Amidst COVID-19 pandemic, some question high cost of restaurant delivery fees

Food delivery services cost money. That wasn’t considered a problem by most Hawaii restaurant owners prior to COVID-19, when delivery was a small part of their businesses, and an expense customers could opt for when they didn’t feel like leaving home for a meal.

But these days delivery is more necessity than convenience, and paying services as much as 30% of every order eats away at already decimated restaurant proceeds.

Typically, services like Bite Squad, Uber Eats, DoorDash and Grubhub take orders through their websites and apps, then send drivers to pick up and deliver the food. They normally charge both restaurants and customers for the service. All offer various specials and discounts to customers, and marketing services to restaurants.

Terence Waclawik, Bite Squad’s Hawaii business development manager, said that his company’s take from partner restaurants is less than 30% per order. “Way less,” he said, although he wouldn’t detail the actual charges. And even if that number were 30%, a restaurant makes a substantial profit if it uses his company’s service, he said.

As part of his sales presentation to restaurant owners, Waclawik explains that signing up with Bite Squad won’t affect staff or overhead costs. Food — typically 35% of a restaurant’s costs to operate — also will remain fixed. Thus it is a win-win — or a win-win-win, if customers are happy.

But restaurateurs say that was before the pandemic, and today’s situation is different, even worse with the current ban on all sit-down dining.

Big City Diner owner Lane Muraoka said up to 90% of his restaurants’ orders are now delivered, mostly by Bite Squad. “It’s not a minuscule percentage of your business anymore. That’s what the public doesn’t see. You can’t survive that way.”

Muraoka added, however, that he doesn’t want to discourage customers from using delivery services. “That would be devastating at this time.”

La Ciccia Italian Fusion and Brunch Bar is contracted with Bite Squad and Uber Eats. “It does cut a lot into the profit margin, but right now we’re just trying to get food out of the restaurant,” La Ciccia owner Amiee Phommachanh said. “It’s the nature of the beast.”

A Grubhub spokeswoman detailed the marketing services restaurants receive: “We drive diners to the restaurants on our marketplace through TV advertising, Google ad words, paid social media, out-of-home campaigns, diner promotions, and more. With these costs, Grubhub’s profit is just 1% of the food sales driven to restaurants.”

The added exposure doesn’t hurt, but restaurants note that they already have plenty — much of it free — especially on social media platforms like Instagram.

WHILE THE public doesn’t see the cost to restaurants, customers might notice charges that are significantly higher than your old-fashioned pizza delivery (for example, Domino’s charges a $5.99 flat rate).

In addition, the delivery services’ food prices are usually marked up above what you’d find on the restaurants’ menus.

“If you only look at the fees, it doesn’t look like that much,” said Denise Yamaguchi, CEO of the Hawai‘i Food & Wine Festival, which has spoken out for restaurants on the issue. But comparing your bill to prices listed on a restaurant’s menu can be revealing, Yamaguchi said. “I ordered $86 of food on Bite Squad and my bill was $126.”

Other charges related to delivery can add up.

On a recent Bite Squad order from Golden Eagle restaurant, three dinner items were marked up $2 each over the menu prices. After other charges (a $2.99 booking fee, $6.49 for tax and “other fees” and an optional $4 tip for the driver), the bill totaled $50.45 for food that would’ve cost less than $40, including tip, at the restaurant.

This variety of charges is also how a service can promote a “free-delivery” special, but still make money from the customer, in addition to what it is getting from the restaurant.

ANOTHER DELIVERY option exists in Honolulu, but, at this point, in a very limited form.

Yamaguchi also helped start a restaurant support service, Food-A-Go-Go, which worked with Ryan Chun, founder and CEO of Elite Parking, to create Elite Delivery. Launched in May, it is still a pilot program, servicing 15 restaurants and customers in the Waialae and East Honolulu areas, only from 4 to 9 p.m. daily.

For a flat $10 fee to the customer, a driver from Elite will pick up and deliver meals. The prices are the same as at the restaurant, and the restaurant is charged nothing.“It helps the restaurants and it helps the consumers,” Yamaguchi said. Plus, it keeps some of Chun’s employees working.

Chun said Elite averages just four or five deliveries per night. “We’d have to have hundreds of deliveries to make it pay. We’ve been losing money, but it’s something we feel good about, that we can help the restaurants.”

The ordering process is cumbersome compared with the seamless one-step system offered by the larger delivery services. To use Elite, a customer must place an order with the restaurant, then contact Elite with the delivery details. Yamaguchi and Chun are working on streamlining this process.

Also, the program has yet to gain traction because customers don’t realize the flat $10 fee is often less than the total of smaller charges added to orders by the larger services.

Bite Squad’s Waclawik said he is supportive of Elite Delivery. “I’m on board with the way they want to run it,” he said. “A good point is they’re doing it locally, it has the local aspect, which is great, and with the flat rate.”

THE NATIONAL companies are established, and expanding. Bite Squad is up to 900 restaurants on Oahu and has hired 300 new drivers since the pandemic started in the spring, Waclawik said. “There are still jobs to be had for drivers,” he said.

“Some of it has leveled off because some of our client restaurants that gave us a try have closed down,” Waclawik added. “We’re trying to help the independent restaurants stay alive.”

Of the national services, only Bite Squad has an office in Hawaii. Waclawik lives and works on Oahu, as does regional director Chris Ralston.

Uber Eats lost $1.9 billion last quarter, but being new to food delivery, considers it an investment. “At the height of the pandemic we waived delivery fees for all independent restaurants,” said Caleb Weaver of Uber Eats public affairs.

But that was when things were worse in some mainland markets like New York City, and virus numbers were low in Hawaii. Delivery fees have been reinstated nationally.

Uber Eats is trying to help restaurants locally by offering use of its online ordering software, even if the customer picks up the order or the restaurant handles the delivery itself, Weaver said.

“We’re currently partnered with more than 600 restaurants in Honolulu, nearly twice the number since the start of the year,” he said. “The service is expanding to Maui and the Big Island next month.”

IN MAINLAND markets, restaurant owners have pushed back hard on the delivery services.

The New York Times reported in June that Chicago, Los Angeles, New York, Seattle and San Francisco capped delivery services’ fees, at least temporarily.

Yamaguchi said local restaurants haven’t suggested that approach yet, and Mayor Kirk Caldwell said last week the issue has not been raised with the city.

“We have not received complaints from restaurants regarding the fees by delivery services,” Caldwell said in a statement. “However, buying local and supporting our local eateries is always important, but especially now during this pandemic.”

THE BREAKDOWN

The major restaurant delivery services on Oahu — Bite Squad, DoorDash, Grubhub and Uber Eats — all apply charges that default to a certain amount. Customers can change some of them. For example, if you prefer to tip upon delivery you can remove any tip from your order.

Delivery service is competitive and all four offer specials and promotions that can change quickly, even throughout a given day.

If you shop around you can save, although if you want to order from a particular restaurant you’ll need to work with a service contracted to that restaurant.

Buca di Beppo uses all four, so we set up test orders on a lunch for two (chicken rigatoni and chicken Parmigiana). The food cost $30.90 We didn’t change any default fees.

Grubhub offered the best price for this specific order:

>> Grubhub: $35.78. This included a $5 “reward,” for a first-time order at Bucca. Even without the reward, though, Grubhub came in cheapest. A suggested 20% driver tip was $6.80, taxes and fees were $3.08; no delivery fee.

>> Uber Eats: $42.89. Delivery fees are based on distance and availability of drivers; this time it was just 49 cents, but was waived anyway because the order was over $15. The suggested driver tip was $5.65 (18%), mandatory service fee $4.64 and tax $1.70.

>> DoorDash: $42.92. The delivery fee of $1.99 was waived, as it is for all orders over $10. The suggested driver tip was $7 (23%). A mandatory $5.02 charge included an 11% service fee and tax.

>> Bite Squad: $49.14. This included a $5.48 service fee, which could be waived (the company says this goes toward paying its workers). The bill included a $3.99 booking fee, $3.09 suggested driver tip (10%) and $5.68 in mandatory taxes and other fees.