‘Race to the cliff’ as restaurants try to join digital age
THOUSANDS of small cafes and restaurants risk ruin unless they adapt to the revolution in online orders, an expert has warned.
The businesses are more than 15 years behind retailers in adopting online ordering systems, according to the chief executive of Preoday, which provides online and mobile ordering technology.
Andrew White, whose company partnered global payments business Worldpay in March, compared firms failing to keep up with consumers’ increasing reliance on technology to dinosaurs and said they were beginning to panic.
He said: ‘Retail had 15 years ago what hospitality is looking at now, which is online ordering. There’s a lot of catching up to do, but they’ll catch up in about four or five years. There’s a bit of a panic. The problem is only four or five per cent of venues can take an order for money from a mobile phone holder.’
White advised small hospitality firms against relying solely on commission-charging technology companies such as Just Eat and Deliveroo in the panic.
It comes after the Competition & Markets authority launched an investigation last month into the proposed merger of Just Eat and Hungryhouse. It has until November 2 to decide whether to permit the deal.
Just Eat has said the business would be ‘compelled’ to offer a range of restaurants to attract consumers, so it would ‘ensure it provides attractive terms to restaurants’. But White said companies using commission-based firms have seen rises in the fees they pay over the years and have less control over the marketing of their company or business data compared with his clients. One Preoday customer, Asad Ahmed, whose three restaurants include The Snooty Mehmaan in Faringdon, Oxfordshire, said: ‘A lot of restaurants and takeaways didn’t have a website. They didn’t have an online presence. And that’s where Just Eat has capitalised. The commission rate was low, but because Just Eat floated, it promised shareholders, “Right we’re going to be increasing the bottom line”, and the only way to increase it is by pushing up commission.’ White said: ‘Restaurants need an independent way to interact with consumers, the data should be owned by the firm and the website should be easy to maintain, add to and change. Preo- day, which has 181 clients, charges smaller ones on a monthly basis, and charges larger ones a flat fee for custom systems. Preoday said its clients interact directly with consumers via their own websites, for which it provides the technology and app, whereas Just Eat controls the ordering and its clients have no direct contact with consumers.
White said: ‘The profit margin of most of these restaurants is around 10 per cent. And now up to 30 per cent of their business is coming from Just Eat. If it costs you about 14 per cent commission and you only get 10 per cent profit, it’s a race to the cliff.’
A Just Eat spokesman said the firm takes responsibilities to its 28,000 UK restaurant partners ‘very seriously’. He added that in the last year it has invested £40 million in marketing and technology, including new order processing hardware and ‘a self-service tool to allow restaurants to run many elements of their business and access key insights and data about their business performance.’
He added: ‘We continue to drive innovation across key new consumer platforms such as Amazon Alexa, Xbox and Apple TV to ensure our restaurant partners can reach consumers wherever they are.’
Just Eat also brokers deals with the likes of wholesaler Booker and Sky on behalf of restaurants and has a customer care team handling enquiries and complaints for firms.