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Deliveroo Lowers Restaurant Commission Fees to 5 Percent, but There’s a Catch

by Jennifer Marston
May 7, 2020May 7, 2020Filed under:
  • Business of Food
  • Delivery & Commerce
  • Featured
  • Restaurant Tech
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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.  


Related

Deliveroo Launches Pickup Feature for Restaurant Food

Deliveroo has launched a new pickup feature that lets users place an order then go to the restaurant and get the food themselves, according to The Telegraph. The new service is live at over 700 restaurants in the UK, and Deliveroo says it plans to offer the feature in 10,000…

DoorDash Launches Tiered Commission Fees for Restaurants

DoorDash announced today that is has launched a new pricing structure to deal with its historically controversial restaurant commission fees. Via these “Partnership Plans,” as the service calls them, U.S. restaurants can now choose between three different commission price points. Plans are priced according to how much area a restaurant…

Fare Launches ‘Ethical’ Delivery Service in NYC With Zero Commission Fees for Restaurants

Restaurant delivery service Fare, which calls itself “an ethical and fair alternative” to third-party delivery, today announced its official launch in NYC. The company’s number one claim to fame right now is that it charges restaurants zero commission fees on orders because of its more local approach to food delivery.…

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  • deliveroo
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Comments

  1. 9AppsAPK says

    September 15, 2024 at 10:30 pm

    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.

    Reply

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