My Business – Food delivery giants leave small business short-changed

Maja Garaca Djurdjevic Maja Garaca Djurdjevic

Food delivery

The Franchise Council of Australia has slammed delivery platforms for suggesting customers should tip restaurants while failing to budge on delivery fees.

The FCA has called on all food delivery services to halve their delivery fees to food retail and hospitality businesses that have seen their turnover slashed by 80 per cent due to the coronavirus business restrictions.

Noting that online orders have surged since the enactment of COVID-19 lockdown measures, the FCA has argued that delivery platforms have ignored calls to ease the burden on vulnerable customers and small businesses by halving their fees.

“Uber Eats, which dominates Australia’s delivery market with around 80 per cent market share, in many instances takes almost a third of the share of the total cost of a meal,” said FCA CEO Mary Aldred.

“Food delivery platforms’ share of revenue is much greater than the flat delivery fee customers see — a reality for struggling small businesses that consumers don’t appreciate.” 

“Small businesses already under massive financial strain urgently need food delivery platforms like Uber Eats and Menulog to lower their delivery fees,” Ms Aldred said.

“If food delivery platforms don’t ease the cost pressures to help their partners in food retail survive, there will be a greatly reduced food retail industry left to support them in the future.”

Tipping enabled 

Last week, both Deliveroo and Uber Eats announced they are launching new features allowing customers to choose to add a tip to their bill.

Both delivery platforms also pledged to match tips but up to a certain amount, with Uber Eats committing to $3 per order to a limit of $1 million across the industry and Deliveroo to the first 10,000 customer tips but up to a quarter of the order value.

“Many Australians in the food and hospitality industry have been hurt by the COVID-19 crisis and our focus is on how best we can support our restaurant partners to adapt quickly during this time,” Deliveroo Australia CEO Ed McManus said in a statement.

However, commenting on the news, Mr Aldred said that both Deliveroo and Uber Eats are shifting responsibility and urged them to come forward with “genuine support”. 

Ms Aldred said: “The announcements by Uber Eats and Deliveroo to encourage stay-at-home customers to add a tip to ‘help the hospitality industry’ is shifting their responsibility to support struggling small businesses, consumers and employees.

“Uber Eats and Deliveroo are experiencing a massive lift in revenue, but outside of delivery driver payments, their costs remain fixed in most cases, and yet they are refusing to provide flexibility in pricing.” 

She argued that on top of food and labour costs, a small business can barely earn anything out of a standard delivery.

“The hospitality sector is at the ‘tipping point’. A reduction of delivery fees is one of the most significant things that can be done to help small businesses survive and keep people in employed,” she said.

“If delivery services want to genuinely support hospitality, they should halve their fees rather than put an additional financial burden on small businesses struggling for survival.”