Meal delivery apps taking big bite out of restaurant profits

Like many restaurants still open during the COVID-19 pandemic, at Freshii Westboro, deliveries have become the primary source of sales. 

Karla Briones says commissions charged by third-party apps take big bite of slim profits

Freshii Westboro owner Karla Briones says the 25-30 percent commission paid to meal delivery companies such as Uber Eats and SkipTheDishes leave her with little to no profit. (submitted by Karla Briones)

Like many restaurants still open during the COVID-19 pandemic, at Freshii Westboro deliveries have become the primary source of sales. 

But for owner Karla Briones, relying on third-party companies to get her sandwiches into her customers' hands comes with a big hit on the bottom line.

"Uber Eats, DoorDash and SkipTheDishes are the big ones, and they take anywhere from 25 to 30 percent of the bill," said Briones. 

Briones said she could live with paying the high commissions before the COVID-19 pandemic, when deliveries only accounted for only one-tenth of her total sales. 

But since the shutdown, deliveries with third-party apps account for two-thirds of her sales, meaning it takes a lot of sandwiches to barely break even.

"It's one of the necessary evils unfortunately, because everybody has one or two of the apps on their phones right now," she said.

"I could bring [delivery] in-house, but it would mean more of an investment."

Uber Eats says it has taken certain steps during the COVID-19 pandemic to help out restaurants, including reducing the commission it charges to those that employ their own deliverypeople. (Sean Gallup/Getty Images)

Uber Eats says it's made changes

In a statement, an Uber Eats spokesperson stressed that third-party platforms help restaurants generate revenue, and that the company has adjusted to support restaurateurs during the pandemic. 

Uber Eats said it reduced its commission by half — from 30 to 15 per cent — for restaurants that choose to use their own employees to deliver for a month, while also waiving the delivery fee that's normally charged to customers of independent businesses, which varies from $0.99 to $4.99.

Neither of those discounts help Briones, since she doesn't have her own drivers and — despite being independently owned and operated — her restaurant is a franchise. 

Karen Wood has co-founded a new delivery service in Ottawa focused on independent restaurants. (submitted by Karen Wood)

Local delivery option launched

Briones' restaurant also doesn't qualify for a new Ottawa-based delivery service launched at the start of the shutdown to help local independent restaurants.

Love Local Delivery was established after a brainstorming session between restaurateurs and Karen Wood of Knock on Wood, a communications consulting firm with expertise in the restaurant business.

"The motivation was to help the restaurant community survive the crisis, and help transition to takeout and delivery without having to pay ... commissions associated with the major apps," said Wood.

Rather than a commission system, eligible restaurants pay the service $2 while the customer pays $5 to have their meal delivered up to five kilometres from the restaurant, plus $1.50 for each additional kilometre.

Food delivery apps eating a big chunk of local restaurant profits, owner says

2 years ago
Duration 0:47
Karla Briones, owner or Freshii Westboro, says the percentage of her sales going through third party delivery apps has jumped to over 50 per cent during the pandemic, with the companies taking a cut of the profits.

"We just wanted to be really transparent in the costing model," said Wood.

"Delivery may be positioned as being free, but it's not free because in the back end the restaurant is burying the burden and they're paying a lot. With the small margins it's just not sustainable."

Since its March 19 launch, Love Local Delivery has enlisted 53 independent restaurants, mostly in the city's core.

Wood said while customers have to currently call the restaurant to place an order, they have plans to introduce their own app "in the coming weeks."

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