Food Delivery Apps

November, 2020

Online food delivery certainly helped many restaurants stay afloat during the pandemic lockdown and the cautious reopening that followed earlier this year. But the high fees and a lack of quality control have others questioning whether food delivery apps are a solution or a whole new problem for the restaurant industry.

“I just find there’s a lot of shady practices going on with some of these companies,” says St. Albert restaurateur Ed Cordova. The co-owner of Luisa Ristorante is speaking about the food delivery apps—Skip the Dishes, UberEats, DoorDash, etc.—that were already growing in popularity before COVID-19 thrust a new normal on Albertans. “To me it’s not worth my time to even get involved with them.”

A pandemic changes everything

Although COVID-19 has been hard on small businesses across the board, restaurants have been uniquely affected. The lockdown shuttered dining rooms and bars for weeks, and reopening plans in Alberta required social distancing and other preventative measures. 

While these measures were necessary, it’s still been rough sailing lately for an industry already known for thin profit margins. A Restaurants Canada survey in April found that half of independent restaurateurs weren’t sure if they would last through the summer if conditions didn’t improve. Out of the 800,000 restaurant jobs lost nationwide, 95,000 of those were here in Alberta.

“Normally, dining in would be about 95 percent of my business,” Cordova says. While Luisa Ristorante fortunately did not have to close, the damage was substantial. “We’ve taken a fairly big hit revenue-wise because we had to stick to strictly takeout for a couple of months.”

A tenuous lifeline

Enter online delivery. While the concept dates back to the early days of the internet, the phenomenon as we know it now is a fairly recent one. It was only about five years ago that ordering online overtook ordering by phone in North America. 

Here in Canada, UberEats, DoorDash and Winnipeg-based Skip the Dishes are the top players. A February survey out of Dalhousie showed that 39 percent of Canadians and 44 percent of Albertans had tried a delivery app before. Slightly over a fifth of Albertans reported using an app at least once a week, making us some of the most frequent users in the country. 

And that was before the pandemic. “I was an advocate against if for the longest time, but when things go sour, you gotta use every avenue,” says Tony Saporito of Nello’s Cucina Italiana in St. Albert, who signed up with Skip the Dishes during the lockdown. Saporito previously viewed food delivery apps as little more than a loss leader until events forced him to reconsider. “It was part of the business plan, not the entire business plan.”

The pandemic made delivery apps a bigger part of the plan, though. Larisa Sens, supervisor at Jack’s Drive-In in Spruce Grove, says that their orders through Skip the Dishes increased during the lockdown, although maybe not as much as she expected. Nonetheless, the restaurant’s drive-thru model meant that it was able to cope better than others. 

“Drive-thru, hands down, is always the busiest. I still find people would rather get out,” Sens says. “But we do get quite a bit of Skip. There’s a certain amount of people who can’t be going out right now.”

The Bad Side of Delivery

Still, there have been a few horror stories from restaurants that use delivery services: late or no-show drivers, food not getting to customers on time or at the quality the restaurant intends, careless handling of orders and so on. 

Unfortunately, the restaurant and not the app often bears the public brunt of customer displeasure. 

“What happens is the client doesn’t review the delivery service, they review the restaurant,” Cordova says. “Ultimately, it’s the restaurant that takes the hit on social media, and ratings can make a big difference in a business.”

In some cases, apps have even been accused of adding restaurants without those restaurants’ permission. Cordova himself experienced this when his family purchased Luisa Ristorante in 2019. He only realized his restaurant was on DoorDash when a customer called about a dish that wasn’t even on the menu; the company had uploaded an outdated menu from the old owners. He also knows one Edmonton restaurant that needed to lawyer up to stop an app that was repeatedly adding it without permission.

Fees and more fees

There’s also the commission, which apps charge on every order. The rate varies but can be anywhere up to 25 or 30 percent. With food costs typically around 25 to 30 percent, and labour costs about 30 per cent, and rent to pay on top of that, the math quickly gets ominous. 

“When you’re giving away 20 to 30 percent to your delivery app, you’re really not making any money,” Cordova says.

Additionally, Skip the Dishes and other apps grade restaurants on their wait times. It’s meant to ensure that drivers don’t have to cool their heels too long while an order is prepared, and it gets food to the customer quicker. But the practice places even more pressure on restaurants, who are charged if they exceed their set time frames. Furthermore, like customer feedback and delivery time, it impacts the restaurant rating that appears on the app.

The system can work well for fast food restaurants, where meal prep is automated. For finer establishments that make everything from scratch, less so.

“You’re at a disadvantage two times,” Saporito says. “You’re losing money, and then not getting so many deliveries because your rating is lower.” 

Saporito even turns the app off sometimes during busy stretches because managing it on top of managing a dining room is just too much work.

“We don’t get to control those ratings. We don’t get to comment on bad customer feedback, we don’t have any say in that. You almost have to work harder and be better at Skip the Dishes than anything else.”

Helping Out

Nonetheless, the major players have made efforts to help out local and independent restaurants. Skip the Dishes announced a 25-percent rebate on commissions back in March. Originally planned for 30 days, the rebate was later extended. According to a Skip the Dishes spokesperson, by June the company had given back over $16 million in commission rebates and other initiatives.

“We’re able to provide benefits for our restaurant partners, such as access to our customer base and order-driving initiatives, increased visibility, and assistance with menu optimization so they can focus on what they do best,” the spokesperson said.

The company also gives partners the option of delivering with their own employees for a reduced commission fee of 10.5 percent.

In response to the lockdown, both Skip the Dishes and Uber Eats made changes to their apps that allow customers to directly tip local restaurants. Canadians have responded in kind. In June, Skip the Dishes said it had raised more than $630,000 in this way. Uber Eats meanwhile reported that average tips in Canada had increased by 55 percent since March 9. Among major Canadian cities, Edmonton ranked 6th in tips, the highest in western Canada after Victoria. 

Bringing back the dining experience

As things gradually return to the old normal, it remains unclear what the restaurant landscape in Alberta will look like or what role online food delivery will play. Despite the criticism that delivery apps have faced recently, there has also been measured praise.

“They do a lot of work for you as an owner because they’re advertising and making all the hardware and software,” Saporito says. “In this day and age, that little bit helps, right?”

At Jack’s Drive-In, Sens sees Skip the Dishes as a decent investment. “It’s been very helpful for our business. Sometimes it’s frustrating, but everybody’s just doing the best that they can.”

In any case, probably the best thing will be to get bottoms in seats when it’s safe again. “Most people want to come in and enjoy the atmosphere and the dining,” Cordova says.

Saporito concurs. “In our business, what you need nowadays is the bond you build with customers because it’s a small restaurant. I’m the owner, I’m the chef, I go out there and talk with diners. I build relationships. And that’s very important for longevity.”

Online Food Delivery Worldwide

• In the wake of the COVID-19 pandemic and economic slowdown, global online food delivery is expected to grow to $111 billion in 2020 and $200 billion by 2025 

• A quarter of people in China—about 355 million—use delivery apps, and about 1.8 million orders are placed every day in Beijing

• In the U.S., almost 60 percent of restaurant orders by millennials are for takeout or delivery

• 70 percent of U.K. consumers prefer to order directly from a restaurant, rather than going through a third-party app

Delivery Comes Online

Pizza Hut started the first online order service in 1994, launching a website called PizzaNet. The site consisted only of a basic order form that customers could fill out. 

The very first order was placed in Santa Clara, California for a large pepperoni and mushroom pizza with extra cheese, and an employee had to call the given number to confirm the order and collect payment. 

Not only was this the first online food order, it may have been the first physical good ever purchased on the internet (though this is debated).

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