Restaurants Hate Third-Party Delivery Services, Actually
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When it comes to 2020, one of the things third-party vendors like to say is that they have been “a lifeline” for restaurants that may have to close permanently due to dining room closings and restrictions.
Many have denied this in the past few months. But maybe nobody has been more topical lately than Recodes Kara Swisher, who hosted Uber CEO Dara Khosrowshahi on her Sway podcast this week.
“You can’t get away with saying you were a restaurant lifeline,” she told Khosrowshahi early on.
Swisher noted the oft-quoted figure that delivery services charge restaurant commission fees of up to 30 percent of a single transaction for using their services. Khosrowshahi countered that Swisher’s math was “incomplete” and the 30 percent “untrue” when it comes to depicting which restaurants are actually on the hook to pay for delivery services. According to his calculations, restaurants pay Uber Eats 13 percent per transaction “minus the courier”. If restaurants want to use their own couriers, the commission cost is “around 15 percent”.
But as Swisher suggested, even those lower numbers are detrimental to restaurants, which typically operate with margins of around 3 to 5 percent. This inconsistent math is one of the reasons cities in the US have mandated commission fee caps, some of which are as low as 10 percent.
Before the pandemic, the argument was that if a restaurant had problems with high commission fees, it could simply refuse delivery. That argument doesn’t include water right now, however, as the pandemic has essentially forced restaurants to deliver and most don’t have the money or expertise to build an in-house delivery business. In fact, most cannot even afford their own courier fleet.
It’s also worth noting that while Khosrowshahi called the 30 percent commission fee “untrue”, he never gave a hard number for what a commission fee from Uber Eats is when a restaurant uses a courier service like most are . If anything, his cagey response of “13 percent minus the courier” seems to confirm the existence of the 30 percent commission.
Uber Eats had a big year in 2020. By the end of the year, Uber Eats more than doubled its sales and even acquired a competitor, Postmates. Khosrowshahi himself said the service has an execution rate of over $ 40 billion and will be larger than the company’s mobility business in 2021.
Conversely, the restaurant industry has lost $ 240 billion in sales and is still 2.5 million jobs below pre-pandemic levels, according to the National Restaurant Association. A total of 110,000 restaurants have closed in the United States, which is about 17 percent of the country’s total restaurants.
Khosrowshahi defended his company’s approach to restaurant contracts by describing them in terms such as “reasonable” and “fair”. What Swisher merely pointed out was that most of the restaurants she speaks to disagree and only use the world’s Uber Eats and Caviars because the pandemic has forced them to.
“They hate you,” she concluded flatly before using the phrase “threat economy” to describe the environment restaurants now have to work in to stay in business.
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This is how the Biz restaurant survived 2020
I know most of you would rather forget 2020 ever happened, but it never hurts to look back before moving on. That’s exactly what the National Restaurant Association did this week. The trading group released a list of the top trends that it claims has kept many restaurants in business over the past year while the pandemic devastated the industry.
The 10 trends that were on the list were based on the results of a survey the association conducted among more than 6,000 restaurants and 1,000 adults. Most of the trends on the list are directly related to helping restaurants “keep their businesses open and keep employees on payroll,” as the association puts it.
The full research article is worth reading. Since this is The Spoon, I’ll highlight a few points that are on the list and illustrate how technically the pandemic has advanced the restaurant business in the past few months:
- “Optimized Menus.” Part of this has to do with actual food: restaurants needed a way to reduce inventory and get items done faster, and “reduce menu” became a mantra for many early on in the pandemic. However, optimized menus also have to do with making sure that groceries that can be easily transported are offered for pick-up and delivery, and that digital customers are not overwhelmed with choice paralysis when viewing menus on their own mobile devices.
- “Off-premises food service has priority.” The association found that before the pandemic, 80 percent of full-service restaurant traffic was on-site. In March, when the first shutdowns began, the change restaurants had to change the delivery and take-out formats, affect the entire industry and are now more or less anchored in operation. This means that even when the restaurants are fully occupied again, off-premises are an important part of any restaurant’s strategy.
- “Sell groceries.” This started early in the pandemic when restaurants started selling unused inventory due to downtime, and did so through external channels like delivery and transit. The association’s survey found that “more than half of consumers” would consider buying staple foods (products, dairy products, meat) in restaurants themselves if these items were offered. No wonder, then, that third-party delivery services like DoorDash and Uber Eats added groceries to their stores in 2020.
Other trends in the restaurant industry – ghost kitchens, virtual restaurants, better back-of-house technology – are tied into the more general trends on the association’s list. For example, a move to an outside grocery service inevitably means more ghost kitchens. When you pull up a virtual restaurant menu from just about anyone these days, you will find that it is downright streamlined.
“We now know that three things are certain: The pandemic tested the limits of operator creativity and know-how, accelerated the adoption of technology and emerging trends, and confirmed that customers sorely miss their dining experience,” the report said .
With a widespread vaccine still months away (at least) and restrictions still in place for most dining rooms, those trends that helped us survive in 2020 will continue to shape 2021 and beyond.
Restaurant Tech ‘on the Internet
Panera is the latest major chain to announce plans for all-in ghost kitchens. The brand announced this week that mobile kitchens, redesigned drive-through lanes and a virtual catering company are also in the works.
In the meantime, Fat Brands is doubling its existing ghost kitchen strategy. The company said at an ICR presentation this week that it plans to open a dozen ghost kitchens in 2021.
Restaurant technology provider Perfect Company raised $ 6 million for its solution that enables automation for the front of the house, the back of the house, ghost kitchens, convenience stores and other food service areas.