However, Mathieu Palombino, founder of the New York-based pizza chain Motorino, sees the boost provided by home delivery apps as a ‘big wish’ because more orders are not generating higher profits for restaurants.
“When you receive thirty or forty orders a day, you are happy. But the problem is that it does not translate into profit,” Palombino told AFP.
Food delivery services can charge restaurants fees of up to 30% of a meal bill, according to their websites.
To address that problem, in August, the New York City Council passed a law limiting third-party shipping rates to 15%.
“Small businesses should not be pressured to accept these rates in order to remain viable and competitive,” said New York City Councilmember Francisco Moya, author of the bill.
And a similar law was passed in San Francisco in June. The food delivery giants have denounced these laws in court.
“We believe that DoorDash will be able to present a strong legal case against permanent rate caps,” Bank of America noted in an investigative note last month.
DoorDash, Grubhub and Uber Eats argue that the limit is unconstitutional and that restaurants are free to negotiate their commissions with delivery platforms.
Industry giants also say they have invested heavily during the pandemic, which led to millions of people ordering food online that they had never done before.
DoorDash maintains that restaurants that used its platform during the pandemic had a survival rate eight times higher than the industry average.
The company also claims that even before the laws were passed, it was already offering a 15% rate formula.
Put Palombino, the founder of the pizza chain, is not convinced. “The problem is that they are so established that there is no way back,” he said. “If you’re not on Seamless (one of New York’s most popular delivery services), you don’t exist.”
As for the 15% commission, Palombino added that a successful restaurant “can only expect” a 15-20% profit margin. “So, at the end of the day, they take it all.”
In court, food delivery platforms have argued that the cap will lead to higher fees for consumers.
The strategy of some restaurateurs
Collin Wallace, managing director of marketing firm ZeroStorefront and former director of innovation at Grubhub, says that so far it’s the restaurants that have had to give in.
“The only way to solve this will be through technology platforms, using the same engineering and innovation that they used to get their companies to this point,” said Wallace.
Some restaurant companies are already trying to get around delivery apps by creating their own platforms.
One of these startups, ChowNow, helps restaurants launch their own order-taking apps so they don’t have to pay any commission.
Another, LoCo, creates delivery cooperatives where restaurants, who own them, can choose what commission to charge, often half of what the delivery giants charge, said company founder Jon Sewell.
Sewell, also a restaurant owner in Iowa, added that this arrangement also allows restaurants to keep customer data for themselves.
LoCo has launched franchises in Virginia, Nevada and Nebraska and is looking to expand further.
But Sewell admits that the concept is not easy to sell. “It is difficult to convince these people that they need to start working as a collective.” But, he added, “for me, that’s the only real solution.”
With information from AFP.