How meal-delivery apps are hurting your favourite restaurants

How meal-delivery apps are hurting your favourite restaurants

"Most restaurateurs, however, seem resentful, feeling that these companies have poached their customers, and that they can’t afford not to pay the ransom in the form of a sales commission. They’d rather not trust a third-party company with delivering their food hot and on time. But they feel they can’t say no, as these companies gobble up market share by transforming diners into delivery customers...

“I would have less of a problem with it if the charge was passed onto the customer rather than the restaurant,” says Grant van Gameren, who co-owns a half-dozen restaurants in Toronto. “Restaurants often feel forced to join in order to remain competitive even if they know that Uber will take any bit of profit. I hope for a day when everyone on Uber revolts and gets off it. Uber’s new rate takes 35 per cent from the restaurants now and takes customers out of the seats.”

Again and again I heard restaurateurs describe being on the losing end of the disruption-technology industry’s strategy — getting between successful businesses and their customers, then charging the businesses to access their former customers...

[On commission] “Uber is 30 per cent for us,” says Mollie Jacques, executive chef at Lambretta Pizzeria in Toronto. “And the app gets worse every time they upgrade; we now have no control over anything, and it is definitely losing us customers. Foodora is 25 per cent and DoorDash is a bit lower. Foodora has the best service. Doordash, we don't make the food until the driver is in the door, as they are often so late the food is cold and we have to remake it.”

According to a recent story in The New Yorker, “How delivery apps may put your favourite restaurant out of business,” making a profit on delivery alone is not possible, as the labour cost of the delivery is too high (also, these companies are themselves as-yet unprofitable tech ventures). So the profit margin has to come from somewhere else: the pockets of restaurateurs. Meanwhile, according to a survey by Morgan Stanley, “forty-three per cent of delivery patrons said that a meal they ordered in was replacing one they would have otherwise eaten at a restaurant” — suggesting the problem is only going to get worse.

A lot of restaurateurs say they use these apps strictly for marketing purposes, hoping to break even on the high commissions while exposing their product to a larger audience. But I spoke with a former salesperson for multiple delivery apps, who, in addition to confirming the rates I was hearing from restaurateurs, also told me that the average customer doesn’t use these platforms to discover new restaurants, but instead orders repeatedly from the same half dozen.

In 2015, California chain In-N-Out Burger went so far as to sue Doordash in order to have their restaurants removed...

However, everyone seems happy with Ritual. It’s pick-up only. But the system has a feature called “Piggyback,” which can prompt coworkers to add on to your order by alerting them that you’re going to grab lunch from a favourite place. Ritual CEO Raymond Reddy tells me that about a third of the orders in Toronto end up piggybacking, which effectively creates a network of free delivery while increasing order sizes for restaurants. Ritual also (sorry to sound like a Ritual shill, but it is the only company that no one complains about) has much lower fees of 10 per cent, which restaurants can negate entirely with their regulars, if they get them to sign up as customers of the restaurant.

It wasn’t always this one-sided. In 2015, when UberEATS launched in Toronto, it was a good deal for everyone. But it was a different system. Back then, UberEats had only a handful of options every day. Restaurant partners would prep hundreds of orders of one or two items and load them into Uber vehicles, to be delivered over the lunch period. Consumers got meals out of orbiting cars within minutes. And restaurants were able to maintain food waste and labour cost by pretty much guaranteeing large-volume sales on a dish of their choice. But within a year UberEATS had transformed into a more traditional, “We’ll pick up food from a restaurant for you,” service. At the same time, they drastically reduced payment rates for their drivers.

One driver told me that to make any money, it’s necessary to work for multiple companies. With UberEATS, which prompts customers for tips after delivery instead of while ordering, he only receives a tip about 10 per cent of the time. We tend to think that it’s not necessary to tip for delivery because there are no servers. But there is just as much work for the kitchen, with no share of tips that would be collected from orders in the restaurant.

At the middle and high-end range of restaurants, dining out is about an experience. So people are going to keep going out to eat, because it’s more for entertainment than sustenance. But the lower range, where customers will always choose what is easiest for them, is ripe for automation of labour and exploitation by parasitic tech companies. The convenience of phone app delivery makes even quality and price less important. A Just Eats spokesperson told me they guarantee the same prices as ordering directly from the restaurant. But my Burger’s Priest bacon double cheeseburger was $11.99, instead of the $9.99 in the restaurant. DoorDash similarly marks up prices. Pad Thai from Sukhothai, ordered through UberEats, is the same price as in the restaurant, but the portion is smaller. Meanwhile, delivery ramen becomes less than the sum of its parts, the wow factor of hot broth over springy noodles lost to winter chill. And it is simply not possible to keep fries hot and crispy for delivery. In an open container they go cold. In a closed container they steam."