Do Restaurants Profit from Outsourced Delivery Orders?
As coronavirus pandemic hit the US in spring and closed countless restaurants’ doors, many establishments started relying on delivery services for their survival. Most eateries don’t have their own drivers, so Uber Eats and Grubhub became their one and only lifeline.
While getting exposure to a wider range of customers through delivery sounds all good, partnerships with outside companies for that can be very expensive. This was known prior to the pandemic, but during it, when some eateries survive only because such a service, the financial burden became even more painful.
There have been owners and chefs who have been trying to expose what they have to go through to make a few dollars after delivery services are deducted. One such example is Chicago Pizza Boss owner Giuseppe Badalamenti – he shared a post about how he got $376.54 out of $1,042 order after Grubhub charges were taken away. He, like many others, urged consumers to not believe that ordering through third party apps supports restaurants. Restaurants are tired of suffering in silence, Giuseppe said, and enough is enough.
But is the situation really that bleak?
Grubhub confirmed that Chicago Pizza Boss receipt was correct, but it also stated that this particular establishment opted for extra fees for marketing, included delivery price, and higher paid marketing package. In addition to that, there was a fee for missing items from the order. Overall, most restaurants pay 15-25% in fees that consist of these fees: 4% processing and fraud protection fee, 15-20% marketing fee, and 10% optional delivery fee. All of that doesn’t amount to 65%, but singular cases of such ridiculous charges, unfortunately, still exist.
According to Grubhub, restaurants choose their own fee percentages and pay commission to Grubhub for generated sales. But despite all those reassurances, some fees still feel very heavyweight.
Since March, services like Grubhub, Uber Eats, Doordash, and Postmates have seen new customer numbers go through the roof. Many restaurants still don’t offer dine-in option and thus are forced to sign up with those services for delivery. Eateries are always advised to calculate their pros and cons before partnering with delivery services to make sure cost is not higher than benefit. Let’s take a look at some fees that your favorite restaurants pay for the luxury of getting their meals to you:
Restaurants pay about 15-30% fee. It covers everything and can be selected based on individual needs. If a restaurant uses its own drivers, it will pay 15% marketplace fee. If Uber drivers are used, the payment will be capped at 30%.
Restaurants and retailers negotiate a fee individually with Postmasters as it depends on options selected. All fees are included in the commission fee, which is calculated on pre-tax amount.
The company negotiates rates with restaurants individually and does not want to disclose the real percentages. Eateries pay some percentage of the subtotal amount and delivery services are optional.
While nobody expects free services, some people feel that those delivery fees are a bit too much as so many restaurants continue to struggle. Some progressive cities are beginning to step in and mediate between restaurants and delivery companies trying to make both sides happy. Jersey City, for example, caps third party delivery commissions at 10%. Washington D.C., Seattle, and San Francisco are following suit with 15% cap. Los Angeles is also at 15%. New York, Chicago, and Boston have been in talks about similar measures. So far no national mandate has been issued.
Europeans are also on top of this stuff with Deliveroo in the UK getting criticized for its 35%+ commission fees. Uber Eats, DoorDash, Postmasters, and Grubhub are all facing class action lawsuits for their excessive charges.
To remain in good graces some delivery services have developed relief programs to show that they support restaurants during this difficult time. Last spring DoorDash reduced commissions for some eateries by 50%. It benefitted over 150,000 restaurants in the US, Canada, and Australia, but the program lasted only through May.
In March Uber Eats didn’t charge marketplace fees for pickup orders and continued with it through June. The program has since expired.
Postmasters tried some pilot programs in Sacramento, Detroit, San Francisco, and Los Angeles, where they didn’t charge commission fees and discounted marketing promotions. Those measures were temporary and very limited.
Grubhub allowed for more time to pay marketing commissions, but did not waive the fees. This only happened for one month in March, but many restaurants are still struggling and closing down.
When it comes to your convenience, think before you use the third party delivery companies. Consider driving to get a pickup yourself or use restaurant’s fleet if they have it. Doing so will help your beloved places survive those difficult times and stay in business.