Restaurant meal take-out has become increasingly popular for U.S. consumers. A growing list of delivery companies are taking advantage of the upward trend. However, many restaurant operators are finding their share of the delivery costs not so tasty. But hungry diners do like the convenience of home or office delivery and are now accustomed to the service.
Competition among delivery aggregators like Grubhub, DoorDash, and Postmates has grown fierce. Amazon has just pulled out of this business, but many new entrants are appearing. At some point, expect a shakeout of delivery companies. For now, delivery firms’ pricing power is weaker and restaurants can try to get some temporary financial relief.
A Wall Street Journal article discusses more on this topic which is excerpted below:
“Some of the biggest restaurant operators 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. Restaurants were quick to sign up with delivery companies such as Grubhub Inc. and Postmates Inc. to reach more customers.
Now, growing competition in the delivery business is emboldening many restaurants to seek lower rates from such companies. McDonald’s Corp. , Applebee’s and Cousins Submarines Inc. are among chains negotiating to pay lower commissions and asking their delivery partners to spend more on marketing and promotional discounts, people familiar with the negotiations said.
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.
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.”
Overview by Raymond Pucci, Director, Merchant Service at Mercator Advisory Group
