- Addie Broyles American-Statesman Staff
When Jackie Davies started Eat Out In, the country’s first multi-restaurant delivery company, in Austin in 1986, she kept track of customers with a three-wheel Rolodex and stayed in contact with drivers via two-way radio.
Thirty years ago, the idea that you could get Mexican or Italian food delivered was a novel one. Chinese restaurants and pizzerias hired their own drivers to save customers a trip to the restaurant to pick up dinner, but the assumption in the industry was that other kinds of food wouldn’t travel well and customers weren’t busy enough to pay a premium to eat takeout while in their homes or offices.
Davies was busy enough to know better. She was a fashion buyer who traveled frequently to Dallas and Houston, and when she’d get home with nothing in the fridge, she wished for more options than pepperoni pizza or sesame chicken.
Her dad, a bread-distributor-turned-restaurateur in Detroit, thought it sounded like a pretty good idea, so she dived into a year of research to see if she could make it work.
By the time she was a teen, Davies had already worked a bunch of jobs for her father, helping route the bread drivers, make the salads, mind the books or ring up customers at the restaurant. “They thought it was real funny to have me cut the garlic on my date nights,” Davies, now 68, says.
Those years in the food service industry helped Davies know how to sell her delivery idea to restaurant partners who worried that the food, their most important asset, would get cold or tossed around in transit.
Gert Rausch, a prominent chef/owner who had a restaurant called Austin’s Courtyard, was the first to sign on, and his backing made it easier to persuade the folks at Chinatown, Katz’s Deli, County Line and Chuy’s.
Chinatown owner Ronald Cheng says it was Davies’ persistence that finally influenced him to say yes. “It was a difficult sell because my business at the time, we were super super busy,” he says. She wouldn’t take no for an answer, and he says it was easier to say yes than keep pushing her away.
Once she secured the supply chain, she had to build demand. “We had to convince the customers and the restaurants that you could deliver more than Chinese and pizza,” she says. “People weren’t that busy then.” But in March 1986, with five of the city’s most popular restaurants on her roster, she launched Eat Out In.
In that first year, Davies faced another challenge: She was 40 years old, working 80 hours a week, and she and her husband at the time had invested all of their money in the business. Six months in, she found out she was unexpectedly pregnant. They’d tried to have a baby for years, and she’d given up hope of becoming a parent. Now, she was birthing a baby, a new company and an entirely new business concept.
“I don’t know how I did it, honestly,” she says.
The restaurants gave Eat Out In 25 percent of sales, and customers paid another 15 percent. It turns out that diners didn’t mind paying a little extra for the convenience, and the restaurants quickly figured out that the volume of delivery more than made up for the fee they were paying. “I brought them extra revenue, and as delivery became more important, their delivery (income) went sky high,” she says.
“They all thought I was silly for keeping the number of restaurants small,” Davies says. “I told my restaurants, ‘If you won’t go with every delivery service, we won’t bring in all the restaurants.’ It was a gentlewoman’s agreement.” And it worked.
Austinites were ordering dinner delivered to their homes, but within a few years, it became clear that the real money was to be made in large catering orders, not the “onsie, twosies” as Davies calls it.
Catering customers — which came to include brides, movie directors and even Jimmy Kimmel, who hired them for his first South by Southwest taping — would order the food ahead of time. The restaurants had time to prepare. Davies’ staff made sure the food was hot and that the set up and take down went smoothly. It was a boon for the restaurants. “It was revenue coming in through the back door. We’re talking thousands of dollars they got on their books before they even open for the day,” she says.
In 1995, Davies hired a programmer to develop Eat Out In’s internal software, but her dispatch still had to call or fax the order to the restaurants. It wasn’t until 1999 that she got a website and 2005 until the online orders outpaced phone orders.
For many years, they relied on that giant three-wheel Rolodex that held cards for every customer, where Davies could keep track of addresses and phone numbers, order history, gift certificates, etc.
Without smartphones, her 60 or so drivers had to use physical maps to find addresses and two-way radios to stay in touch with the handful of dispatchers at the office. The radios stuck around until 2010, when drivers switched over to digital devices, but she still had dispatchers to help coordinate the calls for larger orders or other customers who didn’t want to order online.
Despite market pressure to add as many restaurants as possible, she only increased to 35, including some national and local brands like California Pizza Kitchen and P.F. Chang’s. Her roster of restaurants wasn’t changing at the same pace as the city’s culinary scene, and she didn’t use high-tech methods to optimize drivers’ routes or accept cashless tips, but her profits continued to grow.
“I wanted to deliver food. I didn’t want to get bogged down with technology,” she says.
After losing about 15 percent of her business during the 2008 recession, she came back with a bang, not only expanding to San Antonio in 2009 but increasing revenue 30 to 40 percent a year. In 2013, eight of the 35 restaurants brought in 80 percent of the business, and she was pulling in $8 million in sales a year with 17.5 percent profit.
“I only had a million people (in Austin), and we killed it,” she says.
This multi-restaurant delivery concept started popping up in several other markets in the 1990s, and in 2001, she acquired the local franchise for Takeout Taxi, her biggest competitor.
Davies faced plenty of competition over the years, but her relationships with some of the highest-volume restaurants in the city kept most of them at bay. However, Davies saw a shift in the industry about five years ago that she knew was about to change everything: Technology companies, some already in the delivery space, touting slick apps, top-notch mapping software, buzzy social media and hundreds of millions in venture capital.
“I saw all the competition and how cheap they were delivering. I knew the game was over,” she says. “When I saw Amazon was coming, I thought, I am so screwed.”
Amazon is even looking into delivery by drone, an idea that brings one of the biggest chuckles of all from Davies. “As the traffic got worse and worse, it got to be so challenging to make deliveries at 5 o’clock. I made a joke about how we’ll have to deliver by helicopter, and now they are talking about drones.”
In 2013, she made one last-ditch effort to bring together the regional delivery companies like hers with established customer bases and relationships with restaurants so that they could try to compete with the goliaths that were about to enter the space. “What was hurting our industry is we didn’t have the good software like what some of the newer websites were doing,” she says.
She couldn’t get anyone on board, and within a year, the next-generation delivery companies GrubHub and LAbite started buying those regional companies.
In fall of 2014, LAbite approached Davies about acquiring Eat Out In. The business hadn’t been for sale, so Davies threw out a crazy number she never thought they’d go for, but in February 2015 she sold the company. Earlier this month, GrubHub bought LAbite, bringing its customer base to more than 7 million users.
Fred Pavon, who has worked for Eat Out In for five years and is now the regional manager for North Austin, says that the company has expanded quickly in the past year to include more than 250 restaurants, many of which are mom-and-pop shops, which customers had been requesting.
The office staff, which also handles dispatch and customer service for the Houston and San Antonio orders, has grown to more than 40 office staff and 250 drivers to handle the orders. “We’ve gone from being the small company reaching out to the big companies to a big company reaching out to the small ones,” he says.
Even though GrubHub has reported a 27 percent increase in revenue, Davies’ profit margin would be an impossible feat for most companies in the space today. Some offer free delivery for first-time customers, with delivery fees ranging from $1.99 to $5, without a cut from the restaurants or upcharge on the price of the food.
“I’ve crunched those numbers, and they don’t make any sense,” Davies says. “They are giving it away. They are all thinking that when the number of users get high enough, the profit line will finally come.”
Davies, who is now enjoying retirement and thinking about writing a book about her experiences, has a hard time imagining a day when enough customers use the service to make such low-cost delivery profitable.
She misses the rush and rhythm of getting the orders, pushing them to the restaurants, coordinating drivers to get hot food to a customer who didn’t feel like cooking.
“It was a beautiful dance,” she says. “Now, I’m sitting back still watching to see who is going to win.”
Note: This story has been updated to correct the spelling of Fred Pavon’s name.