Many small businesses have complained that by relying on third party delivery services has hurt them more than they have helped. That is because of the outrageous commission that they have to deal with. Third party delivery services have been imposing commissions that can be up to 30% of the order that a customer pays. Taking almost a third of a cut on all orders is an extremely large burden for many small restaurants, especially when they may not be making large profits. This taxing method is prevalent across many third party services, and hasn’t done much to help businesses stay afloat during these times.
The realization of how unfair this commission fee is hasn’t gone unnoticed. San Francisco has put a cap on the commission rate at 15% last Friday in order to help restaurants stay afloat. Similarly, DoorDash has said that they would limit their commission fee on all restaurants to only be charging a 10% commission fee on 4/13. While there have been some strides to help alleviate the financial burden that small restaurants may face, it is not universal. Not all cities have put caps on commission fees and not all services have said that they will lower their fees willingly. While the third party delivery services continue to be very profitable, it seems that it will come at the expense of many small restaurants struggling to make ends meet.
Sources:
https://www.baynews9.com/fl/tampa/news/2020/04/01/small-restaurants-third-party-delivery
https://www.cnbc.com/2020/03/17/doordash-eliminates-and-reduces-some-commission-fees-for-restaurants.html
https://www.sfchronicle.com/business/article/San-Francisco-mayor-caps-Uber-Postmates-15192738.php
This is an interesting article. I think now food delivery services are charging larger commission fees because they simply have a more inelastic demand now in the business and delivery service relationship. People aren't going to sit down at restaurants anymore, so the only way customers can be reached is through the food delivery services. This means that the businesses will basically be forced to pay the commission in order to even have the chance to stay afloat. I'm glad that our area is realizing this issue and putting caps on the commission fees. However, I feel bad for areas that aren't taking this issue seriously and in turn, hurting small businesses during this time even more than they already have been.
ReplyDeleteWow! I had no idea this was happening! The 30% commission seems really cruel and is definitely putting small businesses at a disadvantage. However, this also makes me wonder how much is going to the driver. If companies are having such a steep commission, the least they could do is give a higher raise to their employees, who are actually exposing themselves to the virus.
ReplyDeleteI think that it's great that cities are noticing the problem and attempting to put caps on the commission rate. Especially in this time, it's so important to support businesses like restaurants to ensure that the people owning them are able to continue to make a living, and that after this pandemic they are able to continue their services. The cap on commissions should be more widely spread and mandatory.
ReplyDeleteFood delivery companies are already known to be scummy and penny pinching. Doordash had a scandal where they would guarantee a $7 per delivery to workers. However, if the customer chose to tip, the first $7 of their tip would go towards that guaranteed tip. For example, if a customer chose to tip $3, the worker would only get $4 from Doordash for a total of $7 tip.
ReplyDeleteUnfortunately, most restaurants don't have the resources to run their own delivery service, forcing them to rely on these limited options.
You bring up a very good point. I never really thought about how big commissions are. Consumers need to be more aware of these things in order to make the best decisions to support small businesses and ensure that they stay in business.
ReplyDeleteIt's surprising that stores would require money from third party delivery services (I admittedly don't know what model they use), but it would seem that these delivery services introduce a completely new audience of customers that would not go to a certain restaurant if not for the delivery option. Seeing as how these restaurants are gaining more exposure with third party delivery services, a commission fee on top of that seems a little extra.
ReplyDelete