Online delivery eating the lunch of restaurants and cafes

Hands up those of us who enjoy eating out at restaurants and having a night out at the movies. Both activities may soon be a thing of the past thanks to the likes of UberEats, Netflix and other digital marketplace disruptors.

A new report from Restaurant & Catering Australia (R&CA), the peak body representing the interests of more than 47,000 eating establishments in Australia has come to the disturbing conclusion that online food delivery platforms are threatening to put restaurants, cafes and caterers out of business.

The vast majority (92%) of restaurants and other prepared food providers in Australia are small businesses (less than 19 staff) that collectively employ more than 450,000 people and turn over more than $37 billion annually.

The 2018/19 industry benchmarking report, released today by R&CA, was distributed to 15,000 restaurants and had 656 respondents, admittedly a relatively small but still statistically significant number.

According to R&CA, digital disruptors are skimming the profits of small business owners, who find themselves forced into partnering with them, and threaten to destroy entertainment precincts.

R&CA says that digital disruptors are damaging the restaurant industry by encouraging patrons to stay home and eating into profits by taking their substantial cut of the enduser price plus delivery charges.

R&CA chief executive Wes Lambert, said, “High streets are falling silent and neighbourhood restaurants are pushed to their limit as delivery services discourages bums on seats. There is only one winner between the platform and the restaurant, the platform wins due to the exorbitantly high fees charged and the restaurants lose as they see their profits decline even as their revenue increases.

“Some restaurants are finding themselves pushed to the brink of closing – a bad outcome for our social precincts, restaurants patrons and, ultimately, home delivery consumers. Others are ditching the platforms altogether.” says Lambert.

RCA survey snapshot

According to Lambert, under the partner models of digital disruptors, the platform is profitable, and the restaurant is not.

“Restaurants have been forced into taking on an unwanted business partner they didn’t ask for and who takes a 35% cut. At that rate, meals become unprofitable for the restaurant,” he says.

This year’s survey revealed ongoing and significant growth in penetration of online food delivery platforms – 53.8% of restaurants surveyed use online delivery platforms. That is more than triple the number (15.4%) from the same survey in 2017. In 2018, the percentage using delivery platforms was 31.2%.

Of the restaurants surveyed, 46.2% said they didn’t use delivery platforms, compared to 68.8% in 2018 and 84.6% in 2017.

When asked which delivery platforms they prefer, 26.2% said UberEats, 22.3% said Menulog, and 3.8% said Deliveroo. Of those surveyed, 32.3% use combination of platforms and 7.7% use all three delivery platforms.

Sixty-three point three percent said their primary reason for signing up to a delivery platform was to increase their customer base. Others (32.03%) said they were forced to participate because their competitors were using these platforms.

Respondents overwhelmingly said that they had experienced an increase in revenue but a decrease in profit (53.9%) and 32.8% said they experienced an increase in revenue and profit and 13.3% indicated no change.

More than half (55.5%) said that fees associated with online food delivery were so high that it was impossible to make a profit using the platforms. Only a quarter of businesses (25%) said that platforms provide a convenient service that allows restaurants to increase their revenue and 19.5% indicated they encourage customers not to go out and buy directly from the business.

The conclusion, according to R&CA, is that more than 70% of businesses surveyed believe that online food delivery is negatively affecting the hospitality industry.

Other significant findings of the report:

  • 65.56% spend money on digital marketing channels, with half naming Facebook as the most popular marketing tool.
  • 92.3% indicated that card payment was the most common payment method, while only 2.56% paid by cash, and 0.9% phone touch.
  • The most common form of card payment was PayPass or Tap & Go, with 79.83% indicating it was the method of choice for customers. This was followed by 12.88% using PIN input, 2.2% using smart phone payment, and 3.9% use online payments (through booking platforms).