AFP – Meal delivery services became essential during the pandemic, when millions were under lockdown and restaurants were shut to visitors. But these days the platforms are increasingly finding themselves under fire, with US politicians seeking to regulate the industry and restaurateurs accusing the likes of DoorDash, Grubhub and Uber Eats of freeloading. And they are looking for ways to do without them. In just the first nine months of this year, DoorDash has probably filled more than 1 billion orders, most of them in the US, where the company is the market leader.
But Mathieu Palombino, founder of the New York-based pizza chain Motorino, calls the boost provided by delivery apps a “big illusion” because more orders don’t bring bigger profits to restaurants. “When you receive thirty or forty orders a day, you are happy. But the problem is that it does not translate into profits,” Palombino said.
Food delivery services can charge restaurants fees of up to 30 percent of the bill for a meal, according to their web sites.
To address that problem, in August the New York CityC ouncil passed a law, capping third-party delivery fees at 15 percent.
“Small businesses should not be pressured into accepting these fees in order to remain viable and competitive,” said New York City Councilman Francisco Moya, who initiated the bill. A similar law was passed in San Francisco in June.
Food delivery giants have challenged the laws in courts, and some analysts think they have a point. “We believe DoorDash will have a strong legal case against the permanent fee caps,” Bank of America said in a research note last month.
DoorDash, Grubhub and Uber Eats argue that the cap is unconstitutional and that restaurants are free to negotiate their commissions with delivery platforms. The delivery giants also say they have made huge investments during the pandemic that led millions of customers who had never ordered meals online to get started. And DoorDash says restaurants that used its platform during the pandemic had a survival rate eight times higher than the industry average. The company also says that even before the laws were passed it already offered a 15 percent fee formula. Put Palombino, the pizza chain founder, is unconvinced. “The problem is they have become so established that there no longer is a way back,” he said. “If you’re not on Seamless [one of the most popular delivery services in New York], you no longer exist.” As for the 15 percent commission, Palombino said that a successful restaurant can “only hope” for a profit margin of 15 or 20 percent. “So at the end of the day, they take it all.” In court, the food delivery platforms have argued that the cap will trigger higher fees for consumers, who have been relatively spared for now. Collin Wallace, managing director of the marketing firm ZeroStorefront and former head of innovation at Grubhub, says that so far it’s the restaurants who have had to bend. “The only way to get this resolved is going to be by the technology platforms, using the same engineering and innovation they used to get their companies to this point,” Wallace said. Some businesses are already trying to get around the all-powerful delivery apps by creating their own platforms.
This article was first published in Khmer Times. All contents and images are copyright to their respective owners and sources.
