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Delivery Apps Offer Restaurants a Lifeline—at a Cost

Miami chef Richard Hales was sitting on his couch two weeks ago, a rare moment of downtime for the owner of four restaurants, when he saw an ad for Uber Eats that jolted—and angered—him.

Using #eatlocal, the promotion offered app users free delivery in the name of supporting local restaurants. Diners have disappeared and many restaurants have closed, at least temporarily, as people stay home to comply with social distancing recommendations amid the coronavirus pandemic. In much of the country, take out and delivery are the only options for restaurants.

But Hales was upset because Uber Eats takes 25 percent of the check for those delivery orders, eroding his already depleted revenue and thin profit margin. That’s not supporting local restaurants, he says.

The coronavirus has pushed the nation’s restaurants, which generated $800 billion in revenue last year, to the brink in just days. Spending on restaurants fell by more than 50 percent in late March, compared with the same days in 2019, according to Bank of America. By the end of the month, only one of Hales’ restaurants was still operating.

To stave off collapse, restaurants are joining food delivery platforms like GrubHub and Uber Eats in droves. Uber claims a 10-fold increase in new signups as many restaurants shift to take-out only. Hales is one of many owners watching helplessly as their relationship to delivery services invert, from roughly 15 percent of his revenue to the overwhelming majority of his business.

Hales tried and failed to renegotiate his commission with Uber Eats. With deliveries now most of his remaining business, he feels mocked by their ostensibly “supportive” branding. Uber has waived delivery fees to consumers on most food orders, but a spokesperson confirms there’s no coronavirus-related change to delivery commissions.

“I'm getting their marketing material,” he says. “They're #eatlocal and #keeprestaurantsopen. Of course, because nobody's using [Uber] right now. Everybody's scared to get into it. So restaurants are their lifeblood now and they won’t even come to the table.”

Other restaurateurs voice similar complaints. “My business has shrunk by almost 90 percent,” says David Foulquier, chef and owner of Sushi Noz in New York City and Fooq’s, a downtown Miami restaurant. Sushi Noz closed temporarily soon after New York’s shelter-in-place order, while Fooq’s is now delivery only. With so much of his business reliant on delivery platforms, Foulquier says the fees leave him with little to pay staff and order food. “Of the remaining 10 to 15 percent that I have left, the delivery apps take up about 25 percent of my sales,” he says.

Many restaurant owners have long resented the delivery commissions but viewed them as an increasingly necessary evil because the delivery platforms had become so popular.

“These apps already have so many people hooked,” says chef José Mendin, who has restaurants throughout Florida. When Uber first approached him four or five years ago, he turned them down because of the 25 percent commission. He soon realized he had little choice. “I said no,” Mendin says. “But then I had to get in, because everybody else was doing it. I didn't want to miss out on those sales.”

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In the past month, Mendin estimates his sales dropped about 65 percent. Of the remainder, 25 percent of each sale goes to UberEats.

The economics of the restaurant industry have changed drastically over the course of only a few weeks. The coronavirus relief bill enacted last week is a glimmer of hope for owners, who may qualify for loans covering two and a half months of their payroll. Applications begin Friday, but even if they qualify, many wonder if they can keep their doors open until the money arrives.

“I think if we renegotiate the commission fees and they were lower, down to between 10 to 12 percent, we could certainly make a go at it,” says Hales. “We're just trying to keep the lights on.”

Like many other restaurant owners, Hales is navigating a complicated series of applications for grants, loans, and federal relief, all while trying to maintain as full a staff as he can. With any relief funds still weeks away, he’s had to dip into personal funds.

He’s candid about his situation. On a normal Wednesday night, he would expect roughly $5,000 in revenue. This Wednesday, the total was $665. Of that, $523 came through delivery apps, primarily Uber Eats. Those commissions totaled $131, leaving him just $534 to cover rent, plus the cost of food and staff. His typical daily overhead is about $3,000. With reduced staff, it’s now about $1,200—more than twice as much as his revenue Wednesday. “It's not sustainable,” he says.

Uber Eats isn’t the only company accused of trying to capitalize on the crisis. GrubHub’s recent “Supper for Support,” meant to encourage buying from local restaurants, drew widespread criticism. The deal offers a $10 discount on certain orders between 5 pm and 9 pm, but GrubHub charges restaurants its commission on the full price of the diner’s item, not the reduced price. The platform offered to “defer” its commission from some impacted restaurants, but it’s not clear which restaurants qualify or when deferred commissions were due to the company. GrubHub didn’t respond to a request for comment.

Yelp, which funnels enormous amounts of traffic to restaurants through its review system, created fundraising pages for bars and restaurants without the owners’ knowledge. The system was pulled only a day after its implementation, after many cited that fundraising activities could affect owners ability to apply for outside help from state or local funders or even impact their insurance premiums. "We have paused the automatic rollout of this feature, and are working with GoFundMe to provide a seamless way for businesses to opt into the program moving forward," Yelp said in a statement.

Legitimate GoFundMe pages are very helpful for those laid off, as are gift cards and opting for pick-up over delivery, said Foulquier, the New York and Miami chef. Mendin made it easier to order delivery direct from his restaurant’s website, while Hales recently received funding from a food and wine festival. They’re able to make it, but for many, the coronavirus delivery boom is a bust.

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