Exclusive: Hidden costs restaurants pass on to customers using food delivery apps

Channel 9 News

If you order the pale ale battered flathead and a side of chips from one Sydney restaurant, you can expect to pay $32 whether you eat the product in-store or pick it up.Using Deliveroo, Menulog or Uber Eats to order the exact same meal from the exact same restaurant will see you paying an additional 17 per cent surcharge – a cost supplementary to the $5 delivery fee paid when using food delivery services.At first glance, it appears unfair to be putting an extra cost onto the customer – but it is not as straightforward as that.

Customers might not know they are paying more for the meal. (Supplied)

A nine.com.au investigation of restaurants from one Sydney delivery zone found 70 per cent of food outlets from a sample group charged customers significantly more for the same meal ordered using the delivery service when compared to in-store or pickup pricing.Some individual items were found to have mark-ups of as much as $6.Sydney franchise Chicken and Sons was found to increase individual items by as much as $4, with owner Mark van der Goot labelling the price hike as “purely economic” move to recoup the 35 per cent of the total bill he claims to be charged by food delivery services.”[We had] to shrink the portions, change the product or charge a little bit more. We chose the latter as we don’t want to change our product in any way,” he told nine.com.au.

He said without incorporating the service fee, the restaurant already had the cost of sales (35 per cent), fixed costs such as rent and utilities (20 per cent) and wages (40 per cent), leaving the “well-run hospitality business with a net profit of around 5 per cent”.Mr van der Goot said adding the 35 per cent food delivery service fee – which takes $7 of every $20 order – would leave the business “with a loss of 10 per cent” if prices were not inflated.The restaurant owner said Chicken and Sons previously employed its own delivery drivers and charged the same across its in-store and delivery menus, however it was forced onto food delivery platforms after food delivery platforms achieved a monopoly on the market.”Over time, as people adopted the Uber platform, our delivery business suffered greatly,” he said.

If you pickup or eat this burger in-store at Chicken and Sons, it will cost you less than if you order using a food delivery app. (Supplied)

Other than boosting cash flow on quieter nights of the week, Mr van der Goot said there is virtually no benefit to the excessive 35 per cent service fee.”Our experience is that service and support are pretty much non-existent,” he said, using Uber Eats as an example.”You need to pay for bags, pay for an Uber photographer to get onto the platform and even when your feedback ratings are amongst the highest on the platform, your venue is often invisible until the fourth or fifth click.”Supermarket giant Coles also charges a premium for the products it sells on Uber Eats, but claims it’s still offering “a competitively priced choice for customers”.For example: A family block of Cadbury Dairy Milk Hazelnut Chocolate will cost $4.80 in-store or $6 on Uber Eats, while Coles Pink Lady Apples Prepacked (1KG) cost $4.50 at Coles or $6.20 on the delivery service.”There is a small price premium on the products available from Coles via the app to help cover costs associated with using the Uber Eats platform, as well as the dedicated team members who select our customers’ groceries,” a spokesman told nine.com.au.WHAT DO THE FOOD DELIVERY COMPANIES SAY?Deliveroo and Menulog have both come out in support of restaurants passing on their respective service fees to customers, while Uber has condemned the action.Deliveroo said despite its restaurant partners seeing “sales increase on average by 30 per cent” by using the platform, it supports food outlets passing on the service fee the customers in the form of a price hike on individual food items.”The digital economy is spurring on new ideas and innovation across Australia’s food sector and we’re seeing this drive growth for our restaurant partners,” a spokeswoman told nine.com.au.”Deliveroo is helping restaurants adapt to ever changing consumer tastes and habits, thereby helping their businesses to grow and thrive in a challenging and competitive environment.”We support our restaurant partners to get the most out of being part of our food delivery platform.”

Jeff Goldblum for Menulog
Jeff Goldblum likely just paid more for that pizza than he would in-store and Menulog is ok with that. (Supplied)

Menulog Commercial Director Rory Murphy said restaurant partners always set their own menu prices and these are provided to the service upon joining. “Many of our restaurants offer the same prices for home delivery as they offer in-store, some chose to change menu prices for delivery to help cover some of the costs in delivering the meal to customers – this is up to individual restaurants to decide what works best for their business,” he said.”We’re very supportive of restaurants finding sustainable ways to growth their businesses, whilst continuing to provide a positive experience for customers.”Uber disagrees and said the service fee shouldn’t be passed onto customers as it is used to connect restaurants across Australia with new customers, while offering a fast and reliable delivery option.”We encourage consistent pricing and the majority of restaurants charge the same in-store as they do through food delivery apps, which provides a consistent customer experience,” a spokeswoman told nine.com.au.”The restaurant service fee helps connect restaurant partners to a large network of delivery partners and customers, gives them access to 24/7 customer and operational support, as well as app development, marketing campaigns and business insights.”

Eating at a restaurant
Eating at a restaurant could save you money. (iStock)

IS ANYONE IN THE WRONG?The ACCC recently forced Uber Eats to amend contracts which previously allowed the company to deduct refunds from the restaurant even when the problem with the meal may not have been the fault of the food outlet.”Uber Eats has committed to changing its contract terms that we believe are unfair, because they make restaurants responsible and financially liable for elements outside of their control,” ACCC Chair Rod Sims said.However, the consumer watchdog said nothing could be done about restaurants passing on the service fees from delivery apps to customers.”Generally, businesses are free to set their prices as they see fit. This includes setting different prices for the same products depending on the method a consumer choses to obtain those products.,” a spokesman told nine.com.au. “The Australian Consumer Law does not prevent businesses from choosing to set different prices for the same products because their costs are different where the products are supplied in a different manner.”Retail consultant Roger Simpson said while consumer law doesn’t prevent price hikes in this scenario, customers’ wallets will ultimately decide the fate of these restaurants using food delivery services.”They see the [food delivery] platforms as a value add service that appeals to busy people – therefore they believe customers will expect to pay a little extra,” he said.”It’s the same as buying a product from a convenience store compared to a supermarket.”At the end of the day, the customer will decide if they want to purchase at a higher price.”

Source: Channel 9 News https://www.9news.com.au/technology/uber-eats-deliveroo-menulog-hidden-cost-restaurants-pass-on-to-customers-using-food-delivery-apps–finance-news/6fb923b3-273a-4f80-898b-9565e97a272f