Seattle Times. “With delivery sales at 70-80% of restaurant sales, the delivery companies are now taking 18-20% of restaurant revenues. When average restaurant profit margins are 8-10%, this makes restaurants no longer viable.”
Did you know that those delivery services that we love and use so much are actually killing those very small businesses that we’re trying to help? It’s no lie. The popular ones charge fees of up to 30% per order. Some of these fees were so high that cities such as Denver, Los Angeles and New York had to put a cap on what they were charging. Even with the increased revenues from these delivery services, the fees wind up killing a restaurant’s margins to the extent that it’s at best marginally profitable.
But here’s the thing: we as consumers want things easy. We’re not going to change our habits. We like those apps. So what options are there for the small restaurateur?
Delivery Co-Op, which helps local eateries band together to share delivery costs, are helpful but, according to one restaurant owner, limited because “The restaurant industry isn’t set up for co-opetition.”
The simple fact for a restaurant owner is that these delivery apps are here to stay. They are enormously popular and, thanks to the pandemic, have significantly grown. I believe that restaurant owners that resist these apps are hurting their brands by missing out on potential customers. Restaurant owners may argue whether those revenues aren’t worth anything if there’s no profit. But are these apps any different from a marketing service that other small businesses use? And like any marketing investment, isn’t it up to the business owner to figure out how to cover these costs, particularly if those services are sending new business their way?
The good news is that the delivery platforms are not as evil as some would portray them. They have some skin in the game. They are competing against other services. They want their listed restaurants to profit.
Maybe instead of fighting, the nation’s restaurant industry and their related associations need to proactively embrace the delivery service industry and both figure out ways to profitably work together. Small restaurateurs should be pushing their industry leaders to address this issue and work out a longer-term and more profitable relationship. I’m not sure there is another choice.