Food delivery app services can take a bite out of profits

PHILADELPHIA (WPVI) -- With COVID cases surging, indoor dining is becoming even more restrictive - or prohibited altogether - in our region and that means even more people will be using food delivery services.

But while food delivery apps make it easy to order, they can also take a big bite out of restaurant profits.

Delivery Apps like employ many people right now and make it easy for diners to find restaurants and order food with just a few clicks, so it's no wonder restaurants use them.

"I sort of tried to explore, do some research on it," said Phillip Shade of Broad Street Grind in Souderton, Montgomery County.

Shade said a food delivery service solicited his business, but the cost was more than he could handle.

"They wanted 31, 32% for the delivery fee," he said.

Many apps advertise "delivery fees" of 49 cents, $1 or even free delivery for consumers. But Checkbook Magazine said they charge restaurants much more, in some cases 40% per transaction.

"The restaurants are still on the hook for a lot of commission fees paid to these businesses," said Kevin Brasler, Executive Editor of Checkbook Magazine.

After mergers and acquisitions, three big companies now dominate the food delivery space: DoorDash, UberEats, and GrubHub.

In a Checkbook Magazine test, DoorDash cost restaurants 46% of the food total, GrubHub 33% and UberEats 32%. Many big chain restaurants can afford to absorb those fees, but small mom and pop places like Broad Street Grind cannot.

"And that cuts to the bottom line for the small business owner," said Shade.

This leaves those small restaurants with a tough choice.

"They can say we're just not gonna work with the GrubHubs and UberEats and Doordash in the world or we're going to work with them and struggle and ultimately what they'll end up doing is either going out of business or raising their menu prices," said Brasler.

In a response to Checkbook's report, the big three services say they have increased restaurants' business before and during the pandemic and provided hundreds of millions in temporarily reduced, waived or deferred commissions and other help.

Broad Street Grind did not end up signing up with a third party delivery app and operates its own deliveries.

So, if you want to help restaurants maximize revenue, consider calling in your order or trying the restaurant's own website for delivery.

To read the full report from Checkbook Magazine, CLICK HERE.

Full Statements:

UberEats:

"We support efforts to help the hospitality industry, which is why we continue to focus the majority of our efforts on driving demand to independent local restaurants, which we know is a key concern of our partners during these times. Regulating the commissions that fund our marketplace forces us to radically alter the way we do business and ultimately hurt those that we're trying to help the most: customers, small businesses and delivery people."

DoorDash:

"Everything we do is to help merchants drive sales and continue to grow. Our merchant-first philosophy means we are focusing on logistics and services needed to help merchants do just that. Delivery has actually been a lifeline for restaurants during the pandemic. Restaurants on DoorDash are four times more likely to have remained open during the Covid-19 pandemic compared to U.S. restaurants as a whole."

GrubHub:

"Our mission since we were founded in 2004 has been to connect hungry diners with great, local restaurants. We send nearly 650,000 orders to restaurants a day, and restaurants have received almost $4 billion in sales from orders on Grubhub so far this year."
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