Delivery app fee limit a boon for restaurants
As pandemic continues, carryout orders are still thriving locally
Restaurant owners and managers say a rule capping the commission third party delivery services can charge them is a boon for Columbus eateries, although a handful still think fees charged by such services are too high.
In November, the City Council temporarily limited fees taken by companies like Doordash, Ubereats, Postmates and Grubhub, which use independent drivers to deliver meals for local restaurants, at 15% of a customer’s bill.
The limit ends 120 days after capacity restrictions are lifted on Ohio’s restaurant industry, which likely won’t happen until the coronavirus pandemic has subsided.
In the meantime, Columbus restaurant owners heavily rely on delivery and carryout orders as customers largely avoid in-person dining, and most are unable to create in-house delivery programs.
Third party delivery companies charge a commission of up to 30% on individual deliveries, and restaurateurs say the fees eat up any profit from delivery orders.
“Dropping (the commission limit) down to 15% is a huge help for us and a lot of restaurants around Columbus,” said Kyle Nelson, the beverage director for Service Bar in the Short North.
Third party services, which are essentially technology companies, say the fees are necessary to pay their operating costs. The companies need to pay drivers, buy insurance, conduct background
checks, pay credit card costs, provide customer support and support restaurants with marketing and advertising, Doordash explained in a recent blog post.
“Doordash has always supported restaurants,” Doordash said in a statement. “Pricing regulations could cause us to increase costs for customers, which could lead to fewer orders for local restaurants and fewer earning opportunities for (drivers).”
A Grubhub spokesperson called the commission cap counterproductive.
“The caps impact how many orders restaurants receive, which drives down pay for drivers by reducing the number of deliveries available,” a Grubhub spokesperson said in a statement.
The commission cap hasn’t alleviated delivery headaches for everyone. Matt Rootes, who co-owns Pat and Gracie’s Kitchen and Tavern and Matt and Tony’s Wood Fired Kitchen, both in
Downtown Columbus, said Doordash continues to charge his restaurants a 27% commission, claiming the pair of establishments are locked into a contract, even as other services charge only 15%.
Rootes said he was under the impression that he only had an agreement with Doordash, rather than a hard-and-fast legal contract.
“At the top it says ‘this agreement,’” he said.
Rootes said he can end his arrangement with Doordash and start over with a lower commission, but “in the meantime, we would lose those sales.”
“I guess we could do it, but it’s frustrating,” he said. “Right now, everyone is focused on applying for (Paycheck Protection Program) money, and this is one more hurdle that we don’t want to go through.”
David Miller, press secretary for Columbus City Council, said other restaurants are experiencing similar problems, but said any contracts with the delivery services that begin after council approved the commission cap must limit commissions to 15 %.
A Doordash representative stressed that the commission cap governs new relationships between restaurants and delivery services. She urged Rootes to contact the company if he feels his restaurants are being treated unfairly.
Roughly 30% of Service Bar’s business now comes from delivery orders. The figure skyrocketed when the first cases of the coronavirus were diagnosed in Ohio and Gov. Mike Dewine placed capacity restrictions on bars and restaurants.
The Short North establishment relies on Ubereats and Chownow, an ordering service that uses Doordash drivers, to deliver meals to customers who are unable or unwilling to leave home.
“We were not necessarily happy about (the 30% commission), but we also need to be cognizant of the fact that we need a delivery service,” Nelson said. “Something like Ubereats and Doordash helps us at the very least get our name out there.”
Nelson said starting an in-house delivery service is prohibitively expensive.
“You have to take into consideration the overhead for hiring drivers,” he said.
For Brian Swanson, who owns Bodega and Bristol Republic, both in the Short North, third party services were worth the cost even before the commission limit.
The two restaurants activate the services when business is slow, and any orders that come in through a third party amount to a bonus, Swanson said.
But prior to the commission limit, “those fees made it very difficult for there to be any profit on the back end,” he said.
Swanson said the commission limit makes him more likely to incorporate delivery service into his business plan by promoting delivery on Bodega and Bristol Republic’s social media pages.
“We never really marketed it before because it wasn’t a big money maker,” he said.
In a statement, Columbus City Council President Pro Tem Elizabeth Brown called the previous commission fees “exorbitant.”
“We continue to hear from independent restaurants that the fee cap is working,” her statement read. “For them, this legislation ensures third party delivery companies no longer hold them hostage and renews their hope for their business to see the other side of this crisis.”
For Anand Saha, who owns Mozart’s Cafe in Clintonville, third party services still aren’t worth the cost.
Restaurants that are already set up to offer a large volume of carryout orders can absorb the cost, he said, but Mozart’s can’t.
“For them, it’s a marketing expense,” Saha said.
“Restaurants have razor thin margins of 10%,” he said, meaning even a 15% commission eats into his bottom line. “I’m sure it’s helped many businesses out, just not mine.”
Depending on third party delivery creates challenges beyond the added expense, he said. Even though third party drivers don’t work for Mozart’s, Saha worries that his cafe would still be on the hook for any mistakes.
“That’s the No. 1 problem,” he said. “What if the order is cold or melted? Then you take another hit, because you get a bad name and you have to replace that product.” pcooley@dispatch.com @Patrickacooley