Uber Eats is slashing its commission fees from 35% to 30%.
It comes after restaurant owners raised concerns over the high commission fee they have to pay while forced to shut their doors during the coronavirus pandemic.
Uber Eats will also allow restaurant owners to use their own staff for deliveries from May 18.
The food delivery service has been under fire from some restaurant owners over its commission fee, as many were forced to use delivery services amid the coronavirus pandemic.
Melbourne food writer Dani Valent started an online petition calling for services like Uber Eats and Deliveroo to reduce their fees. “These are incredibly difficult times for restaurants and cafes,” Valent told Business Insider Australia in March. “But it is a time when delivery is likely to play a very important role for not only people who are stuck at home, but also for businesses who aren’t able to have perhaps any or as many customers in their venues.”
Uber Eats finally relented, dropping its commission fee from 35% to 30%.
“This is not a temporary reduction, we are making this change for the long term to relieve pressure on the bottom line of our restaurant partners,” Uber Eats Regional General Manager APAC Jodie Auster said in a statement.
Auster said that while many restaurant owners want Uber Eats to slash their fees by half, “the issue isn’t as simple” as that.
She explained that the fees cover costs associated with delivery partners (drivers), generating demand for restaurants and revenue for the Uber Eats business.
What exactly the commission fees cover
Uber says the fee is used for things like signing up new drivers as well as education and insurance costs.
“Many people don’t realise that much of the commission fee paid by restaurants is reduced to cover the actual cost of food delivery,” Auster said. “This is because delivery fees paid by consumers at the check-out can be as little as $2.99 (or $0 for promotions) and don’t always cover the restaurant’s cost of paying delivery partners for the work they do.”
The company says it generates demand through advertising and marketing campaigns, while the revenue aspect covers operating costs, investment in technology and profits.
Auster also pointed out that Uber Eats is a “low margin business”, citing an independent study by IbisWorld which showed that food delivery platforms in Australia make, on average, a 3% profit margin.
Uber Eats is rolling out other new measures for restaurants as well
The reduced commission fee isn’t the only new change Uber Eats is rolling out.
From Monday May 18, restaurants will be able to use their own workers to deliver Uber Eats orders. They can also choose the delivery fee and areas they cover, which will let them pay “less than half the current commission to Uber Eats”. According to Uber Eats, that fee is 8% until July 31, before it goes to the long term rate of 16%.
Restaurant owners can also elect not to have the delivery option at all and only have pick-up.
These new measures come after Uber Eats introduced other initiatives to support businesses during the coronavirus pandemic such as a $5 million funding to help restaurants attract more customers, removing its service fee on pickup orders and introducing a tipping feature with the funds going straight to restaurants.