[Seamus]

I hesitate to even post this as I know many will criticize me as a shill or worse! But I see a lot of misinformation when lambasting UE/DD/GH fees of up to 30%. People use words such as "greedy" etc.etc. and think they take all the profits from the restaurants. This is just a realistic perspective to keep in mind.

Keep in mind that is not as simple as it sounds. I'm NOT defending UE/DD/GH fees and I realize that small businesses especially, get their profit eaten into but in reality for medium to large businesses the deal might not be as bad as you think.

Many drivers tend to think of the fees as only representing "Delivery". In reality the fees make up:

• Credit Card payment processing. These fees paid by a restaurant without delivery are going to be approx 3.5% and there is usually a "swipe fee" on top of that of up to 30 cents per swipe.
• Marketing Think of the cost to a restaurant to advertise in print, radio, or TV. Many have pulled back on marketing expenses as UE/DD/GH are in effect marketing for them. Industry standard is 6% of sales for restaurants. Again, small mom and pops don't spend much on marketing so they get bit into the worse.
• Delivery Well this speaks for itself. Many restaurants don't offer delivery so this is a cost of doing business for top line growth. While mom and pops that offer delivery are paying drivers in tips and cash most must pay on on the books wage. In states like NY that means about $15/hr plus payroll taxes. Add that, WC, UI, etc. and your talking more like a real cost to the business of $17/hr and consider on average that person makes 3 deliveries per hour. More during peak but less during dead times.

Add it all together and it's not quite as bad as you think, except to small mom and pop businesses.

Also keep in mind the GROSS MARGIN on food is 200-300% although the NET MARGIN is 5-7%. UE/DD/GH are biting into the GROSS MARGIN which most restaurants will easily make adjustments for.

setting all things equal, Example:
Order for restaurant with own delivery person
+$20 food order
-$6.50 food cost
-$1.00 Credit card fee
-$1.20 marketing
-$5.70 delivery driver cost
-----------
$5.60

Order for restaurant with NO delivery offered
$5.60
+$5.70 add back delivery driver cost
--------
$11.30

Order for restaurant with using UE/DD/GH at 30% fee
+$20 food order
-$6.50 food cost
-$6.00 UE/DD/GH fee of 30%
---------
$7.50

So the real questions are:

• Is a 30% hit to the GROSS MARGIN of 200-300% worth it for top line revenue growth? (maybe)
• If restaurants add more GROSS MARGIN to cover fees who pays? (consumers)
• How can mom and pop small restaurants use UE/DD/GH? (only by raising prices)
• Will restaurants that DON"T participate lose business to participating competitors? Yes

It's become just another cost of doing business for many restaurants.

In the end it's the consumers who pay the price in higher prices!!!

Q Why do UE/DD/GH charge up to 30% fees?
A Because they can.

 

[jaxbeachrides]

Um yeah if it's a high profit business, like pizza where you're selling flour and toppings, or Starbucks where you're basically selling flavored tap water.

Some of these places have no place taking a hit. If you sell a $12 prime steak for $20, and are only getting $14 for it, delivery makes no sense.

It really doesn't make sense at all if only the customer wins. Customer has no transportation. Orders delivery for $5 no tip. Restaurant loses money on the order because of no drink sale, DD loses money because of promotions, driver loses money because of theft of free labor by company.

So really only the customer benefits 100% of the time.

 

[Rickos69]

I hesitate to even post this as I know many will criticize me as a shill or worse! But I see a lot of misinformation when lambasting UE/DD/GH fees of up to 30%. People use words such as "greedy" etc.etc. and think they take all the profits from the restaurants. This is just a realistic perspective to keep in mind.

Keep in mind that is not as simple as it sounds. I'm NOT defending UE/DD/GH fees and I realize that small businesses especially, get their profit eaten into but in reality for medium to large businesses the deal might not be as bad as you think.

Many drivers tend to think of the fees as only representing "Delivery". In reality the fees make up:

• Credit Card payment processing. These fees paid by a restaurant without delivery are going to be approx 3.5% and there is usually a "swipe fee" on top of that of up to 30 cents per swipe.
• Marketing Think of the cost to a restaurant to advertise in print, radio, or TV. Many have pulled back on marketing expenses as UE/DD/GH are in effect marketing for them. Industry standard is 6% of sales for restaurants. Again, small mom and pops don't spend much on marketing so they get bit into the worse.
• Delivery Well this speaks for itself. Many restaurants don't offer delivery so this is a cost of doing business for top line growth. While mom and pops that offer delivery are paying drivers in tips and cash most must pay on on the books wage. In states like NY that means about $15/hr plus payroll taxes. Add that, WC, UI, etc. and your talking more like a real cost to the business of $17/hr and consider on average that person makes 3 deliveries per hour. More during peak but less during dead times.

Add it all together and it's not quite as bad as you think, except to small mom and pop businesses.

Also keep in mind the GROSS MARGIN on food is 200-300% although the NET MARGIN is 5-7%. UE/DD/GH are biting into the GROSS MARGIN which most restaurants will easily make adjustments for.

setting all things equal, Example:
Order for restaurant with own delivery person
+$20 food order
-$6.50 food cost
-$1.00 Credit card fee
-$1.20 marketing
-$5.70 delivery driver cost
-----------
$5.60

Order for restaurant with NO delivery offered
$5.60
+$5.70 add back delivery driver cost
--------
$11.30

Order for restaurant with using UE/DD/GH at 30% fee
+$20 food order
-$6.50 food cost
-$6.00 UE/DD/GH fee of 30%
---------
$7.50

So the real questions are:

• Is a 30% hit to the GROSS MARGIN of 200-300% worth it for top line revenue growth? (maybe)
• If restaurants add more GROSS MARGIN to cover fees who pays? (consumers)
• How can mom and pop small restaurants use UE/DD/GH? (only by raising prices)
• Will restaurants that DON"T participate lose business to participating competitors? Yes

It's become just another cost of doing business for many restaurants.

In the end it's the consumers who pay the price in higher prices!!!

Q Why do UE/DD/GH charge up to 30% fees?
A Because they can.

I remember a long long time ago, I had written about this as well.
Back then I had focused on the marketing (free advertising), and on the
economies of scale, keeping their staff busy (cooking / packing / bagging)

However, the flip side is that many restaurants get hit with other costs that are not immediately visible.
For example, a Mexican Restaurant that I pick up from, forgot 1 item.
Grubhub gave the customer a full refund and hit the restaurant with it. $70.

Another situation.
I was there, picked up a delivery, came back 20 minutes later, and the owner was still on the phone with Grubhub,
because there was an order that had not been picked up in 4 hours, and it was worthless, and the owner was trying to get payment approval for the order from Customer Service.

 

[Seamus]

Some of these places have no place taking a hit. If you sell a $12 prime steak for $20, and are only getting $14 for it, delivery makes no sense.

If you're selling a $12 cost "quality" prime steak for $20 you're a complete idiot.

Take a look at the price of a "quality" prime steak at a nice restaurant or steakhouse, the price is no where near $20.

If you are selling a steak for $20 than you are selling a "lower quality" piece of meat and paying a lot less for it.

You can get steaks $20 or less at some chains IHOP, Chili's, Applebees, etc.etc. but they are not even close to selling "prime" cuts of meat. For FS a quality Burger with higher grade beef (such as Angus) is hard to find for less than $16 let alone a quality steak!

 

[Ms. Mercenary]

I remember a long long time ago, I had written about this as well.
Back then I had focused on the marketing (free advertising), and on the
economies of scale, keeping their staff busy (cooking / packing / bagging)

However, the flip side is that many restaurants get hit with other costs that are not immediately visible.
For example, a Mexican Restaurant that I pick up from, forgot 1 item.
Grubhub gave the customer a full refund and hit the restaurant with it. $70.

Another situation.
I was there, picked up a delivery, came back 20 minutes later, and the owner was still on the phone with Grubhub,
because there was an order that had not been picked up in 4 hours, and it was worthless, and the owner was trying to get payment approval for the order from Customer Service.

Or the owner could have just delivered it himself in way less time. It really depends on the owner in these cases.

If I were one, I’d likely find a way to incentivize drivers to deliver those no-tip offers, be it asking a driver to grab it for $5 or whatever (in fact, I’d be friends with acouple and have their numbers, just in case). This needs to be a new way of looking at things.

I appreciate what @Seamus said. Those mom & pop shops get exposure and traffic they could never even dream of, as in the vast majority they never could afford to offer delivery.

I pick up my own orders - I’m way too cheap to pay fees. And on several occasions I had ppl talk to me about not using yelp ordering (GH, essentially) and order from them. Yet they don’t even have web ordering and expect me to find their paper menu and order on the phone. Um. No. I will order online. And that’s what they pay for.

 

[Rickos69]

Or the owner could have just delivered it himself in way less time. It really depends on the owner in these cases.

If I were one, I’d likely find a way to incentivize drivers to deliver those no-tip offers, be it asking a driver to grab it for $5 or whatever (in fact, I’d be friends with acouple and have their numbers, just in case). This needs to be a new way of looking at things.

I appreciate what @Seamus said. Those mom & pop shops get exposure and traffic they could never even dream of, as in the vast majority they never could afford to offer delivery.

I pick up my own orders - I’m way too cheap to pay fees. And on several occasions I had ppl talk to me about not using yelp ordering (GH, essentially) and order from them. Yet they don’t even have web ordering and expect me to find their paper menu and order on the phone. Um. No. I will order online. And that’s what they pay for.

The delivery services charge the restaurants 30% so they don't have to deliver the food themselves.
If they are going to deliver all the orders themselves because of all the lowballers, what do they need the delivery services for?
Also, not all restaurants have their own delivery people. That is why they signed up.
And you can forget about the owners doing this themseleves. They have stores to run

 

[Uberisfuninlv]

Most restaurants have gotten smart about recovering the delivery fees. Some cities have enacted caps on delivery fees that the big delivery companies can charge restaurants. My city capped it at 15%

Also it seems every restaurant now prices the same items on the delivery apps around 20% higher than the in store price if you bought the same item in person

if you combine those two things, along with the advertising the restaurants get from the apps, they actually might be breaking even cost wise from the costs and getting lots of free advertising from the delivery apps

 

[bobby747]

I got 21 years night delivery. I just stopped doing. After 6 plus years away. I can only speak for mom and pop food places.
Their rake thur G.H. is 30 % it will bankrupt the small business.
But if the small business is 30 years plus old like ours. 90% slice and g.h. with very small carry out DD. AND EATS.
People use g.h direct to our store I deliver..
So your post is very good.
But an example only.
$10 pizza they get $3 we go bankrupt.
But if you are big like we are. G.H GIVES us those $100 orders so $70 we can swallow. New places cannot.
Our app only store did not last 1 year. As drivers were late and surges caused customers to order somewhere else.
I avg..40 deliverys in 6 hours money was decent. Up to $300 a night. Very high pressure..as many as 10 orders per hour in a small area.
I did it so many years . I grew tired of it. I did as good with my private wheelchair customers at my own pace.
But you post here is a very good intelligent one.
I just got the non app experience..
I will say think a great mom and pop store drivers can earn $1300 a week plus 5 days @Only $4 hr .50 cents delivery as covid tips are super sick..some 3 block $40 orders got $10 tips plus the other 4 in your car 70% are paid for..just some info for food guys. These #s are for busy city places in small delivery zones..

 

[Seamus]

I pick up my own orders - I’m way too cheap to pay fees.

Keep in mind there are 2 parts to the fee. The part they charge the restaurant and the part they charge the customer. I usually pick my own up as well but we are just saving ourselves the fee they charge the customer. Indirectly, you are still paying higher prices with this change to the business model. If the restaurants adjust their gross margin to cover the cost of UE/DD/GH fees then all customers pay more for their food, not just app users. The only way you don't is if the store has 2 different prices which most don't.

 

[Ms. Mercenary]

They have stores to run

Which he is clearly not doing spending 20+ minutes on the phone with support. Right?

So spend 20 minutes with support and get a fraction, or 20 minutes to drop off and get the full amount. Hmmm.

Note I never said it was right. But lets face it - those offers are not getting delivered for a very specific reason. So someone needs to address that specific reason.

 

[Ms. Mercenary]

Keep in mind there are 2 parts to the fee. The part they charge the restaurant and the part they charge the customer. I usually pick my own up as well but we are just saving ourselves the fee they charge the customer. Indirectly, you are still paying higher prices with this change to the business model. If the restaurants adjust their gross margin to cover the cost of UE/DD/GH fees then all customers pay more for their food, not just app users. The only way you don't is if the store has 2 different prices which most don't.

No, i’m not. If their menu prices were cheaper, I would order directly. They’re not. I have zero incentive to order from them except the goodness of my heart (one of my usual spots has online ordering, but it’s very glitchy and messed up, yet I still use it rather than a generator).

In fact I think Iheard it’s part of their contracts with generators that their house prices cannotbe lower. Iread that here somewhere.

 

[Ms. Mercenary]

P.S. to previous post about same prices: oh, and one place has direct web ordering, but also has the balls to add a $2 “convenience fee”. REALLY?!? You bet those cajones they have to charge it I’m ordering on GH for free.

 

[Seamus]

Q: If UE/DD/GH are taking 30% from the restaurants and also charging customers fees how is it that everyone in the mix is losing money on this business model?
A: The high % of garbage orders allowed!

Any system that allows a customer 12 miles away to order a cup of coffee or 1 Happy Meal and have it delivered is broken financially! No one can make money on small orders, low value orders, or too far away orders.

The only way to financially fix this basket case of a business model is to change the parameters so everyone can make some money.

• MINIMUM ORDER VALUE. Obviously, at a certain point the order value is just too low to be worth delivering. There are plenty of examples of people ordering food/drinks with a value way under $10. Ridiculous!
• MAXIMUM DELIVERY DISTANCE. C'mon really, someone on the internet can order food delivered from 18 miles away? Stupid!
• TIPS REQUIRED. Years ago when I did private delivery for a Chinese Food Restaurant if the customer didn't tip the driver we would tell the owner. The owner's wife would call up the people and tell them if they didn't tip the drivers they would be cut off from getting orders delivered! Close to 100% of the customers tipped!

 

[bobby747]

Our biggest flaw was prices were the same p.u local and g.h. as per eats food each item is alot higher

 

[Ms. Mercenary]

Q: If UE/DD/GH are taking 30% from the restaurants and also charging customers fees how is it that everyone in the mix is losing money on this business model?
A: The high % of garbage orders allowed!

Any system that allows a customer 12 miles away to order a cup of coffee or 1 Happy Meal and have it delivered is broken financially! No one can make money on small orders, low value orders, or too far away orders.

The only way to financially fix this basket case of a business model is to change the parameters so everyone can make some money.

• MINIMUM ORDER VALUE. Obviously, at a certain point the order value is just too low to be worth delivering. There are plenty of examples of people ordering food/drinks with a value way under $10. Ridiculous!
• MAXIMUM DELIVERY DISTANCE. C'mon really, someone on the internet can order food delivered from 18 miles away? Stupid!
• TIPS REQUIRED. Years ago when I did private delivery for a Chinese Food Restaurant if the customer didn't tip the driver we would tell the owner. The owner's wife would call up the people and tell them if they didn't tip the drivers they would be cut off from getting orders delivered! Close to 100% of the customers tipped!

I don’t know. While I agree in theory, I also think that one should be able to order that one cupof coffee from 20 miles away if one craves it. However, one should also be required to pay for that sort of diva behaviour.

But if it becomes in any way a per-mile charge, we can forget about tips. Notgonna happen.

 

[Seamus]

I also think that one should be able to order that one cupof coffee from 20 miles away if one craves it

 

[Rickos69]

@Ms. Mercenary
Which he is clearly not doing spending 20+ minutes on the phone with support. Right?
So spend 20 minutes with support and get a fraction, or 20 minutes to drop off and get the full amount. Hmmm.
He will not get a fraction. He will get full payment for loads not picked up.
And how does he know that load will never get picked up in the first 20 minutes?

But lets face it - those offers are not getting delivered for a very specific reason. So someone needs to address that specific reason.
Its not his job to address that issue. The restaurant has a contract with the delivery services.
HE/SHE makes the food, the services pick up and deliver.

 

[Nats121]

And you can forget about the owners doing this themseleves. They have stores to run

Actually, some owners are delivering themselves.

I know of at least a few family-owned restaurants whose drivers are family members and part owners. They often times cherry-pick the best deliveries and give the rest to the gig companies.

 

[Rickos69]

Actually, some owners are delivering themselves.

I know of at least a few family-owned restaurants whose drivers are family members and part owners. They often times cherry-pick the best deliveries and give the rest to the gig companies.

My remark was in regard to delivering orders that were supposed to be picked up by the delivery companies.

 

[Nats121]

My remark was in regard to delivering orders that were supposed to be picked up by the delivery companies.

Suffice to say the restaurant's own drivers won't touch those orders with a 10 foot pole, LOL.