The cost of convenience Delivery apps have helped many struggling eateries through the pandemic but customers need to know they are paying more while restaurants are getting less By: Gabrielle Piché Posted: 7:00 PM CST Friday, Jan. 21, 2022

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Delivery apps have been the pandemic-era saving grace for many restaurants and hungry customers — but often, people are paying more while restaurants get less.

David Newsom has watched Hildegard’s Bakery’s online sales skyrocket since Manitoba’s first COVID-19 lockdown. Most orders come through the DoorDash app; in the beginning of January, nearly all of the shop’s online requests came through DoorDash.

“It was such a large percentage of our orders that the overall margins start(ed) to look… a lot less attractive,” Newsom, the bakery’s co-owner, said.

Each time someone buys goods from Hildegard’s Bakery through DoorDash’s app, the delivery service takes a 25 per cent commission.

However, when customers order through the bakery’s website — which is powered by DoorDash — the bakery keeps 97 per cent of the transaction.

In both scenarios, DoorDash drivers deliver, and customers pay delivery fees and tips.

The deal is fine when more people are eating in, Newsom said. After all, he agreed to DoorDash’s conditions. But Manitoba is still in a pandemic, and many are dining at home.

“Most restaurants have not structured their menu in such a way that they could actually survive if they were paying 25 per cent commission on every order,” Newsom said, adding restaurants have different agreements — and varying commission fees — with their delivery service providers.

Customers also may pay more through a delivery app than a company website. In Hildegard’s Bakery’s case, a $15.18 pizza ordered on its website — to be delivered to the Winnipeg Free Press office — came to $25.19. The same pizza through DoorDash’s app checked out at $26.24.

“If people are just discovering us, I’m happy to make the sale at a lower margin and have the chance to earn a lifetime customer,” Newsom said. “But, I want those people to then come back and be dine-in customers.”

“Most restaurants have not structured their menu in such a way that they could actually survive if they were paying 25 per cent commission on every order.” – Hildegard’s Bakery co-owner David Newsom

SkipTheDishes takes 22 per cent of Hildegard’s Bakery’s sale when its services are used.

Despite the hefty fees, the companies have been crucial to Hildegard’s Bakery’s operations over the past couple years. New patrons have found the spot by scrolling online, and when restaurants were physically closed, delivery was the go-to.

“(The services) have allowed us to stay open and maintain our hours and keep our staff working… and I’m really thankful for that, even if we (are) dealing with margins that (aren’t) as favourable,” Newsom said.

Tommy Schneider, owner of Tommy’s Pizzeria, reduced third party delivery fees by employing his own drivers.

“My model for my restaurant was never supposed to be pickup and delivery,” he said. “I never wanted my pizza going out the door — it’s going to change the quality of the pizza, it’s going to change the temperature… but I had to do it due to the pandemic.”

He partnered with SkipTheDishes last March to showcase his menu on their platform.

“They have a lot of presence, especially in Winnipeg,” he said.

Schneider said SkipTheDishes took 14 per cent of each sale that went through its website; it could’ve been over 20 per cent had he used their drivers.

A lack of trust in third party drivers led Schneider to hire his own, and the pandemic led him to create a Tommy’s Pizzeria app, another way for customers to order and pay online. This wasn’t to avoid third party commissions, Schneider said — he just didn’t want his staff to deal with a machine or carry cash and get robbed.

“The third party delivery apps, I like their platform, but that’s about it,” he said.

Such apps were meant to be supplemental to a restaurant’s business, according to Shaun Jeffrey, CEO of the Manitoba Restaurant and Foodservices Association.

“The third party delivery apps, I like their platform, but that’s about it.” – Tommy Schneider, owner of Tommy’s Pizzeria

“Especially when we were fully closed… these delivery platforms were our main source of income, and our only source of income for a lot of restaurants,” Jeffrey said.

It’s been part blessing, part curse: the apps have helped propel businesses forward during the pandemic and opened them to new markets, Jeffrey said. But, the commission taken off each sale hurts already struggling restaurants.

The Manitoba Restaurant and Foodservices Association has a website, letsorder.delivery, which acts as a portal to restaurants’ own online ordering pages.

“Regardless if some operators think 30 per cent (commission fees are) too much, it’s much less than operating your own fleet or hiring your own drivers,” said Sylvain Charlebois, a Dalhousie University professor of food distribution and policy. “No restaurant operators have been forced to sign on to these deals.”

“I wouldn’t be surprised if one day you see like a Veganville online, for example, or people looking for specific diets.” – Sylvain Charlebois, Dalhousie University professor of food distribution and policy

Charlebois said he’s heard delivery service commission fees range between 15 and 30 per cent. He doesn’t believe the industry will change its fee structure. Instead, he thinks delivery apps will diversify and become more niche.

“Right now, the offering is very generic,” Charlebois said. “I wouldn’t be surprised if one day you see like a Veganville online, for example, or people looking for specific diets.”

SkipTheDishes did not respond to interview requests. DoorDash highlighted its suite of available services to companies and consumers.

“Our commission structure is personalized for each merchant to match their unique needs, which can depend on the breadth of merchant services each restaurant owner uses to expand their reach and revenue,” a DoorDash spokesperson said in a written statement.

Uber Eats said its marketplace fees, paid by restaurant partners, are funnelled into areas including technology, safety (like masks for delivery workers), marketing and employment.

gabrielle.piche@winnipegfreepress.com

Gabrielle Piché
Reporter

Gabby is a big fan of people, writing and learning. She graduated from Red River College’s Creative Communications program in the spring of 2020.

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