Cleveland Restaurants Are Buckling Under Surging Commission Fees For Delivery Services

Chef Douglas Katz rings the doorbell of an old house in Cleveland Heights on a stormy November night. He carries a brown paper bag twice the size of a shoebox in each hand as he delivers groceries from his Middle Eastern restaurant, Zhug. Set against the backdrop of the COVID-19 pandemic, Zhug’s warm, minimalist interior stages the back and forth of Katz’s kitchen staff, who carefully wrapped fresh pita in aluminum foil and swirled hummus in rectangular containers before topping it with curry lamb, apricots and olives Oil. Katz was recently named one of the 23 Best New Restaurants in America by Esquire. His job in Zhug is braving the rain-soaked sidewalks of Cleveland’s inner East Side to hand-deliver their dinner to customers.

“All of my thinking was more triage than anything else,” explains Katz. “We closed the fire [Food & Drink] and closed Zhug, and we immediately started takeaway and delivery. To be honest, I never thought of anything else. When someone is going to order, I want someone I know to bring it to the door. When I order something, I want someone to have some skin in it. “

The hotel industry has changed forever as a result of the pandemic. Dozens of permanent closings have been made in Cleveland, including two of the city’s gold standards, Katz’s Fire Food & Drink and Michael Symons Lola. In order for restaurants to survive in this new reality, they need to rely on delivery and take away, whether they like it or not.

“Before the pandemic, dine-in was our bread and butter,” says Bac Nguyen, co-owner of Ninja City in Gordon Square, where pre-pandemic takeout was 10% of sales. “We’re more of a place in the neighborhood where people come to the meeting point.”

Like many restaurateurs, Nguyen and his partner Dylan Fallon have turned to services like Uber Eats and DoorDash that rely on independent contractors as a delivery management strategy. While they’re convenient and affordable, they have a number of problems: an onerous fee structure and a lack of accountability governed by opaque tech giants headquartered 2,400 miles away.

“When Uber Eats first started in Cleveland, they were looking for people and giving me a really good price, so it made sense,” says Anna Harouvis, owner and cook of Good to Go Cafe downtown and Anna on the Raw. “They kept increasing their rates and taking more until they were 33%. [of each order]. ”

Delivery-based services like Uber Eats and DoorDash charge restaurants a commission for every order placed through their service. Once a restaurant is part of the Uber Eats network, it charges each restaurant 30% of each order for using Uber’s delivery network, or 15% of the total order if the restaurant chooses to use its own delivery service. DoorDash doesn’t openly disclose its fees, but a typical restaurant can expect the company to pay about 20% of every order. In an industry known for its wafer-thin margins, Cleveland’s restaurateurs flinch at a commission of 30%.

“They told me I could only charge customers 33% more,” says Harouvis when she tried to discuss this structure with Uber. “I can not do this. I’m already doing a luxury item with GMO-free and organic food. Can’t ask more than $ 8 or $ 9 for a juice. ”

Since the beginning of COVID, this commission fee structure has been heavily criticized by restaurateurs. In cities like New York and Portland, Oregon, city lawmakers have set caps of between 10% and 15% on the commissions these platforms can collect. And in December, Cleveland City Council passed similar laws to cap commission on delivery and pick-up jobs to 15% during COVID.

“The biggest problem is that the model is not sustainable for the restaurant,” says Katz. “If they take 20% or 30% off the top, there is no profit. They can’t even cover part of your expenses. “

Equally worrying is the lack of transparency in the use of these platforms and the lack of control restaurateurs have over their product as soon as it leaves their hands. In Harouvis’ case, customers complained about late orders or no orders at all.

“I would call Uber and they would say they were never picked up,” she says. “If someone said they didn’t get anything, they would automatically be on their side and we would have to pay for the fine.”

In Fallon’s case, there was no communication with delivery platforms.

“Now that we’ve signed up with Uber Eats, I find it almost impossible to get in touch with anyone in the US,” he says. “All technical questions, all ordering problems, all complaints that I need to correct are brought to a call center overseas.”

As these services proliferated over the past five years, they acted as a means for restaurants looking to deal with delivery to outsource their logistics and insurance problems to third parties. Due to COVID-19, take-away and delivery are now an essential part for restaurants to stay in business, but the quick fix from delivery platforms is not what many restaurateurs have signed up for.

“We tried Uber Eats as a delivery service at Fire over two years ago,” says Katz. “We were terribly lucky with them. They write the check for the delivery orders after they collect the money. It took them about 60 days to write us our first check and it gave us a really bad taste in our mouths. “

Cleveland Magazine contacted Uber Eats for comment, but it was not available.

Katz and Harouvis found solutions by completely bypassing third-party delivery platforms. Katz and a small team personally deliver orders from Zhug as well as from his two nearby ghost kitchens, Amba and Chimi, which serve Indian and South American cuisine from Rising Star Coffee Roasters on Lee Road.

“We’re a small company and I run my business as a small company,” says Katz. “The people we trust are the people I want to deliver.”

Harouvis cut ties with Uber Eats more than a year ago and hired a former Uber driver to deliver their delicacies ahead of the COVID-19 outbreak.

“I have my own delivery because I can control it,” says Harouvis.

Others like Fallon and Nguyen have taken a different approach: they incorporate Uber Eats and DoorDash into their business model, and charge an additional 10% for orders through these platforms – compared to orders through the Ninja City website – to make up for this fee.

“If we’re just using Uber Eats, you’re pretty much wasting your time,” says Fallon. “The way we try to make it work is kind of a combination.”

At the moment, tech platforms seem to be in a privileged position. If you’re not on Uber Eats or DoorDash, you are missing out on the diners market looking for a multitude of options in a stay-at-home digital age. And when you use these services, you are at the mercy of a platform that receives your cut, regardless of whether the diner receives your order.

“This whole pandemic is going to change the way consumers shop for groceries online. It’s going to make them all the more competitive for restaurants,” says Fallon. “Something has to change. [The delivery services] Truly get the best of all aspects now. “

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