UAE's restaurants, cafes launch direct-to-customer campaign, drop delivery charges

More than 40 operators sign up for campaign that will run all through June

Dubai: Restaurants in Dubai have taken the first step to reducing their reliance on food order-and-delivery portals such as Zomato and Talabat by launching a direct-to-consumer campaign during Eid.

Multiple restaurants and cafes in the emirate are requesting customers to place their orders directly and thus save on their final bill. The campaign will run for the next few days and will eventually lead to the F&B businesses launching their own app.

More than 50 F&B businesses have launched their ‘Help your neighbourhood restaurant’ campaign, and with more expected to join.

“The only way for restaurants to survive in a COVID-19 infected environment is to fight back against the portals,” said one restaurant owner. “The way to do so is by telling customers who order that they can make significant cost savings by coming directly to us.

“We’re talking about 8-15 per cent of savings on the final bill, which otherwise they would be paying to the portals for delivery.

“If restaurants in Dubai can fulfill the majority of orders directly, we can make that difference.”

Pushing back

In recent weeks, restaurants and cafes made repeat requests to the food portals to reduce their commission structures, which in many cases could reach 30 per cent more of the invoice. After the COVID-19 outbreak, the F&B sector was the hardest hit, and the impression was unless some sort of cuts were not done on the commission structure, it would hurt their business fatally. More so, as F&B operators are yet to make any significant progress in their talks with landlords to drop rents.

“Restaurants can only sustain with direct orders and can't continue paying 30-35 per cent “aggregator” fees,” said an F&B owner. “From what we can see in the initial days, the public us showing much support for their neighbourhood restaurants. Our offline orders are increased up to 30 per cent.

“It’s a global trend now and will continue in future as well - the relationship between restaurants and customers are more direct now.”

Cut the food portal

Some of the F&B businesses in this direct-to-consumer campaign are willing to go the full distance and cut all ties with delivery portals. For them, it’s as much about survival as it is about commercial sense.

“We at Little Italy are focusing on direct orders from June 1 onwards and not looking back - that is the best and safest way to sustain ourselves as of now,” said Anmol Mehta, Managing Director. “We do not plan to leave the aggregators at least for the next two to three months, until we push the traffic to our online ordering and tele-orders.”

Portals are dictating terms

As if taking away 30-35 per cent as commission per order is not enough, some food order-and-delivery portals are even imposing “penalties” on restaurants for any delays that might happen on an order. According to F&B industry sources, more such instances of their unilateral penalties are happening.

“We find these charges unacceptable - If there was a customer complaint we should have been given a chance to address the incident,” said one restaurant owner. “Henceforth we will be contesting any such charges.”

Not going to be an easy run

The plan is to have the direct-to-consumer campaign run all through June and then take stock of the results. Would F&B businesses running these campaigns still have their associations with food order-and-delivery portals during this period?

“Aggregators do a lot of marketing which is at another level altogether,” said Shanavas Mohammed, Managing Partner at Golden Fork Group. “Hence, our primary objective is to drive customers to us from these aggregators. Ultimately, if we are providing enough value to the customer he or she will order from us.”

If that happens…

It would ease the pathway for F&B businesses to launch their own app, which would then compete directly with the likes of Zomato and Talabat. (Recently, Uber Eats decided to quit the UAE market and said it will be represented through Careem Now.)

Restaurant industry sources say a final decision on a dedicated app will be made soon. Their promise is that the final charges on the customer for using the app will be much lower than what the food portals do right now.

But now, all that F&B businesses want their customers to do is call in directly and place the order.

A recipe to turnaround UAE's F&B industry
Restaurants are all in survival mode now. Rents remain the highest fixed cost for any entity.

Even before the crisis, rents in Dubai were higher than the global rate as a percentage of sales. Having said that, rent relief alone is not enough to ensure survival. Many other measures need to be taken into account as each business has different circumstances but without rent relief, survival is not possible.

With the limited capacity, all the social distancing guidelines along with increased costs associated with keeping outlets safe - such as extra sanitizing, contactless menus and payments - rent relief is a necessity. We are all in this together and the landlords are also suffering, but the best way forward is to charge turnover rent until the recovery, which I don’t expect until Q4-2021.

For our business, the two most immediate priorities are rent relief and cash facilities. If we are able to have our rents waived or reduced to turnover rent, and we can get access to liquidity via loans or extended overdraft facilities from our banks, we may be able to weather the storm.

As for layoffs, with our significantly lower volumes following a period of complete closures, we find ourselves in a position where we have excess labour costs. In any other circumstances, I would have taken measures to reduce labour costs - it is the correct business decision. However, this is a humanitarian crisis.

One of our first initiatives was to ensure that no one gets laid off. We will retain our staff for as long as possible. We are in the people business, and this is simply the right thing to do.

- Elias Madbak, Managing Director of RMAL Hospitality, which operates 10 restaurants including wagamama and Trader Vic’s Madinat Jumeirah.