Restaurant owners clash with delivery services over high fees
Restaurants that remain closed to dine-in customers during the coronavirus pandemic have turned to delivery apps like GrubHub, DoorDash and UberEats to continue serving customers. But now the restaurant industry is rebelling against the fees charged by these companies, which they say can gobble up to 30% of the customer's tab for an order.
City councils in New York, Los Angeles, San Francisco, Seattle, Washington, D.C., and elsewhere have sided with the restaurant industry, recently voting to cap delivery companies' fees at 15% of the price of each order. Grubhub, which Uber has reportedly approached with a takeover offer, says it is opposed to the measures.
The fight over delivery fees comes as restaurants have been hard hit by the pandemic, with eateries across the nation forced to close their doors to in-person dining since March. Shifting to takeout and delivery has allowed some restaurants to remain open, but many continue to struggle.
Grubhub, for its part, says limiting fees will only end up hurting restaurants.
"Grubhub is strongly opposed to the proposed cap on fees paid by restaurants for delivery and marketing services. Any cap on fees — regardless of the duration — will result in damaging, unintended consequences for locally-owned businesses, delivery workers, diners and the local economy," the company said in its testimony to the Council of the District of Columbia before it voted on the cap earlier this month.
Restaurant owners say Grubhub may be helping them reach more customers, but the fees are a problem. Take Ed McFarland, who owns Ed's Lobster Bar, a seafood restaurant with locations in Manhattan and in Sag Harbor, New York. He says he only signed up with Grubhub when he was forced to close his restaurant to prevent the spread of the coronavirus.
"I am on almost every delivery service right now and would never have joined if we didn't have the shutdown. I was always against it because of the high charges," he told CBS MoneyWatch.
But right now, the exposure is worth it, McFarland said, noting that customers use apps to find food options that they might not have otherwise known about.
To make it worthwhile, he's tweaked his to-go menu to offer lower-cost food items like burgers so his margins are wider, in addition to his trademark fresh seafood offerings.
"It's essentially a survival technique I used to drop 10 points off of my food costs, and it's still tough to show any margin with delivery services," McFarland said.
Still, apps help generate income and workers employed.
"In order to get the reach, you do need the services right now," he said.
