Covid-19 delivery systems set up for the restaurants- is it really worth it for them?
After the coronavirus pandemic shuttered dining rooms across the country, restaurant owners quickly began relying on delivery and pick-up orders as their primary sources of income. For many dining establishments that don’t have a fleet of drivers, food delivery apps can introduce small businesses to a wider range of customers.
But partnering with third-party services can also be incredibly costly. Long before the pandemic, many restaurateurs had been trying to shed a light on how expensive customer convenience can be when it comes to getting food delivered in the modern era. Now that these platforms have become the only way certain restaurants can continue operating through the pandemic, that harsh reality has more apparent than ever.
In late April, Chicago Pizza Boss owner Giuseppe Badalamenti shared a photo of a March statement from Grubhub, one of the country’s biggest food delivery apps. The now-viral post revealed one of Badalamenti’s restaurant clients brought in $1,042.63 worth of orders during the month — but only pocketed $376.54 after all of Grubhub’s fees were deducted.
“Stop believing you are supporting your community by ordering from a 3rd party delivery company,” Badalamenti wrote in the post.
“I shared the post out of outrage for the client. There has been a silent rumbling for at least three years and restaurants have been suffering in silence,” Badalamenti told TODAY Food about his decision to post the invoice. He added that he generally advises clients who want higher margins not to use third-party platforms.
But do most apps really rake in nearly 65% of restaurants’ profits?
A representative for Grubhub confirmed the statement’s authenticity and then broke down the various costs for TODAY, saying that while most of its restaurant partners end up paying between 15-25% in fees, this particular business opted to have $231 deducted from its profits to apply towards promotions, which are optional sales coupons a restaurant may offer customers. This restaurant was also charged a 10% delivery fee (also optional), plus it opted for a higher-end marketing package at 20%. Still, even before the promotions fee was deducted, this restaurant’s take home pay would have been $607.54, about 57% of the original orders.Over the past several weeks, many restaurants struggling to make ends meet have been relying on delivery services like Grubhub, Uber Eats, Doordash and Postmates to serve diners who can no longer patronize their eateries in person.
“We’ve seen nearly 10 times the amount of merchants sign up to be part of Postmates (since March). That’s restaurants, retail stores, even bookstores wanting to deliver goods to their customers,” a Postmates representative told TODAY.
But are these seemingly convenient services really worth the investment? It’s hard to say since each business is different, but restaurants should always thoroughly review an app’s service fees before making any decisions.
Related: Here’s what delivery services are doing to keep drivers and customers safe during the coronavirus pandemic.
Here is a breakdown of some of the most common fees associated with third-party apps. While all fees are not publicly disclosed, CNBC recently reported that many company’s commission fees can be as high as 30%.
- Restaurants partnering with Uber Eats typically pay a marketplace fee between 15-30%, depending on the services they select. This fee supports operational costs such as payment processing, customer support, credit card and marketing services, as well as employee onboarding and wages.
- Restaurants that use their own delivery team for Uber Eats orders pay a 15% marketplace fee. Those that use Uber’s delivery service pay a fee that’s capped at 30%.
- The minimum commission fee a restaurant pays when working with Postmates depends on which services the restaurant selects. Those fees are privately negotiated between the restaurant, or consumer goods business, and Postmates. A Postmates spokesperson declined to share a percentage range with TODAY, but did reveal that marketing and delivery services are included in the commission fee.
- According to the Postmates’ website, there are no upfront costs for restaurants partnering with the service and “partners only pay Postmates a commission on the pre-tax subtotal of goods sold via the Postmates Platform.”
- According to a DoorDash representative, who declined to share specific rates with TODAY, the company’s commission structure is personalized for each restaurant and those rates depend on what merchant services each restaurant selects. Restaurants that use DoorDash delivery services pay a percentage of the order subtotal, but delivery services are optional.
- Like similar services, DoorDash commission fees cover courier wages, background checks, insurance and credit card processing fees.
At Formula Marketing
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