Businesses weigh cost of food delivery platforms


The launch of Uber Eats in the Australian market three years ago has transformed the restaurant industry, alongside its competitors Deliveroo, MenuLog and recent arrival DoorDash.

It’s a significant market. Deloitte valued online food delivery at $1.3 billion for 2019 in its Future of Food report commissioned by Uber Eats.

It’s a catch-22 – you are doomed with them and doomed without them.

Tim Rosenstrauss, co-owner of Burger Head in Penrith

However, the numbers don’t stack up for some businesses. Art of Gelato Michaelangelo has an estimated turnover of under $2 million a year. At its peak, up to 15 per cent of turnover was coming through Uber Eats.

But Piccolo still decided to pull the pin. Not only was he worried about the impact on his business’s reputation and about liability for delivery drivers, he was struggling to make a profit from the platform.

“Particularly in an environment when there is so much scrutiny on restaurateurs to pay award wages, there is a double standard when people will happily jump on Uber Eats and know that the driver and restaurant are getting screwed over,” he says.

Vincent Piccolo, manager, Art of Gelato Michaelangelo with his father Martino Piccolo, who owns the business. Credit:James Brickwood

Piccolo is not alone in his concerns. The Restaurant & Catering Association’s 2019 Industry Benchmarking Report asked its members for the first time to provide feedback on the impact of food delivery platforms on their businesses.

Of the 656 businesses who responded, 53.9 per cent indicated they had experienced an increase in revenue but a decrease in profit.

Of those surveyed, 32.8 per cent indicated they had experienced an increase in profit as well as revenue, while 13.3 per cent indicated no change.

However, while Art of Gelati Michelangelo has been able to survive without Uber Eats, many food businesses in Australia feel locked in to the food delivery platforms.

Tim Rosenstrauss, co-owner of Burger Head in Penrith, uses Uber Eats, Deliveroo and MenuLog for the burger restaurant.

“It’s a catch-22 – you are doomed with them and doomed without them,” he says. “The commission they take is the biggest killer.”

The commission charged to restaurants by food delivery platforms is as high as 38 per cent.

“They advertise it as bringing you extra customers, but we had to start paying for customers we already had,” Rosenstrauss says. “It puts a squeeze on already tight margins, but if we drop off these platforms these customers go to competitors.”

Rosenstrauss says the rise of the food delivery platforms has caused a drop in quality, with customers ordering food that was not designed to be delivered.

Timothy Rosenstrauss, co-owner of Burger Head in Penrith, says some foods were never meant to be delivered.

Timothy Rosenstrauss, co-owner of Burger Head in Penrith, says some foods were never meant to be delivered.

“Burgers start going soggy and cold, and fries suffer the same fate,” he says.

However, Rosenstrauss says customers see this as the fault of individual food businesses like Burger Head, rather than as a problem with Uber Eats.

“We are at the mercy of these contractors we have no control over,” he says. “We see drivers with an Uber Eats phone and Deliveroo phone and they pick up one order and then stand there with it and wait around for the next order. We get slammed by the customer.”

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Rosenstrauss says Burger Head, which turns over more than $1 million a year, is sticking with the platforms for now but weighing its options.

“We are still managing to be successful but many restaurants are suffering and the whole Australian restaurant industry is at risk,” he says.

A spokesperson for Uber Eats declined to say how many businesses have signed up to the food delivery platform or cancelled it.

“We value our relationship with restaurant partners and work closely with them to ensure their experience with Uber Eats is a rewarding one,” a spokesperson says.

The spokesperson says more than 24,000 active restaurants are choosing to be on the Uber Eats platform across Australia and New Zealand.

“Establishing long-term relationships with our restaurant partners is very important to us and we are committed to seeing their businesses succeed,” the spokesperson says.

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