Are Third-Party App Fees Hurting Independent Restaurants?

During the COVID-19 pandemic, many restaurants adapted to dining restrictions by offering customers options like patio service, takeout, and delivery. While many restaurants have offered in-house delivery service, many others have turned to third-party delivery services such as Uber Eats, Postmates, and Doordash.

Unfortunately, using delivery apps usually means fees for the restaurant, which can run up to 30% of the customer’s total bill.  Worse yet, these fees tend to be higher for smaller, independent restaurants that are already struggling.  

In response to these fees, several cities have passed ordinances prohibiting third-party delivery services from charging small restaurants more than a set amount of the customer’s tab. Though details vary, many cities have capped the fee at 15%.

For restaurants in communities without ordinances, some measures can be taken to help offset the costs of third-party delivery apps. Let’s go over a few.

Increase Menu Costs

No one wants to raise prices on their menu, but a recent survey by Datassential suggests that many customers are willing to pay more for their favorite foods to help offset pandemic costs. That being said, they seemed more willing to accept higher prices on the menu than an extra fee on the check as a separate line item. Brooks Sandwich House in Charlotte, North Carolina raised prices this year to offset the increase in beef prices due to a beef shortage from the pandemic. The move has allowed the business to stay open for takeout during the pandemic

Add a COVID-19 Fee

As mentioned, adding a fee for PPE or offsetting delivery charges may not sit well with customers, however many are still willing to pay it to enjoy the restaurant dining, whether it be in person or by delivery or takeout. At Brassica Kitchen + Cafe in Jamaica Plain, MA, owner Rebecca Kean added a three percent PPE fee to all takeout orders. According to Kean, the fee offsets the cost of masks, individually wrapped utensils, and takeout boxes. Thankfully, Kean says customers have been very understanding about the fee.

Offer In-House Delivery

Offering an in-house delivery service is another way to save money on delivery fees. In-house delivery enables you to set your own rates and can also boost the economy by creating jobs. To offer in-house delivery, you may still need a third-party to help attract new customers. One increasingly popular way to draw attention to a business is to use social media influencers to entice their followers to try your food. Influencers are usually paid a flat fee plus a free meal in exchange for high-quality photos of their dining experience posted on their social media page, increasing awareness of your delivery service.

You may also want to consider setting up online ordering for customer convenience. According to Modern Restaurant Management, many customers prefer ordering online to ordering over the phone. In fact, a 2017 Forbes study found that 6.6 percent of restaurant sales came from online ordering versus just five percent from phone orders. That number is likely higher now due to the pandemic, with many restaurants still unable to offer in-house dining.

Lobby Your Local Government

In Monroe County, New York, Legislator Rachel Barnhart recently proposed a cap on fees for 3rd party delivery services. Says Barnhart, “customers would be shocked to learn how much money restaurants have to fork over to these powerful tech companies, especially at a time restaurants are struggling to survive.” 

Similarly, in Milpitas, California, a 15 percent fee cap was recently approved by city council. The cap took effect on October 27th and will remain in effect until COVID-19 restrictions are lifted in California.

If you rely upon 3rd party delivery services but want to see a fee cap in your community, contact your local city council about developing a similar program.

Get Creative

If your business is struggling with high fees from third-party delivery apps, there are options to help lower these fees or at least compensate for them. If you’re concerned about high third-party app fees, get creative and try one of these ideas. It could save your business thousands of dollars.