Delivery apps like DoorDash and Uber Eats are seeing big upticks in traffic as restaurants that have never done delivery before sign up for them — but some establishments, especially chains, have learned that they’re better off going it alone.
Third-party delivery services bring customers and visibility, but also take a large percentage of each sale — usually between 25 and 30 percent. And while the city of Montreal recently started offering low-cost delivery for local Montreal businesses through various Sociétés de développement commercial de Montréal (SDCs), the service isn’t available for meals or perishable food products.
Since the mass closure of restaurants due to the pandemic, various delivery apps have tried to sweeten the deal for restaurants with discounts: DoorDash isn’t collecting service fees for the first 30 days after a new restaurant signs on, and Uber Eats is waiving the delivery fee for customers who order from independent restaurants and providing daily payment to restaurants rather than on a regular billing cycle. Yet some Montreal restaurant owners say using those services still isn’t financially worth it.
“When you have your food cost at 35 percent, you put Uber [Eats] fees in there, whatever payroll, it doesn’t really make sense to stay open just for that,” says Peter Mammas, President and CEO of the Foodtastic Restaurant Group, which owns a range of restaurants including local chaains La Belle & la Boeuf, Bacaro, Carlos & Pepes, Souvlaki Bar, Nickels, Les Rôtisseries Benny, and Au Coq).
Seventy-seven of Foodtastic’s 92 restaurants are currently closed and sales have dropped to $800,000 from $3.8 million, says Mammas, yet two of its franchises are flourishing: Au Coq and Les Rôtisseries Benny. The two legacy delivery restaurants have actually seen sales increase 10 percent compared to this time last year, says Mammas, thanks mostly to their in-house delivery service. Many of Foodtastic’s restaurants that were using third-party delivery services prior to the government shutdown have closed for now, says Mammas, but these two already managed their own delivery.
Now, the Foodtastic is rushing to source cars and drivers to transition the delivery at pizza chain Bacaro away from SkipTheDishes, Doordash, and UberEats. Once that’s set up, Mammas says they’ll reopen all the Bacaro locations (about half are currently closed) with the expectation of being profitable.
In a similar boat is Montreal-grown shawarma chain Boustan, which started transitioning to handling its own delivery in February, according to Director of Marketing Georges Alexandar. That change was almost completed by the time the coronavirus crisis hit. But the delivery area for Boustan’s 24 restaurants isn’t generally as wide as on third-party apps, which it still uses in part. It too has seen a major drop in sales across its restaurants, some of which decided to close for safety reasons.
Alexandar says that despite the reduced profit, the third-party delivery apps have been extremely helpful. “Most of our restaurants were already set up on Uber Eats if not SkipTheDishes or Doordash. And it’s really thanks to them that we’re getting to stay afloat. But we do consider the fees when we’re thinking about our bottom line,” he says.
Other restaurants, including Rosemont restaurant Chez Chose, have transitioned kitchen staff into delivery drivers, an option that has become more common at present (both in Montreal and elsewhere), although it still isn’t a widespread practice among independent restaurants.
While Boustan isn’t doing as well as Au Coq or Les Rôtisseries Benny, it’s still doing better than a lot of independent businesses. According to Restaurants Canada, nearly one in 10 restaurants in Canada has already closed permanently and another 18 percent are expected to close within a month if shut-downs continue. But all of Boustan’s and Foodtastic’s restaurants should reopen if the government shutdown ends in the medium-term, say Mammas and Alexandar (although things could get dicey if it stretches on for six months or more).
Delivery aside, there are some other perks to being a franchise in the current restaurant crisis, notes Mammas, including having more power to negotiate with landlords, suppliers and banks when they know you have more restaurants in the works and (often) more capital.
Foodtastic is still planning to open 80 new restaurants in the next 30 months, and some of those new places have the same landlords as current places. “Landlords are the wild cards in all this. They need to be nice to the people who will grow, so we’re getting concessions from them already,” says Mammas, adding that it might be better for landlords to waive or cut all restaurants’ rent for a few months. That’s a better option than finding a new tenant when this is all over, he says, noting that it’ll be harder for small businesses to gather the money to get off a new location off the ground, meaning commercial properties could end up sitting empty.
For that reason, Mammas says there could be a need for the government to intervene on the rent front.
“Maybe a store can afford one or two months’ rent, but after that… Every day this continues, there’ll be more people forced into bankruptcy.”
- Servers-turned-drivers help restaurants move to delivery to survive the COVID-19 crisis [Toronto Star]
- Are delivery apps hurting Montreal restaurants? [Montreal Gazette]
- New Survey Suggests 800,000 Canadian Restaurant Workers Are Now Out Of Work [EMTL]
- Edmonton restaurant owner encourages people to think beyond delivery apps during COVID-19 crisis [Global]