Shanghai's longest-running English-language food delivery app, Sherpa's, has announced to several restaurant partners that it will close at the end of this month, concluding a 25.5-year run in our beloved city! No easy feat, to say the least.

Sherpa's Impending Closure

In recent years, Sherpa's has found it hard to compete with Chinese language food delivery powerhouse apps – like Meituan and Eleme – that can offer quicker, cheaper, and wider option of delivery choices to both local and foreign communities. As a result, Sherpa's began contacting local restaurant owners to share the sad news of the impending closure and to sign contract termination documents accordingly.

According to The Rooster owner Chase Williams, "I was contacted by the Sherpa's team on Tuesday, December 3. On the phone, I was told they are closing at the end of this month and just need us to chop some new paperwork to terminate the contract. We were assured that December revenue would be paid as usual in January still."

Translation:

Agreement for Early Termination

Party A: Shanghai Sherpa's Trading Development Co., Ltd.

Party B: [Redacted]

In view of the fact that both parties, Party A and Party B, previously signed the "Restaurant Service Contract" and the "Sherpa's Platform Service Agreement" (collectively referred to as the "Original Agreement"), both parties have now reached a consensus to terminate the Original Agreement early as of December 2, 2024. The terms of this agreement (hereinafter referred to as the "Agreement") are as follows:

Due to adjustments in business strategies, both parties agree to terminate the Original Agreement as early as of December 31, 2024 (hereinafter referred to as the "Termination Date"). Upon termination, Party A and Party B shall waive all rights and obligations under the Original Agreement, except for obligations related to payment reconciliation. Payment reconciliation shall be completed within 15 days after the Termination Date as stipulated in the Original Agreement.

Both parties agree that during the early termination process, Party B shall ensure that customer service continuity and quality remain unaffected. Prior to Sherpa's platform closure, Party B shall continue to provide necessary customer support for its clients.

Within 30 days of signing this Agreement, Party A shall remove all data related to Party B from the Sherpa's platform.

Even after termination of the Original Agreement, both parties shall continue to abide by its confidentiality clauses, protecting each other's trade secrets and business information.

Should either party breach any provision of this Agreement, the breaching party shall be liable for all direct and indirect losses incurred by the other party.

Both parties confirm that the early termination of the Original Agreement does not involve any unresolved matters. Party B shall not request Party A to pay any termination-related fees or any other additional compensation.

In the event of any disputes arising from or related to this Agreement, both parties shall first resolve them through friendly consultation. If consultation fails, either party may bring the dispute to the court with jurisdiction over Party A's location.

This Agreement becomes effective upon signing by both parties and holds the same legal force as the Original Agreement.

The City News Service team has confirmed with inside sources at Sherpa's that they are in fact closing at the end of this month, but they have yet to release an official statement.

What is Sherpa's

Since its inception in downtown Shanghai in 1999, the company has flourished, expanding its reach throughout Shanghai and into Beijing in 2011 and eventually Suzhou. Across millions of square kilometers, Sherpa's has consistently delivered delicious meals to eager customers, navigating the rise and fall of countless partner restaurants along the way.

Sherpa's Backstory

When tasked with finding an internship during his MBA at the China Europe International Business School, American Mark Secchia took an unconventional route: he founded his own company, which you may have guessed – Sherpa's.

The original office was a borrowed space from a friend's cleaning company, utilized after hours when the cleaning staff finished their shifts at 5:30pm. Once the cleaning crew clocked out, the Sherpa's team would move in to access the computers. The first couriers delivered meals using wooden boxes strapped to their bicycles, sporting baseball caps until proper uniforms were later crafted by the mother of one of the original team members.

The early days were fraught with challenges. Mark would stand outside popular expatriate spots in Shanghai, such as Plaza 66 and The Portman, armed with photocopied menus, distributing flyers and urging people to try the new delivery service. Frustrated and on the brink of giving up, he contemplated dissolving the company. Fortunately, perseverance paid off.

Over the last 25 years, Sherpa's partnered with over 2,000 restaurants throughout Shanghai, Beijing and Suzhou.

Sherpa's by the Numbers, and Acquisition by YUM! Brands

By 2017, Sherpa's was estimated to be processing more than 1,800 orders per day. Internal staff averaged out their own order history, arriving at a comfortable 150 yuan average order value, meaning Sherpa's would have brought in upwards of 70 to 80 million yuan/year in sales revenue.

That year, Sherpa's was acquired by YUM! Brands, the same company that owns KFC in China.

Delivery services, however, were hit hard during the pandemic, with Sherpa's daily order rate plummeting to 700 orders per day roughly, according to internal sources. Sherpa's commission, which it charged to restaurants, was a floating rate depending on how many orders each restaurant had, with sources telling us it was between 20-30 percent. People who are good at math can come up with estimations of Sherpa's gross profits.

In 2021, Sherpa's was fined due to anti-monopoly laws in China to the tune of 1.2 million yuan.

Chase Williams explained that the sliding scale commission based on revenue ended up being bad for businesses. Chase mentioned, "Unfortunately with Sherpa's deliveries slowing down over the years and revenue lower, the commission rate was getting higher and higher."

What Does This Mean For Shanghai's F&B Scene

There's been a lot of news of closures of late, namely the big one that shook Shanghai to its core with the sudden shuttering of all Camel Group venues (The Bull & Claw, Kin Urban Thai, El Santo, and D.O.C Gastronomia Italiana) on December 1.

For expats who don't speak Chinese, there are other options in Shanghai to order in English, namely, JSS, a Beijing delivery service that entered the Shanghai market in 2019 but didn't really take off until 2021. We might see additional businesses hop onto JSS as well given that their commission scheme is fixed at 18 percent, a confidence booster for businesses who don't want to see their commissions hike in case orders decrease.

Similarly, as we bid Sherpa's farewell, it truly feels like the end of an era. However, new endings pave the way for new beginnings.