Third-party delivery services can help and hurt business, restaurateurs say

Third-party delivery services can help and hurt business, restaurateurs say

Commissions can be as high as 30%

| Published:

Bethesda Chef Ashish Alfred, who owns George's Chophouse and Duck Duck Goose, posted a video to his social media pages on April 11 urging customers to order delivery directly from restaurants instead of using third-party applications such as Grubhub and Doordash.

Screenshot from Ashish Alfred's Facebook page

Workers and managers from some Bethesda restaurants say third-party delivery services such as Doordash, Grubhub and UberEats are often needed to maintain a steady flow of business.

But commission fees that those companies charge can be as much as 30%, which restaurant owners say hurts their bottom line as they rely entirely on takeout and delivery for their income.

Restaurants and bars have been closed since March 16 because of an executive order by Gov. Larry Hogan aimed at slowing the spread of the virus. Carryout and delivery are still allowed.

The high commission rates are, in normal times, not a huge burden for restaurants to bear, said Ashish Alfred, who owns Bethesda restaurants Duck Duck Goose and George’s Chophouse.

Alfred said in an interview last week that normally, money from bar sales, private parties and other types of events can help offset the high commission rates, he said.

“Right now when you only have one avenue to make money and that one avenue is being cut by 30%, it really, really stinks,” he said.

Alfred said he has kept his restaurants closed throughout the pandemic, he said, because taking delivery orders through the apps, as he normally does, would cause his businesses to lose money.

“A lot of our items are high food cost items, so the margins are already low. You add to that having to pay a 30% commission, then I’m no longer in business to make money,” he said.

On April 11, Alfred posted a video on his social media pages urging customers to delete their apps during the coronavirus pandemic to help restaurants, promoting the hashtag #86theapps.

Alfred said he made the video to raise awareness in the public about commission fees to help other restaurant owners.

“The idea was to get people’s attention and to let people know that yes, we appreciate the orders that are coming in, but as much as you think that you’re helping, you would be helping restaurants a lot more if you order directly from the restaurant,” he said.

Ronnie Heckman, who owns Caddie’s on Cordell, said last week that he agrees with Alfred that the commission fees are hurting businesses during the pandemic.

But Heckman, whose restaurant uses multiple third-party delivery services, said “a lot of places wouldn’t be doing the numbers they’re doing” businesswise without them.

“There’s definitely a lot of upside and a lot of negatives to it [using the apps]. They provide you with a lot of business and they get to places you might not be able to get to,” he said. “They’re providing six, seven, 12 different delivery drivers that come into your place on a nightly basis. … And that’s orders that you might not get otherwise.”

Heckman said one positive of using delivery apps is that many deliver farther than his own delivery drivers do.

“We won’t actually go into D.C., which is kind of weird because we go to Western Avenue in Chevy Chase. But an extra two blocks can cost us 15 or 20 minutes in delivery,” he said.

For Heckman and other restaurant owners, not having customers at the bar has been one of the most challenging aspects to the pandemic. Restaurants can serve alcohol for carryout and delivery, but third-party companies can’t deliver it.

“The money’s in the alcohol. Unless you’re a place that can charge $35, $45, $55 for steaks, it’s not much money [that comes from food orders],” Heckman said.

At Brickside Food & Drink on Cordell Avenue, Manager Rob Blackwood said his restaurant has continued to use Doordash, Grubhub and UberEats for the time being. If he were to get rid of the delivery apps, Blackwood said he would lose 40% of his business.

“We’re not making the kind of money that we used to. We’ve had to furlough our entire staff, so it’s just me and my chef that are salaried right now. … I don’t have staff. I couldn’t afford to pay them through this,” he said.

Blackwood said his restaurant has been accepted for a loan under the Paycheck Protection Program of a $2 trillion-plus federal stimulus package passed by Congress last month in response to the pandemic. This will let him bring some workers back on, he said, including a server who will make deliveries for the restaurant.

“If it wasn’t for that [loan], it would just be me and my chef until we can reopen our doors,” he said.

Blackwood, who is friends with Alfred, said he agrees that the delivery apps are hurting restaurants and he hopes to eventually stop using them during the pandemic.

“We’re not gonna get rid of the apps just yet. If it comes to the point where we can get rid of those, we probably will for the time being,” he said.

Jimmy Traettino, the owner of Positano Ristorante Italiano on Fairmont Avenue, said the commission rates are “exorbitant” and if he were to sign up, he would “basically wind up working for Doordash, Grubhub or UberEats.”

“You really have to do a very high volume of delivery service to make that 30% commission palatable,” he said.

The delivery vendors have taken steps to lower their commissions during the pandemic to give financial relief to business owners.

Doordash announced on its website this month that effective April 13, the company would be reducing its restaurant commissions by 50% through the end of May. The policy applies to restaurants with five locations or fewer.

In an email to Bethesda Beat, a Doordash spokesperson wrote that the commission relief program is expected to help roughly 150,000 restaurants in the United States, Canada and Australia.

“This estimated $100 million injection from DoorDash is dedicated to helping merchants respond to the acute financial threats they are facing right now,” the spokesperson wrote.

Additionally, Grubhub announced on March 13 that it would defer up to $100 million in commission payments from “impacted independent restaurants,” although it did not define what constituted an “independent restaurant.” No one from the company could be reached for comment.

UberEats hasn’t changed its commission rates during the pandemic, but the company announced on March 16 that it would waive delivery fees for consumers to help independent restaurants during the pandemic.

An UberEats spokesperson wrote in an email to Bethesda Beat last week that regulating commissions would force the company to “radically alter the way we do business, set a far-reaching precedent in a highly competitive market, and could ultimately hurt those that we’re trying to help the most: customers, small businesses and delivery people.”

Alfred said he was grateful companies such as Doordash giving financial relief to businesses, and thinks it’s a “step in the right direction,” but companies need to waive commissions entirely during the pandemic.

“We appreciate it, but it’s a small drop in a very big bucket,” he said.

Alfred said he doesn’t think commissions to the vendors will be a problem after the pandemic is over.

“No one complained about commissions until COVID came along.  Nobody is gonna complain about commissions when COVID is gone,” he said.

Dan Schere can be reached at daniel.schere@bethesdamagazine.com 

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For other Bethesda Beat coverage of the coronavirus, click here.

To see a timeline of major coronavirus developments in Maryland and Montgomery County, click here.

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