Even larger chains, which can negotiate lower fees, have had their profits nibbled away by the delivery apps.
A former Grubhub executive compared the apps to payday lenders. “They give you the sensation of cash flow, but at the expense of your long-term future and financial stability,” he wrote in May.
There are other causes for concern about the app companies, particularly the treatment of their legion of contract drivers who face inconsistent earnings and are denied health care and other benefits from the companies. DoorDash, Uber and Postmates, among others, pulled together $200 million to back a winning ballot proposal in California last month that circumvented the legislative process and entrenched a system ensuring drivers can’t attain status as employees or other benefits like consistent minimum wage guarantees and help with vehicle costs. The companies have since vowed to bring similar limits to other states.
Restaurants of course do not have to use the apps, but those that don’t or that refuse to pay marketing fees to push their eateries higher up in search results find that customers are funneled to competitors. Desperate to maintain typical profit margins of just 5 percent or less, some restaurants have fought back by encouraging customers to order directly through their websites for pickup. Others are slipping fliers into delivery boxes to promote less costly options, including a few new start-ups that charge lower commissions.
Ashish Arnold, who operates two restaurants in Maryland, implored customers to delete all delivery apps from their phones. “It’s a predatory business,” he said, noting Uber, DoorDash and others had been unwilling to negotiate lower fees with him even as sales slipped. “They say the onus is on us to make it sustainable, but this is not a service we asked for.”
With deep pockets, the dominant app companies have devised ways to put pressure on restaurant owners to sign contracts with them, including downloading menus without restaurants’ consent and then offering their own delivery. Grubhub registered internet domain names of tens of thousands of independent restaurants. Legislators should curtail such anticompetitive practices.
Dan Raskin, an owner of Manny’s Deli in Chicago, said his greatest frustration was the companies’ unwillingness to share customer information with him. That means he cannot verify their claims that they are bringing him new customers. Worse, they appear to be using that data to create competing virtual restaurants — which have no dining rooms, offer multiple cuisines from one location and operate only on the apps.