Before the coronavirus lockdown, Matt Majesky, owner of Pierogi Mountain, was unaware of the exorbitant fees that delivery apps Grubhub and Uber Eats charged him every time they processed an order for his restaurant.
But once the lockdown began, delivery apps became virtually the only source of business for restaurants. Many restaurateurs noticed that delivery companies became the largest expense for their restaurants – far more than what they pay for raw materials or labor.
Pierogi Mountain's main delivery company, Grubhub, was taking more than 40 percent of an order, Majesky said. That led to the restaurant running into financial difficulties and closing in late April.
“You have no choice but to sign up, but there is no negotiation,” Mr. Majesky said of delivery apps. “It becomes a hostage situation.”.
Even as apps like Grubhub, Uber Eats, and DoorDash have become financial saviors for restaurants in the pandemic, the percentages they take from restaurants have become a growing source of difficulty for restaurateurs.
Restaurant owners in Chicago, Pittsburgh, Florida and Texas have expressed their displeasure on social media. Some restaurants have closed, while others have taken down their apps and are looking for other ways to take orders.
Complaints about the amounts that apps charge both restaurants and consumers have been longstanding, but the issue has been magnified as many restaurants are not operating under normal conditions. Even when they do start to reopen, delivery is likely to make up the bulk of their orders.
Many restaurants are also worried that they will soon have even less power to negotiate the amounts they pay on delivery apps. That's because Uber is in talks to acquire Grubhub, creating a new delivery app with much more power.
Peter Land, a spokesman for Grubhub, said Mr. Majesky paid higher amounts than normal because he had chosen to take part in marketing programs that increased the visibility of his restaurant.
“We recognize that this is a difficult time for independent restaurants,” Mr. Land said. “We have redoubled our efforts to support them.”.
Mr. Majesky said Grubhub led him to believe the marketing program was one of the things it pays to help local restaurants, and that he didn't realize he would have to pay extra. Other restaurants have voiced similar complaints.
The gap between the success of apps and the hardship of restaurants is striking. Revenue in recent weeks at restaurants has fallen by about 35 percent from a year earlier, while revenue for delivery services has increased by about 140 percent, according to data from M Science, a company that analyzes transaction data.
For a typical restaurant, fixed costs like labor, food, and rent consume about 90 percent of revenue. That leaves little room for the basic fees that large delivery services charge small restaurants, which are typically 20% to 30% of what customers pay for each order.
George Constantinou, who owns four restaurants in the New York area and uses DoorDash, Uber Eats and Grubhub, said: “Everyone is trying to help us. But these companies that are supposed to be our partners are taking more money than anyone else and trying in every way possible to charge us extra money.”
Matt Maloney, Grubhub’s CEO, promised in a March press conference with Chicago Mayor Lori Lightfoot that the company would contribute $100 million to reduce fees for local restaurants. But the fees were simply postponed for a few months.
In early April, Uber Eats reduced the fees restaurants pay if they don’t use its drivers. It also created a program that allows diners to contribute to restaurants. In the first two months of the program, it earned an average of $37 per restaurant, according to Uber data.
DoorDash, which works with large restaurant chains, said in April it would cut basic fees in half for all independent restaurants until the crisis passes.
Source: nytimes.com
