Over the past few years, the Illinois Hispanic Chamber of Commerce (IHCC) has been watching as tensions grow between restaurants and delivery services. Now, with the COVID-19 crisis, the situation worsens.
In its latest letter to Governor Pritzker and Chicago’s Mayor, on April 20, the Illinois Restaurant Association (IRA) called for greater regulation in delivery service fees.
Based on in-depth market research, which includes dialogue with dozens of Hispanic entrepreneurs who own small restaurants in Illinois, the IHCC supports this request.
Despite complaints from customers and business owners, even today these companies continue to charge restaurants exorbitant fees over 30% per order.
During these difficult times, it is almost impossible for small businesses to deliver and compete against large food chains.
Everyone wants to eat more
The rapid growth of DoorDash, Postmates, UberEats, and Grubhub, born in Chicago, has frustrated one of the industries that have suffered most from the crisis.
There are many hidden costs associated with deliveries; it destroys the low-profit margins and almost all small restaurants in our community.
As in the conquest of the wild-wild west, there is a war between these services, backed by venture capital.
Initially, these apps were closely associated with the restaurants, fostering beneficial agreements that ensured close monitoring and accurate ordering. Today they are under enormous pressure to grow as fast as possible, even though they are damaging the very industry that feeds them.
UberEats, Doordash, Grubhub or Postmates are competing for a $38 billion a year business. The growth potential is so great that, according to Forbes, it will grow up to $100 billion by 2025.
What’s most dramatic, is seeing that aggressive delivery service attitude becoming more egregious as the COVID-19 pandemic has disrupted the entire industry, leaving millions of restaurant employees out of work and chefs and owners desperately struggling to find some way to save their business.
Winning in times of crisis
While the restaurants beg those apps to reduce their commissions, the companies refuse and at the same time launch misleading public relations campaigns, positioning themselves as friends and “saviors” of the restaurant’s industry.
Grubhub called a press conference with the Mayor of Chicago in March and “made noise,” announcing that they will defer commission payments of up to $ 100 million. However, deferring only means collecting money later, not a reduction in commissions. They did not give anything away; they only provided credit that will be collected at a later date.
UberEats reduced their delivery fees for customers. However, they forced restaurants to pay part of that promotion.
Moreover, if that’s not enough, they took their commission based on the order’s total cost before the discount applied for the delivery.
Applications are paying lower rates to their distributors. It was already a problem before the pandemic: the average deliveryman’s salary is $70 a day. Now, in addition to their health exposure, they did not receive a raise nor health insurance.
It might be easier to sympathize with these apps if at least they were losing money too. However, they are not. They’re increasing their profits in the middle of a crisis!
As people stay home, delivery has become more popular than ever. UberEats reported they have increased their profits by 40 percent since mid-March.
It’s time to put an end to this injustice. Someone needs to intervene quickly.