Deliveroo this week said it would lower the commission fees it charges restaurants to just 5 percent — but only on orders where the restaurant provides its own delivery drivers. The announcement comes as restaurants increasingly call for the service to address its steep fees and as Deliveroo’s overall business struggles during the pandemic.
The UK-based service will also completely waive commission fees on all pickup orders. Both forms of commission relief, if you can call it that, will be in effect until June 5.
It’s a nice PR gesture, but it doesn’t solve the commission fee problems for restaurants that can’t afford to pay their own delivery fleet. With the restaurant industry currently on the brink of collapse, even paying one or two couriers on bicycles to deliver food could be more than an independent restaurant is realistically able to pay. Third-party services like Deliveroo charge up to 30 percent, and sometimes more, per transaction for these commission fees, which renders any chance at making profit null and void for many restaurants. Dropping commission fees to 5 percent but still expecting restaurants to foot the bill for their own last-mile delivery won’t benefit many businesses.
The ongoing collapse of the restaurant industry has wiped away any lingering optimism that food delivery apps are actually good for restaurants. What was for a brief minute called a “lifeline” for businesses as they pivoted to off-premises orders in the wake of the novel coronavirus is now under scrutiny from the entire industry, and the subject of much debate among governments. Multiple cities in the U.S. have already imposed mandatory caps on commission fees; overseas governments are now considering similar measures.
There’s also the fact that delivery orders won’t save a lot of restaurants. According to a recent survey from the James Beard Foundation, only 1 in 5 restaurant owners believe “with certainty” they will survive the COVID-19 crisis, and two-thirds of them are “uncertain” that off-premises orders will sustain their business.
Some delivery companies are reportedly gaining business from the collapse, but Deliveroo doesn’t appear to be one of them. Just last week, the service cut 15 percent of its staff and furloughed others. The company said the cuts are in response to coronavirus. The UK’s Competition and Markets Authority recently approved a major investment in the service from Amazon, citing Deliveroo’s “significant decline in revenues” as reason for the approval.
A smart piece from The Guardian’s James Ball last weekend noted that the entire (and heavily venture-backed) third-party delivery system is based on optimism. “Without that optimism, and the accompanying free-flowing money to power through astronomical losses, the entire system breaks down.”
The current state of Deliveroo could be a hint of how other third-party delivery services will weather the pandemic. Meantime, restaurants that need help making deliveries will still be paying the service those astronomical commission fees.
This move by Deliveroo seems promising for restaurants, but the “catch” makes me hesitant. Lower fees could help many struggling businesses, but I worry about how the new policy will affect service quality and delivery times. It’ll be interesting to see how this unfolds and what the long-term implications are for both restaurants and consumers.