Winnipeg Free Press

Winnipeg Free Press (Newspaper) - May 2, 2020, Winnipeg, Manitoba # < y C M K PAGE A11 < y ■ 1 ■ WINNIPEG FREE PRESS, SATURDAY, MAY 2, 2020 • WINNIPEGFREEPRESS.COM |A 11 Delivery apps raw deal for restaurants DAN LETT OPINION THE insult to the injury suffered by restaurants forced to close during the pandemic was delivered by Foodora, a Berlin-based online ordering and delivery app. It announced last week that it would cease operations in Canada. That wasn’t surprising; Foodora has been a colossal failure in most of the countries in which it has operated. What was a bit alarming was that the company chose to declare bankruptcy when it closed, owing restaurants across Canada nearly $5 million. At a time when there is so much loss and uncertainty in the hospitality industry, this may surely be the straw that breaks the backs of some restaurants. Worse, it’s likely a sign of things to come. The online food ordering and delivery industry is facing a watershed moment in its meteoric growth. Restaurants, particularly those that rely on sit-down dining, are right up there at the top of the list when it comes to businesses most affected by the pandemic. In a desperate bid to survive, many have closed and turned all their attention to funnelling takeout meals through Uber Eats, Skip the Dishes, Door Dash and lesser known applications such as Foodora. Lamentably, few restaurants will find salvation via these apps. Food ordering and delivery apps are great for diners but a really bad deal for restaurants. In short, the commissions charged by the apps mean that every take-out container of food you order is sold at a significant loss to the restaurant that makes it. The profit margin at an average restaurant is about five per cent. That means for every $1 a restaurant charges you for something, 95 cents is consumed by wages, food, rent and other overhead. Add in the occasional grease trap maintenance, or the replacement of a fridge, and an entire month’s profit can be erased. It’s hardly surprising that restaurants earning a five per cent profit margin lose money when they have to pay order-and-delivery apps 20 to 30 per cent in commissions. That is not a fair deal for an industry that, on average, makes so little profit. During the pandemic, the delivery apps have tried to justify their outrageous commissions by pointing out that online orders for take-out have gone up by as much as 30 per cent in some markets. Some offer rebates or new tiered com- missions that allow restaurants to take orders through the app but use their own people to do the deliveries. The reality is that a 30 per cent increase in a money-losing enterprise means restaurants lose more money with each order, not less. Let’s not forget the drivers, the often forgotten victims in the industry. Like ride-sharing, it’s not clear that drivers earn a living wage. Even when tips are considered, this is not a lucrative opportunity for most of the people behind the wheel. It takes a special kind of chutzpah to promote a business model that requires the people who supply you with a commodity to lose money so that you can make a profit. It’s even more outlandish if you’re doing that at a time when restaurants have been crippled by a health emergency. If there’s any solace in this story, it is that even before the pandemic, there was a karmic tidal wave building and heading directly towards food delivery apps. We know that because karma has already made its presence felt with other businesses that tried to make a profit on someone else’s losses. Remember Groupon? The local-deal-of-the-day coupon company asked businesses advertising on its site to sell goods or services at a 50 per cent, or more, discount. Once someone buys a coupon for that discounted good or service, Groupon took half. That leaves the businesses with the equivalent of 25 cents on the dollar. Groupon claimed these “loss leader” deals created value for businesses by recruiting new customers. The reality was that Groupon’s principal clientele were bargain hunters who used a coupon once and then left to chase another deal. Once valued at US$13 billion following its IPO, Groupon is now valued at just US$500 million and is considered by many market watchers to be ripe for bankruptcy. It is desperately trying to re-make itself into a virtual marketplace seller. Whether the delivery apps will re-make themselves into a fairer and more sustainable enterprise remains to be seen. But they should take note: the industry they rely on is staring into an economic abyss. A survey by Restaurant Canada in late April found that up to 50 per cent of local, independently owned restaurants expect to go out of business this summer if they cannot resume relatively normal operations. If that happens, it means roughly 50 per cent fewer potential restaurant partners for food delivery apps. If Skip, Uber, Dash and the others wanted to make food delivery and the restaurant industry more sustainable, they would transform their business models to ensure that everyone — app, restaurant and driver — can earn a decent income. It does not appear they’re keen to do that. So, the next time you consider Skipping the Dishes, phone in an order to your favourite restaurant and then Dash out to pick it up yourself. The restaurant will be Uber happy you did. dan.lett@freepress.mb.ca They're our frontline. Help us make them first in line. Thank you ^Healthcare Heroes Gifts generate connection and possibilities, but not all gifts are equal. Some of our most important gifts are time, effort and care. Money doesn’t solve all of our problems. At a time when we are all so disconnected and afraid. The answer might just be showing up to do the difficult work of connecting and caring. With this in mind we would like to say Thank You to all Healthcare Heroes of Manitoba who have so generously cared for us. We would like to care for your cars. Super Auto Centres would like to offer all of our Healthcare Heroes a complementary Oil, Lube and Filter service and tire rotation at all of our Super Lube Auto Centre locations from Saturday, May 2nd to Saturday May 9th. To all of our regular Super Lube Customers; please let us Honor our Healthcare Heroes by letting them be First in Line and waiting until May 11th, if possible, for your next service. You have taken care of us... now it’s our turn to take care of you Jim Brousseau CEO, Super Auto Centres p.s. Let’s drive it forever - together. The World’s "BEST" 10 Minute Oil Change o am superautocentres.com Heart attacks aren’t cancelled Kim Clermont, former St. Boniface Hospital cardiac patient beca use of COVID-19. Lives will continue to be saved at St. Boniface. The Hospital’s Cardiac Sciences Program sees more than 63,000 visits, treats more than 2,590 heart attacks, and performs more than 10,028 echocardiograms and 1,100 cardiac surgeries each year. You can join us in this critical response effort, by donating to our new COVID-19 Resp onse Fund today. jflj to & Hópital St-Boniface Hospital FONDATION • FOUNDATION BE A LIFELINE FOR ST. BONIFACE. DONATE TODAY AT STBHF.CA OR CALL 204-237-2067. ■e- A_11_May-02-20_FP_01.indd A11 # 2020-05-01 9:16 PM | ;