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Food delivery apps cut some restaurant fees amid surging demand due to COVID-19

Food delivery services like Uber Eats and Skip the Dishes are adjusting the fees they charge restaurants to process and handle orders, after pressure from politicians to do more to help an industry that has been devastated by COVID-19.

Delivery and takeout orders have been a lifeline for restaurants in the ongoing pandemic that has wiped out demand for indoor dining. But fees charged by the delivery services can often be up to 30 per cent of the bill, which eats into the restaurant’s profit margins which were razor thin to begin with.

Uber Eats said Friday it has lowered its “delivery-only” fee for restaurants that process the order themselves but simply need a delivery service, to 7.5 per cent. That service was only launched last month, but the rate will be in effect until the end of the year at least, at which point that rate will be 15 per cent.

And the company has added an option that charges zero per cent commission for pickup orders, when the order is processed by Uber but the food itself is picked up by the customer. That option didn’t exist prior to the pandemic, but Uber says it is extending that option until next March at least.

“As delivery moves from a luxury to a utility during the pandemic, we have a responsibility to support restaurants, delivery people and customers,” Uber Eats Canada’s general manager Lola Kassim said. “We’re continuing to build on the needs of our partners to create flexible delivery options and new features that will help local restaurants reach new customers, increase demand, and generate revenue in a sustainable way.”

Ontario Premier Doug Ford called on the industry to do its part, given the precarious financial position of their restaurant customer base. 

“Consider capping your fees,” Ford said. “You’re hurting these restaurants.”

Restaurants like King Rustic in downtown Toronto have been relying on those services’ apps to process almost every order they have some days, co-owner Loren Amos says.

But fees that come with each order are hard to swallow, adds co-owner Amena Ali-Ridha.

“Even though they do take 30 per cent, it’s better than nothing,” she said. “I would rather take 70 per cent of something than nothing.”

Those apps are likely to be even more crucial for restaurants in the coming months, as cold weather shuts patios and COVID-19 protocols forbid seating diners indoors, too.

Uber Eats is a major player in the market, but it isn’t the only one. Skip the Dishes handled 23 million orders across Canada last quarter, almost double the pace of a year ago. The company says it is also cutting some of its fees given surging demand.

Skip the Dishes and GrubHub recently joined the Just Eat family of companies, amid a round of consolidation in the growing food delivery industry. (Skip the Dishes)

“Skip’s support package for local, independent restaurants in affected regions will give back 25 per cent of the commission rate they’ve agreed to when joining the network on all pickup and delivery orders,” a spokesperson told CBC News, adding that the company has already given Canadian restaurants $24 million in rebates since the pandemic began.

“Restaurants receive the rebate directly on their statements, which we’ve accelerated the frequency of during COVID-19 to assist with cash flow.”

Sean Fleming at the Toronto pizza and pasta restaurant Il Fornello says the industry has been hit perhaps harder than any other by the pandemic, and it’s doing its part in the fight. But they need help.

“We are all in this together,” he said. “And if it’s to eliminate the spread of COVID, we need to close the interior of our restaurants, then we should be able to also benefit from a lower commission rate with some of these large companies that have become such monsters in the marketplace.”

Another option

While fee reductions from the big boys may help, at least one tech startup is trying something different to give restaurant owners a different option.

Nav Sangha founded Ambassador in 2017, a technology platform that allows restaurants to process takeout and delivery orders easily and efficiently using a web portal the company provides to its website. 

It’s been called the “Shopify of restaurants” and much like that e-commerce platform, Ambassador has seen a spike in demand during the pandemic from restaurants that weren’t previously handling takeout and delivery orders, but suddenly need to make a go of them.

“What we set out to do … is to provide an alternative for restaurant small business owners to kind of take control of their market again and win back their customer,” Sangha said.

The service so far works with 150 restaurants across Canada, primarily in Toronto, but some in Vancouver, Calgary, Winnipeg and even a handful in the U.S.

Instead of a percentage of every order, Ambassador charges a flat fee of $99 per month to restaurants that sign up.

“We saw restaurants using Ambassador from the early days of the pandemic who didn’t even have a website to begin with,” Sangha said. “Within a week of being on a platform were all of a sudden doing self-managed delivery.”

He’s convinced he’s found a better way, which is why he isn’t impressed by the small gestures being made by his larger rivals to temporarily cut their fees.

“To me this is a short term initiative designed to placate the industry and stop the adoption of software solutions that take consumers away from using their apps,” he said. “Uber can try to confuse the market with these initiatives, but we are going to continue to see more and more independent restaurateurs navigating takeout and delivery independently using software solutions like ours, and depending less upon third party marketplace apps.”  

Fleming, for one, hopes so. His restaurant has been on the new service for a short time, and he’s impressed with what he’s seen so far.

But his experience of trying to handle delivery without having to use big services like in the early days of the pandemic taught him just how hard a task that is to do, long term, because of their ubiquity on people’s smartphones.

“We realized pretty quickly that the companies are not really easy to beat,” he said.

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