Delivery app fees are crushing restaurants during coronavirus pandemic, owners warn

When coronavirus lockdowns prevented us from dining in at restaurants, many turned to supporting local eateries by ordering takeout and delivery.

For some, that meant ordering through third-party delivery apps such as Grubhub, Postmates and Uber Eats. However, restaurant owners say the fees associated with third-party delivery apps are eating into their profits.

Owners ask customers to avoid the apps

John Stamos, owner of New York Greek restaurant Pitas and Sticks, includes a simple note each time a customer orders through Grubhub, NBC News reported.

“Small businesses like us need your support in this time of crisis,” Stamos writes, according to the outlet. “Online apps such as GRUBHUB ARE CHARGING US 30% of each order and $9 or more on orders made using phone numbers on their app or website … please help save the restaurant industry by ordering directly with us.”

Stamos is part of a growing number of restaurant owners asking customers to order directly from their establishments to help them avoid fees, NBC News reported.

Chef Ashish Alfred owns a number of restaurants in Maryland and calls the fees a “huge, huge chunk of our money,” Marketplace, reported.

He’s asking customers to avoid the apps if they can.

“Look up your favorite restaurant, give them a call, see if they will deliver to you, and if they don’t deliver and you can’t leave the house, then do what you need to do,” he told the outlet.

Marcel Bedoya, owner of Black & Blue restaurant in Pennsylvania, said he didn’t mind delivery fees before the coronavirus pandemic, WFMZ reported. Now, delivery accounts for 80% of his business — meaning the loss of income is really taking a toll on his restaurant, according to the outlet.

S+M Vegan in California was planning to pivot from catering to a brick-and-mortar restaurant before the pandemic hit, The Guardian reported. Now, it’s offering meal pickups directly from its kitchen.

“The advantage is we can do it by ourselves. Third-party delivery apps are known for being kind of a scam,” co-owner Marie Chia told the outlet. “The most successful restaurants run on a margin of about 6%, so the more people order from you, the more you’re losing money. We don’t need to be giving over 30% of our already very small margins.”

Delivery fee caps?

Third-party delivery apps charge restaurants 30% commission on average, Eater Chicago reported, but leaders in the Windy City are stepping in to help. Cities including San Francisco, Seattle and Washington, D.C., have capped third-party delivery fees at 15%, according to the outlet.

Chicago is eyeing a similar move, but Amy Healy, public affairs head for Grubhub, told Eater that restaurants can use the service as frequently or infrequently as they want, according to the outlet. She said that delivery apps are a public utility and shouldn’t be targeted — suggesting, instead, that cities go after Facebook, Google or Yelp, Eater reported.

A similar fee cap has been proposed in Los Angeles, but not all restaurants are on board, the Los Angeles Times reported. Several restaurants have signed a petition opposing a 15% cap, citing fears the move could be bad for business.

Owners said they’re worried that reduced fees could cause delivery apps to start cutting down on services, decreasing drivers’ pay or increasing fees for diners, according to the Times.

“These companies have been a lifeline to customers during the COVID-19 response, and altering a system that is working increases uncertainty and concern during a time when each day I am fighting for my business’ survival,” the petition said, according to the newspaper.

This story was originally published May 21, 2020 at 10:24 AM with the headline "Delivery app fees are crushing restaurants during coronavirus pandemic, owners warn."