Why Deliveroo and Uber Eats Should Be Ashamed
The moment restaurateurs, big and small, were told they had to close their establishments for at least three weeks, creative solutions were devised en masse to keep things running. The golden egg: delivery. But will this actually help your business survive? We looked into it and reached a tragic conclusion.
Jesus, your business closed in one go. In one go, zero (!) turnover. The month before, there was nothing wrong. In our extensive hospitality network, we know plenty of businesses that had just made substantial investments, hired extra staff to prepare for terrace season, or started a new establishment. All perfectly sound business decisions, because nobody saw this coming.
It’s logical that many chefs and restaurant owners thought: ‘then I’ll start offering delivery!’ But whether that’s such a good business decision… Quite a lot is involved. Such as: a delivery network.
Home delivery?
But why weren’t you already part of one? There was probably a reason why a particular establishment had kept the Deliveroos, Uber Eatses and Thuisbezorgds of this world out. Because its style of cooking isn’t suited to home delivery, for example. And, let’s be honest, the quality (and therefore your image as a chef/restaurant) often doesn’t improve after a trip by bicycle or scooter. But keeping your business alive is obviously more important than a little image damage right now. At the moment, it’s all about one thing: cold, hard cash, and quickly, before the business goes completely to hell.
A turnover calculation
What is a realistic delivery turnover? That depends on your business. RIJKS* was the first to decide to offer delivery (very clever anticipation!) and is doing brilliantly. With more than 100–150 meals at €32.50, they turn over €3,000–€4,000 per evening. You can wonder how realistic it is to achieve those quantities when you’re joining in later as a restaurant, whether you can sell three courses, whether people are willing to spend €32.50 with you too, and whether you have the capacity to prepare and pack a hundred three-course menus.
But let’s stay super positive (because otherwise entrepreneurs will go completely mad) and calculate with €3,000 for 100 meals. So we start with +€3,000.
Packaging materials
The simplest plastic kilo container with a lid and VAT costs around 30 cents. Bear in mind that you need several containers for a decent-quality meal (and will probably want to upgrade the presentation somewhat). We spoke to one business that ended up spending around €4 on packaging materials—including a bag, containers and cups—for three-course meals in one bag. Multiply that by 100 meals: -€400. And of course your VAT is still included: -€247.70.
Purchasing
Then you still have to buy ingredients. You have a few things left that need using, and you’re running a limited menu: perhaps you can manage to get your food cost down to 20%. Compared with your usual 30%, that’s quite an achievement, but hey, we’re all being corona-creative: -€600.
Deliveroo and Uber Eats percentage
And then comes the big blow: after contacting Deliveroo and Uber Eats, and pressing them a little, you’re offered a percentage of 27%. Utterly ridiculous—those are their standard rates. Isn’t this taking advantage? Can’t they simply negotiate a small percentage that covers their costs and hope that these great restaurants remain connected to the network in the long term? That’s profit too, instead of making extra money at the expense of an industry hanging by a thread?!: -€810.
Delivery profit, help!
And we’re not there yet. The government has announced a very welcome package of emergency measures. But that package does have consequences for your delivery profit. For all the turnover you generate as a restaurant now, you receive no compensation for your wage bill. In the better segment of the hospitality industry, the wage bill is often around 30%. You now get 90% of that back. But not if you generate turnover. In that case, you receive 90% of 30% of your turnover less: -€810.
Do the math…
Did you calculate along? The restaurant now has €132.30 left. Certainly not a fortune, but hey, more than nothing, right? And if one person claims less from the government fund, more remains for someone else, so that’s fine in itself. However, the restaurant we calculated for would never be able to produce more than 40 three-course meals. If they could sell those for €30, €52.92 would remain. And that doesn’t cover the risks of waste, spoilage, etc.
And the people at the delivery platforms simply take another cut of the turnover. There are also connection fees. As a restaurant, you don’t have to pay these upfront now (thanks), but the amount is deducted from your first orders (but no thanks): -€150 (one-off).
So during the first few days, you’re already working for less than nothing as a chef/restaurateur.
Sorry, we’re closed. Or are we?
And then there is the risk surrounding the one-off €4,000 allowance from the emergency fund, which no restaurateur knows exactly how it will work out. If you had to close your business because of government measures, you are in principle entitled to this amount. But if you continue offering delivery and takeaway as a restaurant, are you then “closed”? Do you still receive the allowance? Nobody can say.
With the super-positive turnover of €3,000, you have to offer delivery for 30 days to earn that €4,000 back. But the question remains whether delivery will actually help your business survive after all.
Takeaway
Are there no other options? Yes: if people come to your establishment to collect their food, you pay nothing to Deliveroo or Uber Eats. But your potential market is obviously much smaller. And your own staff on scooters? Possible, but then not only do you have your own website and social media as channels, you are also fully liable if an employee is involved in an accident.
The solution
So really, there is only one genuine solution. The Deliveroos and Uber Eatses of this world need to take a good look at themselves. If they would lower their rates to a normal percentage, delivery would suddenly help keep our much-loved hospitality industry alive.
What does Deliveroo itself actually think?
I called Jeroen Schaling, Marketing Director at Deliveroo, and he had this to say: “We’re pleased that we can offer local restaurants a platform so that they don’t have to close their doors permanently at this time. We understand that the costs restaurants incur for this are high for some of them. We are therefore looking at how we can support restaurants that now want to offer delivery temporarily. For example, from next week we will make it possible for them to use their existing equipment to receive orders, which will considerably lower the connection costs.”
Reducing commission costs is not feasible
And what about the commission costs—can’t they be temporarily reduced now? Jeroen: “At this time, it isn’t realistic for us to lower the commission costs per order. A very large part of that amount, for example, already goes to the delivery drivers. There are also costs involved in making these orders possible, such as online payment options. We support the various initiatives currently underway to keep the hospitality industry afloat during these times. For example, we are also one of the initiators of an industry-wide campaign launching tomorrow. In it, we call on Dutch consumers to keep eating at their favourite local restaurant—but at home!”
