Photo by ADVOCATE news services Third-party delivery apps are making it tough for local businesses to find any profit during the COVID-19 pandemic.

Meal-delivery apps devouring restaurant profits

It’s as easy as just a few clicks.

Third-party food delivery apps have been a welcomed service for consumers across Red Deer since they arrived a few years ago.

While it has helped local restaurants in some ways, especially with in-house restaurant closures due to the COVID-19 pandemic, it is troubling and difficult in many other ways.

Local restaurants take a hit when individuals punch in an order from popular apps such as Skip the Dishes, Uber Eats or DoorDash, some of whom charge a commission of anywhere from 25 to 30 per cent on orders.

With the COVID-19 pandemic shutting down in-house dining since mid-March, third-party app orders had been flying in for many local restaurants, and had been one of the only ways they could get their food to people who want it.

What used to be just a small portion of the business for some eateries, has turned into their major source of revenue during the pandemic. That’s become problematic and potentially disastrous, if it goes on much longer.

“The math just doesn’t work. Most restaurants can’t make any profits with the current fee commission structure charge, given that this is their only revenue stream,” said Mark Von Schellwitz, the Western Canada vice-president for Restaurants Canada, an advocacy group for the foodservice industry.

“And even when they reopen, it will still be a much more important part of their revenue stream. What we’re hearing from members, is when they charge 25 to 30 per cent, there’s nothing left for them when they use these third-party delivery models.”

Ryan Curtis, owner and operator of Famoso Neapolitan Pizzeria in Red Deer, said they’ve had a hot and cold relationship with third-party delivery apps.

He said there’s been a lot of demand from the apps, particularly during the pandemic, but with regular profit margins of around five per cent, it’s hard to give any of that away.

“The reality is anyone placing orders on there, with the idea of them thinking they are supporting local, they’re really mostly supporting (the apps),” he said, adding even so, with competition for business being what it is, it’s tough not to be on the apps.

“When you start having to pay someone 20 per cent, it’s not easy.”

While some businesses, such as Bo’s Bar and Stage, have managed to do takeout and delivery on their own to keep a little more money in their pocket during the pandemic, Von Schellwitz said others are increasingly reliant on the revenue from delivery apps. That’s been the struggle for most.

“It used to be an incremental sales tool to move some inventory, recognizing that they’re not making money off it. Now, they have to be able to do this and be able to have a few bucks left at the end of the day for themselves, otherwise, what’s the point?” he said.

Von Schellwitz said that’s a concern he’s been hearing as well and they have been calling on third-party apps to work with restauranteur so it’s a win-win for everybody.

“We certainly would encourage third-party delivery companies to work with members to make this a real win-win for both restauranteur and delivery companies,” he said.

“We think they need to sharpen their pencils to reduce fees on restaurants, or an increasing number of members are going to be asking us to start implementing fee caps.”

In some U.S. states, there has been discussion about trying to protect restaurants from these high fees. In places such as San Fransisco, New York and Seattle, they have banned some companies from charging delivery fees of more than 15 per cent.

In Chicago, food delivery apps are now required to provide an itemized list for customers about where all the fees they charge go.

Winnipeg-based Skip the Dishes said in an email statement Thursday that it’s been trying to help out wherever it can during the pandemic. It said ultimately, it is only successful if restaurants are.

Skip the Dishes said is has given back more than $5 million to restaurant partners since launching a 15 per cent commission rebate project on March 16.

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