The food delivery industry is learning it needs to keep restaurants happy
In the battle between food delivery apps and restaurants during the pandemic, the latter may now have the upper hand.
The pandemic forced restaurants to turn to delivery to stay afloat. At first, they saw the food delivery services as a lifeline. But some restaurants resented commission fees charged by food delivery companies, which reached much as 30%. The restaurant lobby pushed back, and numerous cities, from Jersey City to San Diego, enacted temporary caps on their fees.
Now, delivery companies are trying to earn their way back into the good graces of restauranteurs. This week, DoorDash expanded its advertising tools, including selling restaurants ads that appear on top of search results—the merchants only pay for the sponsored listings if users click through the ads and make orders. Last month, DoorDash added alcohol delivery on its app, which would help boost restaurants’ average delivery check size. And, earlier this year, the company rolled out a tiered commission pricing model that starts at 15%, as well as created the role of chief restaurant advisor, who would help serve as a liaison between restaurants and DoorDash. Other food delivery companies like Uber Eats have launched similar initiatives.
Why DoorDash needs to work with restaurants
It’s becoming increasingly clear that DoorDash and other food delivery companies, which remain unprofitable, are realizing they need to work with restaurants and be more than just a food delivery company and more of a long-term partner with restaurants to help them run their business.
Despite the goodwill effort from the apps, the pushback from the restaurant industry continues, reflecting its influence and power. The restaurant industry is highly organized, with trade associations, unions, and relationships with politicians at their disposal.
Recently, the food delivery companies faced a series of legal battles from cities where restaurants make up a large part of the economy. Last month, the New York City Council passed a series of bills including several aimed at improving workers’ conditions, such as providing access to restaurant bathrooms and raising the minimum pay. The City Council received feedback from the NYC Hospitality Alliance, a restaurant advocacy group, during the legislative process.
New York City’s recent success in enacting regulatory reforms could influence other cities. At the same time, the third-party delivery apps are fighting back with their own lawsuits over permanent fee caps and sharing customer data with restaurants both in New York City and San Francisco. It’s still too early to say what the outcome of these lawsuits will be and which other cities will move to make fee caps permanent.
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