Delivery App Fee Caps Introduced As Restaurants Rebel

25 May 2020, 08:47

Fee caps have been introduced to protect restauranters that use a delivery app as reported by NBC. Coronavirus has hit the hospitality industry hard with the likes of Grubhub and Uber Eats becoming increasingly more popular but the costs associated with these apps are hitting independent restaurants hard. A small number of cities have introduced these fee caps in order to help restaurants stay afloat whilst using a deliver app such as Grubhub.

Independent restauranteurs have rebelled against these delivery apps. Many have taken to social media to criticize these apps. Others have taken to deliver notes asking customers to order direct rather than through an app. However, although demand for food delivery has increased, the ability for a delivery app to turn a profit has decreased especially with fee caps coming into force.

Coronavirus Explodes Delivery Industry

The demand for food delivery has rapidly increased due to the coronavirus pandemic. Many restaurants have turned to delivery in order to continue trading during this time, relying on apps to streamline the process.

Food Delivery Apps such as Grubhub, who brought their delivery service to Tripadvisor in 2017, offer customer support as well as a pool of insured delivery drivers which many independent restaurants just cannot replicate.

However, contracts with these delivery apps come at a cost. One restaurant owner said that Grubhub charges 30-percent on orders as well as $9 on any order made on their website.

When using these apps was just a side stream of revenue for restaurants it was less of an issue. Now delivery is the only option, these fees have become untenable.

Restauranters Hit Back and Cities Intervene

As a result of these extortionate fees, many restaurant owners have taken matters into their own hands. John Stamos, who owns a Greek restaurant owner in Brooklyn, has delivered over 1,000 notes asking customers to order direct with him. He says that this ploy has worked well and customers are beginning to change their habits.

David Singh, who owns a pizzeria in Santa Barbara, has taken to social media to complain against Grubhub. He and his son have purchased sponsored Instagram posts in order to get their message across. Singh has since ended his contract with Grubhub but as a result, has seen business increase.

Cities have also heard the cry from restauranteurs. Chicago has mandated that delivery apps are more transparent with their pay structures. Washington D.C., San Francisco and Seattle have gone one step further by capping feeds at 15% with New York City putting a cap at 20%.

This is good news for independent restaurants but has hit these apps hard. Although orders have gone up for the likes of Uber Eats and Grubhub their profits have taken a hit. This has led to reports by Second Measure that Uber Eats is in talks to buy Grubhub to take control of almost half of the delivery market.

The hospitality industry is struggling at this time and the delivery market is increasing. However, this is causing problems for both restaurants and delivery services.

More people are relying on delivery for food but, the costs surrounding it are not decreasing. This is leading to pinch points in the system felt by all.