It’s been 100 days since San Francisco removed the 15 percent cap on the fees that delivery companies like DoorDash and Uber Eats can charge restaurants. And, in the last three months, a Wild West of hardball negotiating, perplexity and uncertain earnings has ensued.
No restaurant is quite sure how to keep its fees low and the orders coming. Instead, Mission Local found that restaurants are trying different strategies, or simply accepting the harsh reality of giving more profits to a third party.
Take James Choi, the owner of Rhea’s, a popular sandwich shop on Valencia Street.
“I don’t think it’s about negotiating,” said Choi, who has seen delivery orders for his sandwiches jump 10 percent every month. “It’s that you have to say ‘No’ [to the platform] and people have to call the company and say, ‘I want that food.’”
Rhea’s declined DoorDash’s invitation to join as a merchant for two years and then, nine months ago, DoorDash called Choi — thanks to customers who kept asking for his sandwiches, he believes — and the delivery company agreed to limit its fee for using the app to 12.5 percent.
“After trying for a year, they finally give up and then give you what you want,” he said.
At the beginning of February, San Francisco ended its delivery fee cap, in exchange for getting food delivery giants DoorDash and GrubHub to drop a lawsuit against the city. Around the same time, cities like San Jose, Denver and Las Vegas all dropped their limits as well.
What the food delivery companies want now is clear: Higher fees. And for each increase, they promise more. On the surface, DoorDash and Uber Eats appear to offer three options for delivery orders. Standard service begins with a 15 percent charge for food delivery. A 25 percent charge offers access to a larger delivery area and eliminates the fees DoorDash otherwise charges to customers. For 30 percent, restaurants get a guaranteed 20 orders each month. (Orders where customers pick up the food themselves charge restaurants a flat 6 percent.)
GrubHub, which holds some nine percent of the food delivery market in the United States, compared to 65 percent for DoorDash and 23 percent for Uber Eats, is attempting to compete by offering new restaurants 60 days for free and delivery options “starting at 5%.”
Unbeknownst to many restaurant owners, these seemingly fixed delivery fee options are flexible, but entering the negotiations is just the first stage of a long struggle that seems weighted in favor of delivery companies. Even getting ahold of the right person at DoorDash, Uber Eats, or Grubhub can be difficult, owners said.
Restaurants must “negotiate differently, based on their volume” advises Laurie Thomas, executive director of the Golden Gate Restaurant Association.
Smaller and more vulnerable restaurants are likely to have less leverage in negotiations. “I think some people that didn’t do much business might have been forced to the higher tiers,” she said.
Nick Harrison, who used to work for Uber Eats and is a co-owner of boba shop BoBop, said owners should negotiate. If the platform “knows that they’re going to get a lot more orders from bringing in one restaurant onto the app, then they’ll be willing to go a little lower on the fee,” said Harrison.
Harrison said that Choi did the right thing. The best time to negotiate a better deal is before signing up. After that, it’s already too late. He even, jokingly, suggested a plan of action: “You close your account, give it like a month or two months or three months, and then go back,” he said.
Harrison’s BoBop first signed up for the 30 percent option on DoorDash, and sales did go up. But sending all that money to DoorDash made him return to the 15 percent option. He encourages customers to use BoBop’s own website to make both delivery and pickup orders. To increase sales, he’s also trying marketing angles, such as signing up food influencers on Instagram and TikTok to increase sales.
Harrison suggested restaurants speak to the account manager who signed them up to get a better deal, but often, owners said, those managers are difficult to find.
Michael Ho, owner of Chic n’ Time, is unclear how to reach an account manager. DoorDash, he said, “never had a specific account manager dedicated to Chic n’ Time.”
Ho usually communicates with DoorDash by email, and when he calls, the service person changes every time. Harrison said turnover inside the companies may also be part of the problem.
Last month, Ho just switched his DoorDash option from 25 percent to 15 percent after not seeing sales increase. He now uses the money he saved to pay delivery fees for customers, which has helped orders.
Many other restaurants don’t have the time or energy to play hardball. Vegan Japanese restaurant Cha-Ya chose Uber Eats’ 15 percent option by default, and its owner, Mie Katsumata, is thinking about signing up with DoorDash, but remains unsure.
“The problem with getting on multiple platforms for me: The initial setting up, the hours, it takes time. And for me to sit down and dedicate a half a day to it, I’m just not interested,” said Katsumata.
Katsumata hasn’t seen much of an impact on her business after selecting the basic option. Still, she’s pleased with Cha-Ya’s high ranking on the Uber Eats app (she used the reporter’s phone for the search.) It came up fourth when she entered the keyword “vegan” and first under “Japanese Vegetarian.”
Although she prefers to focus on the quality of her food, she said the habits customers developed in the midst of the pandemic made the delivery platforms a necessity.
Large chains, such as Jack in the Box and McDonald’s, still get good deals because of the exclusivity they give one app. “But just a mom-and-pop restaurant, not really,” Harrison said.
Some restaurants that signed up with DoorDash around 2015 started out with fees as low as five percent, and starting so low means that their fees have not climbed as quickly.
Laurie Thomas of the Golden Gate Restaurant Association, whose restaurants Rose’s Café and Terzo pay an 18 percent fee. To make up for this, she raised prices by $1.
Others, such as the owner of Underdogs Tres, Underdogs Too and Underdogs Cantina, have negotiated deals that vary from 18 percent to 22 percent because of their long relationships with the platforms, according to a survey conducted by the Golden Gate Restaurant Association.
Peter Rzedzian, the manager of Curry Up Now on Valencia, pays 25 percent in fees. He is resigned to the idea of the higher fees, seeing food delivery companies as a fact of life.
“We live in the times when everybody orders a delivery.”
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#Uber #DoorDash get paid by both the Seller & Buyer that’s a good gig.
As for the Consumer / Buyer , those that complain about the delivery cost are not often being realistic of the cost to have a meal delivered.
Having meals delivered from a restaurant is not a right it’s a luxury.
As a single disabled person, picking up up food is way too difficult. But ordering one meal delivered ends up costing a small fortune with the high fees tacked on. Even their memberships are too expensive and do not save any money unless you order food like twice a week, and they still charge fees! I wonder when the fees will get so high it is cheaper and more profitable for restaurants to do their own deliveries and cut on the middleman. I prefer to pay for the food and give a good tip than pay these apps.
Delivery apps, right. What with seated customers watching dashers take deliveries out the door while they sit waiting for the privilege to pay the higher prices that help cover the DoorDash fees. This sure can’t help in keeping restaurants in high rent corridors like Valencia
Obviously Door Dash and others are providing a service for less money than the restaurant could do on their own. If it were cheaper to deliver your own food/advertise yourself, you’d hire your own drivers and marketing person. Door dash has made is cheaper for restaurants to get their food advertised and delivered. If they didn’t, restaurants wouldn’t sign up and door dash wouldn’t exist. Business owners need to act like business owners and do the math. Hard to have sympathy for them….
After the delivery companies raised my delivery fees I contact each one of the delivery companies and said I will not pay more than 15%. All three deliver companies lowered my fees back to 15%.