Tech

Restaurant owners in Britain call on Deliveroo to drop commission fees

Key Points
  • Restaurants have flocked to food delivery apps like Deliveroo and Uber Eats during the pandemic. 
  • While the apps help them to bring in orders, they're not cheap to use. 
  • Deliveroo takes up to 35% commission and Uber Eats takes up to 30%. 
A man riding a bicycle for food delivery service Deliveroo pauses at an intersection on March 9, 2018 in Berlin, Germany.
Sean Gallup | Getty Images

Restaurant owners across the U.K. want Deliveroo to lower the amount of commission they take on each delivery as they struggle to stay afloat during the coronavirus pandemic.

Deliveroo takes up to 35% commission plus VAT (a value-added tax which is like a goods and services tax) on some orders, leaving restaurant owners with relatively little to cover their outgoings.

Mohsen Seify, who owns Crust Trust Pizza in Kingston near central London, told CNBC that Deliveroo's commission works out at 42% per order when VAT is factored in. 

"It's too high," he said, adding that in the last two months, the $2 billion-plus start-up has charged him between £4,000 ($4,973) and £5,000 with a £506 signup fee.

A Deliveroo spokesperson said: "We are here to deliver for restaurants who want to carry on offering their amazing food to families at home during this difficult time. We are working with restaurants to optimize their operations for delivery, and we are doing everything we can to make sure people still have access to the food they want and need."

U.K. Prime Minister Boris Johnson told restaurants to close on March 20 as part of an effort to slow the spread of the coronavirus. Restaurants were, however, able to carry on offering takeouts.

In a bid to increase their orders, restaurants across the country raced to sign up to Deliveroo, Uber Eats and Just Eat. The latter offers some of the fairest rates, according to restaurant owners. 

U.K. Hospitality, an organization that represents restaurants across the U.K. said deliveries are helping to safely feed the nation at the moment.

"They are also helping to ease the pressure and queues at supermarkets as well as providing employment, while helping provide revenue for restaurants," according to Kate Nicholls, CEO of U.K. Hospitality. "People will want to get back to restaurants once it is safe to do so, so this is a way of allowing them to stay afloat."

Unfair fees?

One restaurant owner said he signed up to Deliveroo last week purely because of the coronavirus. "Whatever they charge, we can't say nothing about it because it's better than staying home," he said.

To help restaurants through the crisis, Deliveroo and Uber Eats have temporarily removed onboarding fees and set up teams to assist new restaurants. They've also introduced a same-day payment feature that allows restaurants to request a payout any day of the week for food that they've sold. The companies say this should help ease any cash-flow issues. 

Uber Eats has also waived the additional delivery fees that are levied on customers and can cost anywhere between £1 and £5.  

But the measures aren't enough for many restaurants.

Kadir Tuluk, who owns the Sunshine Café in Surbiton in London, said: "If Deliveroo take 42%, how do we make money?" He added: "They make the money, not us."

Tong Soklee, who owns nearby Asian restaurant Yoriya, agreed that Deliveroo's fees are problematic in the current climate. "Personally, I think it's a little high but we cannot do anything," she said.

The rate of commission is slightly better for restaurants with Uber Eats, but only marginally.

Uber Eats charges different levels of commission depending on the package that the restaurant goes for. 

For the full package — where restaurants list on the app and use Uber Eats riders for the delivery — there's a variable commission fee that is capped at 30%. If restaurants use their own riders then it's 13%, and if they only offer collection, then it's free. Deliveroo also has variable fees but the company refused to disclose them. 

"We are committed to supporting restaurants and the thousands of people who rely on them for work and as an essential service during this difficult time," said an Uber Eats spokesperson.

"At the beginning of the crisis, we put in place a range of initiatives to help restaurant partners, particularly small business owners, as they keep their kitchens firing to feed people across the country."

To try to minimize the chance of infection, Deliveroo and Uber Eats have introduced a contact-free delivery option in their apps, but not everyone feels safe.

"We are the most exposed people to the risk now," said Kassem, who owns a fish and chip shop. "We touch the table, they touch the same table. It's impossible to be contact free."

Trade union Unite condemned the way restaurants are being treated by food delivery companies.  

"Most of our chef members, who are risking public transport to go into workplace kitchens to prepare meals for delivery, are not being paid anything extra," said Unite officer with national responsibility for the hospitality industry, Dave Turnbull. 

"We want to protect jobs for when the lockdown is lifted, so placing an increased fee on restaurants who currently have no public footfall isn't helpful in any way."

Uber Eats and Deliveroo have told riders they can apply for free masks and hand sanitizer, but some Deliveroo riders claim they have been waiting weeks for the safety packages to arrive.

"I am a rider and have yet to receive any mask or hand sanitizer from Deliveroo," said Roxana Cojocariu. Deliveroo did not immediately confirm whether Cojocariu is a rider for the company. 

Last week, U.K. couriers told CNBC that they're making significantly less than they normally do as a result of the pandemic. The main reason is because many of the biggest and most popular restaurants on the food delivery apps have chosen to close entirely. McDonald's, Burger King, and KFC have all closed in the U.K., as have thousands of other restaurants.

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Amazon to the rescue

The decline in orders isn't just hurting the restaurants and the riders: the food delivery apps are also struggling.

Deliveroo admitted it was quickly running out of money earlier this month as it looked to convince the U.K. competition regulator to approve a $575 million investment from Amazon.

It has also reportedly laid off 367 staff this week and furloughed just over 50 others.

A Deliveroo spokesperson said: "The extraordinary global health crisis we are living through has impacted nearly all businesses. As a result, like so many others, Deliveroo has had to examine how to overcome the challenges we all face, as well as ensure we are in the strongest position possible following the crisis.

"This requires us to look at how we operate in order to reduce long-term costs, which sadly means some roles are at risk of redundancy and others will be put on furlough. This has been extremely difficult for everyone at the company, and our absolute priority is to make sure those who are impacted are fully supported."

Uber, meanwhile, is reportedly planning to lay off 20% of its overall staff. It's unclear how many of these will be from the Uber Eats part of the business. 

"As you would expect, the company is looking at every possible scenario to ensure we get to the other side of this crisis in a stronger position than ever," an Uber spokesperson said.