Madison-based online food ordering and delivery service EatStreet Inc. will lay off 26 Wisconsin delivery drivers as it begins contracting drivers from third parties instead of employing them directly.
The layoffs will begin around Aug. 21, according to information EatStreet filed with the Wisconsin Department of Workforce Development earlier this month.
"While we have historically operated with W-2 employed drivers, we have found it difficult to maintain this model in the highly competitive food delivery business," EatStreet said in a written statement.
The company said transitioning to using drivers contracted from third-party delivery services puts it "in a better position to compete in the future" and will allow it to offer expanded delivery hours and broader coverage. It works with more than 5,000 restaurants in more than 250 U.S. cities and will continue to operate in all of those markets, the company said.
EatStreet was founded in 2010, years before competitors including DoorDash Inc. and Uber Eats entered the market. It's backed by local investors including the well-known startup accelerator gener8tor and CSA Partners, a Milwaukee venture capital firm run by former Milwaukee County Executive Chris Abele.
EatStreet began providing its own delivery capabilities in 2017, after acquiring part of a Philadelphia-based food delivery startup called Zoomer. At the time, EatStreet co-founder Matt Howard said the model would allow it to offer a better customer experience and provide users with the capability to better track their food.
Earlier this month, a U.S. District Court issued a $1.24 million judgment against EatStreet in a class-action case on behalf of former delivery drivers who said the company violated the Fair Labor Standards Act by underpaying drivers and failing to reimburse them for vehicle and mileage expenses.
Late last year, EatStreet told the court it would likely be unable to honor its payment obligations, stating that "EatStreet’s financial circumstances have deteriorated rapidly" since August 2022. The company said it was facing likely foreclosure or insolvency after it was unable to negotiate a sale or funding deal to keep its business afloat.
