Delivery Apps Take Out Restaurants
Caitlin Cutler, Owner and General Manager of Ronan in Los Angeles, educates customers on the true cost of your favorite delivery apps, especially during the pandemic.
Editor’s Note: In an effort to provide context through first-person experiences as the situation evolves, we present Covid Diaries: an ongoing series in which food business workers from the front lines of the Covid-19 pandemic share their experiences and insights as the industry continues to adapt.
“Sounds like you signed up for this and now you’re crying about it.”
When I posted the details behind our year-end financials and the impact of delivery fees on Instagram on January 12, I had no intention of setting off a firestorm of comments, shares and direct messages. Ronan had spent a whopping $35,000 on fees to delivery services in 2020. And a majority of that was spent after March 15, when on-premise dining was discontinued and restaurants were forced to rely on take-out to sustain business.
Most people who interacted with the post had no idea that most delivery platforms take a 20% to 30% commission from restaurants. How would our customers know this information? The apps don’t tell them, and before the pandemic, talking about money with guests was kind of tacky. You’d engage in pleasantries with your customers and get to know each other on a semi-personal level, but then you would drop the check facedown and walk away.
My husband and I own and operate Ronan, and we have two young daughters; so like it or not, there were times when guests got an up-close look at our personal lives. And it has served us well. In the Age of Amazon, people are delighted to see real people operating a business and engaging directly with consumers. Pop a pandemic and months of social isolation into the mix, and the desire to support a small, family-run business seems to have compounded.
But the harsh financial reality of running a restaurant first entered the forefront of everyone’s minds as soon as we were forced to close our doors—“just for two weeks.” A lot of restaurants couldn’t afford to do that, and as soon as it became evident that this was going to be the norm for an extended period of time, restaurant closures seem to be announced daily.
Over the past couple years, restaurateurs have tried various tactics that might gently restructure the existing business model that was solidly entrenched in society. There were no-tip models, service charge models, and healthcare mark-ups introduced—and they were all met with pushback. People did not understand that the current traditional restaurant model is not sustainable if minimum wage continues to increase and we provide healthcare for our employees. Now we are in a pandemic and are still facing those financial challenges; and on top of it all, we have to give up to 30% of our revenue to delivery apps. It’s simply not sustainable. But finally, with the imminent closure of 75% of restaurants looming over us, we have people’s attention.
Let’s circle back to the stranger who sent me a direct message in response to our post on delivery service fees: “Sounds like you signed up for this and now you’re crying about it.”
You are right, sir—I did sign up for it. I signed up for it when I was running a full-service restaurant that could financially sustain itself based on the guests who were dining and drinking on-site. Take-out orders accounted for roughly 4% of our sales. During most of service, the kitchen was too busy to take orders beyond dine-in guests, so we typically only turned the tablets on very early in service, and very late. The few orders that came in were a small boost to the slower hours. Our primary use for the delivery services was as a marketing tool, allowing more customers to find out about us.
Like most everyone in the restaurant industry, we have been forced to shift our entire business model to rely, sometimes entirely, on take-out. Using apps like Postmates was feasible when it was a small portion of our business, but it was never meant to fully support us. Now, Ronan is at the mercy of a society that has reached a point where we use the term “Postmates” as a verb.
When the pandemic hit, customers already had their preferred delivery apps downloaded. Yes, customers are annoyed by the “service fees” that seem to fluctuate without rhyme or reason, and it’s still slightly unclear who the tip actually goes to. But with everything life has thrown our way, we are willing to pay for this luxury. After a long day of supervising distance learning or participating in Zoom meetings, you can get a nice dinner safely brought straight to your door. Sweet relief.
I would also like to be clear that I am not crying; I am educating. Whenever people ask me how Ronan has been able to survive the past year, I say, “Thank God we serve pizza.” We didn’t have to pivot into an entirely new concept, and it was our saving grace that our current product offering converted well to take-out. However, we serve expensive pizza. It’s 100% sourdough, it takes at least forty-eight hours to cold ferment, and it is made with high-quality ingredients. We cannot raise our prices 30% to compensate for the fees that Postmates, DoorDash, Grubhub or Uber Eats all charge. People simply won’t spend that much. So we had a choice: dance with the devil, or risk falling by the wayside. We chose to dance.
Generally, customers have no idea that restaurants are charged a commission when you order through an app. I am here to change that. In general, restaurants don’t tell customers, and the delivery services certainly don’t tell them either. When pressed by news and media outlets as to why they can’t lower the commissions being charged to restaurants, the largest delivery services claim they can’t afford to.
But there are a few companies—namely ChowNow and Tock—that have figured out a way to remove the commissions restaurants can’t afford. ChowNow charges restaurants a monthly fee ranging from $99 to $119 depending on the length of your contract, and Tock charges a 3% commission per order. Both companies also offer genuine human contact when you have support issues, which hasn’t been my
experience elsewhere. This, coupled with the seemingly massive budget companies like Uber Eats have for advertising and promotions, leads me to believe the giants of the delivery business could likely figure out a way to lower their commissions, if they felt like getting creative, or if they gave a damn about the companies that support their entire business model. They just don’t.
2020 was the worst. I am so glad it is over, but I am also thankful restaurant customers have become much more aware of how financially unstable the restaurant industry is. Someday, when you get to eat in a restaurant again, look around at all the people working hard so you can enjoy the experience, ambiance and meal. While you are sitting, tucked into your favorite booth or teetering on your favorite bar stool, close your eyes. Listen to the sound of the bartender shaking a cocktail, the expo shouting orders to the kitchen, and the hum of excited conversations around you. Then, take a minute to be proud that you chose to delete the delivery apps that weren’t serving your favorite businesses well during a time of crisis, and be grateful that the restaurant you are dining in did not close. It was nothing short of a miracle.
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