- by Alex Alper |
- August 19, 2020
- Restaurant Technology | 9 min read
50% of Restaurants Still Dont Have a Digital Solution
Digital solutions have become essential during the COVID-19 pandemic for restaurants. On-premises dining has become a dangerous activity and forced customers to dine at home. When even venturing outside carries the risk of infection the natural solution is online ordering and delivery. Unfortunately, the vast majority of restaurants were not equipped with the infrastructure to support large scale online and mobile ordering.
Enter third-party delivery apps. Platforms like Grubhub, Uber Eats and DoorDash provide all the digital infrastructure and a delivery workforce so restaurants dont have to worry about anything other than what they were already doing. Unfortunately, the convenience and expertise they offer dont come cheap
Depending on the platform, restaurants can be faced with complicated commissions and payment structures that generally range from 15%-30% per order.
Here are how the most common platforms break down their charges:
Uber Eats: A representative stated commissions vary based on the package a restaurant chooses. For restaurants that use the app only for ordering and already have their own delivery means, the commission rates are about 15% on average. Using the app as well as their delivery service increases commissions to 15% to 30%.
Postmates: Postmates was acquired by UberEats in July 2020 effectively making them the second biggest delivery platform in the US. Both services continue to operate separately.
. A company spokesperson stated the commission rates are decided on a case by case basis with each restaurant and that arbitrarily setting on-demand delivery prices has real consequences that undermine our ability to operate and kills the whole industrys ability to provide the services restaurants need to stay open. No hard numbers were given but according to various surveys from restaurants, commissions generally fall between 20%-30%.
DoorDash (Owns Caviar): Similarly, DoorDash representatives refused to give reliable estimates for how much commission fees cost restaurants. Surveys indicate that commission fees are most commonly between 20%-40% at the highest levels. Some restaurants have had luck reducing commission fees to 15% during the pandemic but many more restaurants have received pushback.
Grubhub: A Grubhub representative said their platform is free, but restaurants will have to pay 10% commission to access their delivery driver network. Restaurants will have to pay an additional 15% if they want their business featured on their app when customers use the search on their platform for delivery and pick-up options. Restaurants have pushed back saying if they dont pay for Grubhub marketing meaning featured in search options, it is doubtful that customers will be able to find their business on the platform.
Based on this estimate, commissions should be around 25% per order but anecdotal evidence suggests the average commission fee is approximately 30% per order.
Chef Ashish Alfred, the owner of three restaurants in Maryland, was clear for his disdain for the delivery platforms but acknowledge for many restaurants that do not have the resources to build out their own digital platforms, there are few other options.
What are we supposed to do?, he said. We can hate them all we want, but Id rather have 70 percent of something than 100 percent of nothing.
That nothing is a reality for many restaurants.
Our market data suggests that 50 percent of all restaurant operators do not have access to a digital solution today, and even those who do often cant afford it or outsource it, Tech company Toast spokesperson Tejas Kataria said.
Many restaurants still struggle with understanding and effectively implementing digital solutions. Other restaurants cannot afford to hand over 30% of their revenue resulting in a loss of money each time someone orders from them.
May Matsuo-Rose, the owner of Don Don Curry, pays 25%-33% in commissions per order to the four biggest delivery platforms.
Its been really difficult because they take so much commission. Its not a sustainable way to do business. Youre losing money feeding people, Matsuo-Rose says.
There is a steep learning curve even on convenient delivery apps.
Our rep at the kitchen even encouraged us to order from ourselves on these apps so we could trick the algorithm to make it seem like our restaurant is busier and more popular than it is, Matsuo-Rose says.
Digital algorithms dominate how viable businesses can appear on searches on each app. Less tech-savvy companies may be left in the cold even if they decide the high commission fees are worth it.
Easiest Digital Solution
It may sound like a dream but the easiest and best alternative to delivery apps are online services that connect your business directly to your customers, no multi-million dollar middle-man. These services can provide the digital infrastructure that restaurants need to provide online and mobile ordering but without the steep commission structure.
Using these tools, restaurants can customize their online ordering system integrated into Google searches and even comes with personalized mobile apps. Some estimates indicate restaurants can save at least $600 per month on commission fees alone not including having full control over marketing and brand exposure.
Small tech companies like eatOS offer robust features that match or exceed larger companies while also providing the individual attention that restaurants need and only small determined and agile companies can provide during these hard times.
Get easy to use advanced technology with world-class customer service at an affordable price. In many cases, the savings alone will pay for the service allowing restaurants to keep their profits and either save to weather out the pandemic or grow to ensure the business can hit the ground running when the pandemic ends.
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