More and more people are discovering that restaurants don’t actually like third-party delivery services. While many delivery services claim to be a “lifeline” for restaurants amid the COVID-19 pandemic, many of these restaurants express different sentiments, noting the ways delivery services make a portion of restaurant profits.
In 2020, countless restaurants were forced to close their doors for good due to nationwide quarantines, but delivery apps like Uber Eats, DoorDash and Grubhub seemingly kept these restaurants afloat. What customers didn’t realize, however, was just how much these apps profited off struggling businesses.
In mid-January, the Sway podcast hosted Uber’s Chief Executive Dara Khosrowshahi, where he was met with uncomfortable questions by host Kara Swisher about the reality of his business practices. One notable and alarming statistic often highlighted is that delivery services charge restaurants commission fees of up to 30 percent per transaction for their services. Khosrowshahi refuted this claim, saying Uber Eats charges 13 percent commission per transaction, “net of the courier,” which goes up to about 15 percent if restaurants use their own couriers.
Restaurants Struggle Under Delivery Commission Fees
The problem many restaurants face is the damage of commission fees. With the average restaurant operating on a profit margin of less than 5 percent, even a fee of 13 percent could be detrimental to operating costs and profit. To help mitigate this problem, some cities have introduced commission fee caps on delivery services, but some are still as high as 10 percent.
Before the COVID-19 pandemic, it was an easier decision for restaurants to opt-out of outsourcing their deliveries to third parties like Uber Eats, but nationwide quarantines and limited dine-in options often leave small restaurants with no choice. With many restaurants struggling to stay afloat, let alone have the income to hire their own delivery drivers and other staff to sustain delivery processes, it’s virtually impossible for them to not rely on delivery apps.
To show just how much restaurants have struggled as opposed to the third party delivery apps that service them, the restaurant industry lost $240 billion in sales since the pandemic struck, and about 2.5 million jobs. Meanwhile, apps like Uber Eats doubled in revenue, and the delivery service Postmates saw its first $40 billion run-rate for the year 2020. While it’s unclear what will become of these restaurants and delivery services when and if the world returns to a new sense of normal, delivery apps aren’t going anywhere in the short-term.