5 Loaves Eatery, a tiny breakfast and lunch spot in Chicago’s Chatham neighborhood, avoided offering delivery for as long as it could.

But when sales plunged 85% early in the pandemic, owner Constance Simms-Kincaid felt she had no choice but to sign up for Grubhub, DoorDash and UberEats. She credits them with keeping the family business alive.

“I’ve gotta say that it’s been a blessing,” she said.

But it’s also been a curse.

5 Loaves, known for its grits menu, is handling 100 takeout orders a day and exceeding its pre-pandemic revenues. But profits are down because of packaging costs and the fees charged by third-party delivery platforms. Customers call frequently to complain about cold food.

A city law capping the fees delivery services charge restaurants at 15% per order during the pandemic has eased the pressure on her bottom line, but Simms-Kincaid worries how she’ll navigate delivery once the temporary cap is lifted.

“We have to get off of those platforms,” Simms-Kincaid said.

The pandemic has made food delivery central to people’s lives and catapulted the business of third-party delivery platforms, which many restaurants rely upon for marketing as well as drivers. But the relationship is fraught with problems, prompting some restaurants to search for alternative delivery models they can sustain long term.

Some restaurants are hiring their own drivers. Others are partnering exclusively with a single third-party platform so they can exert more control. Many are trying to drive customers to their own websites, rather than the outside companies, for online orders to avoid fees that can take a 40% bite out of each transaction.

Meanwhile, third-party platforms are consolidating, diversifying, and seeking more cash by going public. DoorDash, which has expanded beyond restaurant orders to also deliver toiletries and pet supplies, raised $3.4 billion in its initial public offering in December, one of the largest IPOs last year. The price garnered ridicule from some analysts given that the company continued to lose money even as revenues during the pandemic soared.

Restaurant delivery sales more than doubled to $40.8 billion at the end of 2020, from $19.6 billion a year earlier, according to market research firm NPD Group. The share of orders through third-party aggregator apps more than tripled, to $20.6 billion from $5.9 billion, during that time.

While the growth is expected to stabilize once restaurants are able to operate their dining rooms at full capacity, the long-term habits shaped by the pandemic suggest delivery will remain paramount to their business.

For now, restaurants are flocking to third-party delivery platforms because it’s the easiest way to get their food to customers’ doorsteps, said Cara Rasch, a food industry analyst with Packaged Facts, a market research firm. Diners also are signing up in droves as they use the gift cards employers gave them in lieu of holiday parties, she said.

But Rasch doesn’t expect the third-party giants to dominate delivery for long.

Delivery is expensive to operate, largely because of labor costs, yet the platforms are continually offering discounts to draw customers and people bounce between them in search of the best deals. Delivery drones that could cut costs are years away.

“I think it would be very hard, if not impossible, for companies in this space to become profitable,” Rasch said.

She expects further consolidation will just leave one or two big players. Last year Uber Eats bought Postmates for $2.65 billion and Europe’s Just Eat Takeway announced plans to buy Grubhub for $7.3 billion, while DoorDash bought Caviar in 2019 for $410 million.

Rasch expects more restaurants to adopt in-house delivery, especially those with high volume sales of inexpensive food.

Coalfire Pizza, which has restaurants in the West Town and Lakeview neighborhoods, started doing its own deliveries in December 2019 as it weaned itself off of the third-party platforms, owner Dave Bonomi said.

The delivery platforms had driven lots of orders to Coalfire, at times overwhelming the kitchen, but the drivers could be rude or would clog the aisles, Bonomi said, and he didn’t want them representing his restaurant.

Though he’d gotten the commission fees down to 10% by “complaining incessantly,” he worried about other mom-and-pops getting squeezed. The platforms collect a percentage of each order’s sales and some also collect an extra marketing fee for better positioning on the app.

Sales dipped when Coalfire first left the platforms, but it didn’t take long for customers to learn to order through its website. Bonomi charges a $6.99 delivery fee per order and gives 100% of it to his drivers, who are independent contractors, plus customer tips, with the guarantee that they’ll make at least minimum wage. On average they make $25 to $30 an hour, Bonomi said.

Bonomi calls third-party platforms “the scourge of independents” and said he encourages fellow restaurant owners to bring delivery in-house. But they fear the higher labor and insurance costs and worry customers won’t think to order from their restaurants if they’re not on the platforms, he said.

“They think they’re trapped,” Bonomi said. “I’m out of breath trying to explain to these guys that it’s so easy now to build your own online ordering and just do it.”

Restaurants urging customers to order directly from their websites or mobile apps is on the upswing, not just to avoid the fees but to take back ownership of the customer relationship, said Duane Lyons, who leads the national restaurant practice at Wavicle Data Solutions, an analytics consulting firm with U.S. headquarters in Chicago.

When customers order through third-party sites, restaurants don’t get any information about them and can’t market to them directly, Lyons said.

That shift threatens to weaken the business model of the delivery platforms, which become commoditized if they don’t control customers’ data, he said.

“They only maintain relevance and dominance if they own the customer relationship,” Lyons said.

Some restaurants have figured out how to make the third-party platforms work for them.

One Off Hospitality Group, whose restaurants include Big Star and The Publican, opted to outsource delivery because driving is a high-liability behavior and “we are not a transportation company,” CEO Karen Browne said.

Still, she worried about the fees and service snafus that have stemmed from the delivery companies’ rapid growth. So Browne established an exclusive partnership with DoorDash and set performance criteria so that she could feel comfortable allowing it to be an extension of One Off’s brand.

“When you use third parties, you as a hospitality company have an equal responsibility to be managing them, giving them clear expectations, having an escalation process that works,” Browne said. “I’m not sure a lot of restaurants do that.”

For some boutique offerings — such as its cocktail and bread subscriptions – One Off’s employees make the deliveries to ensure a white-glove experience, Browne said. It also is doing logistics internally for the company’s new One Off at Home service, which offers nationwide shipping of cooking kits and classic dishes from its Chicago restaurants.

Browne doesn’t expect interest in delivery to wane.

“Mid- to long-term I really believe this income stream is here to stay,” she said. “People have adapted to being able to have really great food and drink at home.”

Customers have shown that they are willing to pay a premium for the convenience of delivery, which often includes higher menu prices as well as a delivery fee and driver tips, said Darren Tristano, CEO of Food Service Results, a Chicago-based market research and consulting firm. That’s especially true for the young, urban and affluent.

“The millennial, the Gen Z consumer, is like, ‘Yeah just deliver it,’” Tristano. “It’s growing up with that delivery rather than being old-school and calling and picking it up.”

Restaurants, however, have struggled to cope with fees that can cause them to lose money on orders. Chicago in November joined several other large cities in putting a 15% cap on the marketing fees third-party delivery platforms charge restaurants, but it is set to lift once the pandemic is over. DoorDash passed the cost onto customers by tacking a 15% “Chicago fee” onto their bills.

While the third-party platforms get criticized for fleecing restaurants, they are grappling with high costs.

Chicago-based Grubhub, a delivery platform pioneer when it launched in 2004, lost $156 million last year even as revenues grew 39%, to $1.8 billion. It ended the year with 31.4 million active diners, up 39% from the year before, and 265,000 restaurant partners, up 71%.

Grubhub says once expenses are accounted for, the company made 1% of total food sales as profit. During nonpandemic times it’s about 3%.

The company considers itself profitable for the past 28 quarters based on EBITDA, a measure of earnings before subtracting interest, taxes, depreciation and amortization.

While Grubhub over the past year has focused on supporting restaurants during the pandemic, including by reducing fees and contributing funds for relief grants, its model during nonpandemic times is based on “powerful underlying economics,” spokeswoman Katie Norris said. Small- and medium-sized businesses value being listed on its marketplace, which serves as a replacement for advertising, and often opt for higher marketing fees for more exposure, she said.

Some delivery services have carved out a niche to set them apart from the crowd.

Chicago-based Chowbus, founded five years ago, focuses on delivery and pickup for Chinese and Asian restaurants and offers some unique options, like allowing customers to bundle orders from multiple restaurants.

The app, which is in Chinese as well as English, highlights small businesses that often don’t have their own websites and “get lost in the shuffle,” said Kenny Tsai, head of operations. Its services include helping restaurant owners who don’t speak English to translate mail or business documents, he said.

Chowbus, which has thousands of restaurants on its platform and is in 27 markets, saw sales grow substantially in 2020, Tsai said. He declined to discuss revenues or profitability.

The service tends to charge lower fees than the large mainstream platforms: Restaurants pay Chowbus a 15% to 20% commission fee, while customers pay $2.99 to $4.99 for an order. And its delivery radius is vast, sending orders from Chicago’s Chinatown to as far as Milwaukee and South Bend, Indiana.

The model benefits from the fact that Asian dishes tend to travel well, allowing a driver to pick up 15 to 20 orders at a time and still deliver them warm, Tsai said. Given its popularity, Chowbus is considering expanding beyond Asian cuisine.

“A lot of what we do translates to other ethnic restaurants, other independents,” Tsai said.

For some restaurants, the future of delivery may actually be pickup, which is much less expensive and easier to control.

Carryout is a much larger revenue stream for restaurants than delivery. Delivery represented 11% of off-premise restaurant sales in December while carryout accounted for 46% and drive-thru 44%, according to NPD Group.

Chicago-based Belly Melly, an online food ordering platform that launched last year, charges restaurants a 5% order processing fee and donates $1 of each sale to charity. It doesn’t have drivers, but it provides an ordering tool as well as a marketing opportunity as customers browse the site, which lists several hundred local restaurants.

To founder David Litchman, who also owns the restaurant chain Pockets and the ordering technology company iMenu360, focusing on pickup is the best solution for restaurants catering to a continued hunger for eating out while at home.

“Delivery is an ugly side of the business,” Litchman said. “You clearly can’t control the quality, can’t control the service times. Driving your customers to your own website to pick up is the No. 1 way to help their business.”