The Wall Street Journal reports that a number of restaurant chains are “pushing back against fees charged by delivery companies, turning up the heat on young businesses already wrestling with rivals in an increasingly crowded market for bringing food to people’s doors.”
The goal is to not just negotiate lower commissions with the delivery companies, but also ask “delivery partners to spend more on marketing and promotional discounts.” The renegotiations are occurring in some cases because some restaurant companies “were too quick to accept unfavorable terms from delivery companies, fearing they would otherwise meet the same fate as clothing stores and bookstores whose sales have been felled by online delivery.”
The Journal writes that “delivery has quickly emerged as one of the biggest conundrums facing the food business, from restaurants to groceries. Consumers want the convenience, but the technology and logistics required to get it right - whether in-house or through an outside provider - often are more costly, outweighing any additional revenue generated.”
At the same time, “Restaurateurs say high fees dent their profits. They add that lower fees and more promotional spending by delivery companies could increase customer choice by enticing more establishments to offer delivery.”
The goal is to not just negotiate lower commissions with the delivery companies, but also ask “delivery partners to spend more on marketing and promotional discounts.” The renegotiations are occurring in some cases because some restaurant companies “were too quick to accept unfavorable terms from delivery companies, fearing they would otherwise meet the same fate as clothing stores and bookstores whose sales have been felled by online delivery.”
The Journal writes that “delivery has quickly emerged as one of the biggest conundrums facing the food business, from restaurants to groceries. Consumers want the convenience, but the technology and logistics required to get it right - whether in-house or through an outside provider - often are more costly, outweighing any additional revenue generated.”
At the same time, “Restaurateurs say high fees dent their profits. They add that lower fees and more promotional spending by delivery companies could increase customer choice by enticing more establishments to offer delivery.”
- KC's View:
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There is so much competition in the delivery category here - the players include names like DoorDash and rubHub and UberEats - that Amazon actually got out of the business. That doesn’t happen all that often.
That much competition means that some of the restaurant chains have some leverage in making these demands.
