopChop. Woodberry said those sales include an average 10 percent sales commission paid by restaurants to the national platform, down from the roughly 30 percent rate national firms typically charge. ChopChop earns money on those transactions through a delivery fee of $4-$5.
ChopChop and LoCo’s merger was finalized in April. Terms were not disclosed.
Woodberry had been operating RVA Cafe at 7574 W. Broad St. for around three years when the pandemic hit. A meeting that summer with his accountant showed him that the business had successfully pivoted to delivery, but it displayed some bad news.
“(My accountant) was like, ‘You’re hitting this much in revenue,’ and I got all excited. Then I looked at the other line, and he was like, ‘This is how much you’ve given DoorDash.’ And I was like, ‘Crap. Well, we gotta do something different here,’” Woodberry said, laughing.
“We were making all this money but were giving 30 percent of it out the door to who knows where, for someone’s fifth yacht or something.”
He decided to start LoCo in late 2020, offering an order and delivery service similar to ChopChop, though LoCo’s footprint was primarily in Henrico County while ChopChop served mostly the city.
By late 2021 Woodberry closed RVA Cafe to focus on LoCo. He’d also begun working with Kbox, a UK-based delivery consulting and tech firm. In addition to providing things like order tablets and software to delivery companies, Woodberry said Kbox helped him get to the negotiating table with UberEats and DoorDash and eventually strike the deal to allow LoCo to deliver orders placed on the national firms’ apps.
“It kind of changed my dogma. I’m not in a fight against UberEats, DoorDash and GrubHub. I can talk and work with them,” he said.
It was also around that time that Woodberry and Chandler, who’d gotten to know each other through the industry, began discussing the merger. Chandler said he was keen on teaming up in part due to the deals Woodberry had made with the national players.
“It was a constant fight with (the larger firms). With the merger, we don’t have to really fight, we can kind of facilitate,” Chandler said. “We can help (restaurants) with what their needs are, and that’s lower rates. With Kbox, we’ve been able to regulate those rates to give them a lower commission and still keep it local because we still have our delivery service.”
The arrangement allows restaurateurs to use apps like DoorDash and UberEats more as marketing firms rather than delivery companies.
“Customers order through (national apps) because that’s what they’re used to, but the rest is handled locally,” Woodberry said.
Added Chandler: “Each platform has its own customers. That’s ultimately the reason it makes sense for us to team up. I can’t spend $1 million per year on marketing to get customers, whereas UberEats and DoorDash can.”
Following the merger, ChopChop has about 150 drivers locally, about 50 of which Chandler said deliver on a near-daily basis.
In early 2021, Chandler and ChopChop received a $120,000 grant from the city to help reduce its commission to 7 percent for a few months as restaurants navigated the last days of the pre-vaccine stretch of the pandemic.
“It was basically supposed to be a shot in the arm for the restaurants,” Chandler said, adding that they used all of the money to successfully keep their rates down for three months.
After the grant money ran out, Chandler said they tried to continue with the lower commission rates for around five months, but the numbers didn’t work out and ChopChop has since gone back to its usual rate of 16 percent.
“I wish that program would’ve lasted longer and we could’ve done more for the restaurants,” Chandler said. “But it circles back to (the merger). Now with the help of Daquan, we have a way to get lower rates for restaurants.”