delivery

Why Toronto restaurants are opting out of third-party delivery apps

For some restaurants, partnering with third-party delivery apps is brewing more stress than profit

Back in March when Ontario first began to implement restrictions to reduce the spread of COVID-19, the Ford government ordered Toronto restaurant owners to shut down indoor dining rooms.

No longer able to welcome patrons for dine-in service, thousands of eateries, ranging from mom-and-pop joints to full- fledged restaurant chains, had to find new ways to turn a profit. Some businesses went largely unaffected, such as pizza restaurants, which have long thrived on a delivery service model. But for restaurants that didn’t offer delivery or had not made it a focus of their offerings a serious financial problem arose.

Popular third-party delivery apps, including Uber Eats, DoorDash and SkipTheDishes, made it easy for diners to still enjoy restaurant favourites from the comfort and safety of their own homes.

But for many restaurants, the choice to partner with a third- party app brewed more stress than profit. Major delivery app companies can legally charge restaurants up to 30 per cent of the purchase price.

Effective Oct. 10, the City of Toronto was mandated by the Province of Ontario to return to Stage 2 protocols once more in order to slow the rising spread of COVID-19 cases across the Greater Toronto Area.

As a result of this order, after less than two months of relief for the indoor dining model, Toronto’s restaurants, once more, were ordered to suspend their indoor dining for a period of 28 days — with the possibility of an extension, depending on the circumstances.

Although Premier Ford has repeatedly urged third-party delivery services to reduce their fees, the city and province have not followed the lead of major U.S. cities like New York, Seattle and San Francisco by legislating a fixed cap on commission rates.

Unable to sustain the high service fees attached to third-party delivery service apps, some restaurants in Toronto are starting to launch their own in-house delivery services. And others are partnering up with a growing number of local delivery services that are looking to put the control back in the hands of restaurant owners.

The Ontario Restaurant Hotel and Motel Association (ORHMA), which currently represents more than 11,000 establishments across the province, is one organization committed to calling out the issue of staggering service fees that third-party apps can charge, as well as building alternative options for restaurants.

The organization is working with Cena On-demand Technologies, Ltd. operating as Cena Eats to come up with a solution for the restaurant industry.

“The goal is to ensure that restaurants cut down the high commission costs,” says Tony Elenis, president and CEO of ORHMA. “The industry has been devastated during COVID-19. They [restaurant owners] are at the edge, and they need all the support that can be offered, not only from our government, but also from providers. For many, food delivery is the only option to be sustainable.”

There needs to be a control of fees, especially during this pandemic

ORHMA plans to launch its new delivery service later this year and will cap its service fee at 9.5 per cent — a far cry from the rates charged by larger industry players. It will also employ its own employees as drivers, instead of contractors, effectively solving an even bigger issue faced by third- party delivery services, which is the disconnect between the restaurant and the customer.

In April of this year, one month after restaurants were instructed to close indoor dining, Roger Yang, founder and owner of Avelo Restaurant (Awai Hospitality) launched localEats.TO, an online delivery service that enables customers to order from restaurants directly, without going through third-party apps.

With localEats.TO, restaurants pay only the direct cost of delivery to the customer, without additional service fees that third-party apps usually charge. Like ORHMA’s model, delivery drivers are employees, who are paid fair, hourly wages and protected by insurance.

 

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“From a restaurant perspective, one of the worst things about Uber is that it cuts off the relationship with customers, and in the long term, everything is about customer relationships,” says Yang. “Uber Eats only exists because we [restaurant] told our customers to order from them, and now they’re a parasite on the industry.”

LocalEats.TO is in the process of adding more restaurants to its platform, with a long-term goal of providing restaurants with an alternative delivery service that doesn’t require them to relinquish control to third-party apps.

Additional local delivery services are slowly popping up across the city and are gaining traction with restaurants and customers alike, as their lower sign-up costs allow restaurants to keep overhead costs down amidst an economic landscape still struggling with the effects of COVID-19.

“Current commission fees charged are excessive,” Elenis concludes. “Restaurants are willing to pay for services rendered but at a fair price. There needs to be a control of fees, especially during this pandemic.”

THIRD-PARTY APP RESPONSE

SKIPTHEDISHES

New support initiatives have included a 25 per cent cut on commission rates for restaurants in the three Ontario regions affected by the modified Stage 2 restrictions.

UBER EATS

The brand is now waiving activation fees and reducing fees for restaurants that offer pickup or use their own couriers for orders made on the Uber Eats platform. Uber has not stated it will reduce restaurant commission fees.

DOORDASH

DoorDash is waiving delivery fees in Toronto, Mississauga and Ottawa until Nov. 6, but the brand has not made a statement about reducing commission fees for restaurants.

Article exclusive to TRNTO