This is the first part of podcast series on how delivery aggregators are destroying the Restaurant industry.
Deliveroo and their Dark Kitchens could see a fundamental difference to the way we eat, with negative impacts for employment, food quality and even, I believe, social cohesion.
Have a listen to understand the real impact on Restaurants.
Part II will cover what we can all do.
The death of the restaurant industry is a truly depressing thing to deal with in such a depressing time where all kinds of businesses have been struggling so much to operate under all the restrictions we are given because of COVID-19.
We’ve got the pandemic and Deliveroo taking our customers, trying to create a juggernaut that will fundamentally change the restaurant industry forever.
This is the first part of our podcast series about how delivery aggregators are tearing the restaurant industry apart.
It’s a fight to the death because of how many lives this is affecting.
For those who aren’t involved in the restaurant industry, it’s easy to think that this issue is such a harmless change in the way we’ve gotten used to things, but it isn’t. It’s a problem that’s affecting a lot of lives beyond the owners, staff, and regular customers.
The restaurant industry is the path for new immigrants to the middle class.
Immigrants don’t always know how to speak English and that becomes a disadvantage when it comes to functioning in a country that doesn’t speak their language. Learning a language takes time and if immigrants wait until they do, they won’t survive.
That is why they turn to restaurants as a means to get by and get ahead eventually. A lot of the foreign restaurants we see around us didn’t begin as franchises from huge corporations. Most of them started out small, from immigrant families, as it is a business that won’t require a lot of verbal conversation.
They give immigrants a better quality of living for generations to come, allowing more people the opportunity to get fair jobs and fair wages equipped with only what they know from their land of origin. Their children get to decide to become doctors, lawyers, teachers, or continue the business that their parents and grandparents have started.
It also allows people to experience a little bit of culture without leaving home.
Who wouldn’t love to go around the world and experience different cultures? It’s something that we all want, but not all could do. Luckily, we have the immigrants, their restaurants, and a taste of their culture within our reach!
These restaurants don’t only give us great new food, they also add color to our lives. Trying out new cuisines expand your horizons, broaden your knowledge, and inspire you to take on new experiences.
Why is Deliveroo the company that’s causing all this destruction?
Deliveroo is a very popular food delivery app mostly in the UK, but it is also operational in over 200 locations across the globe. It’s no secret that they have gained popularity among certain demographics and how they’re causing the demise of the restaurant industry shouldn’t be a secret either.
Here are some of the top reasons why Deliveroo is tearing us apart:
- Deliveroo drives price hikesDeliveroo charges a commission of 35% plus VAT on each meal being ordered through the app, leaving restaurants with little to no profit from their sales. This is a huge chunk of what restaurants earn from their sales and it causes a lot of restaurant owners to hike their prices up for deliveries done through Deliveroo to compensate for the commission and taxes, driving local and regular customers to cheaper competition.
- Deliveroo charges all sorts of fees
Aside from the massive commission rate per meal, Deliveroo also charges all sorts of fees to the customers who use the app. They pay delivery fees and service fees that don’t go to the restaurants, but to their pockets directly. While the app gives some form of convenience for customers, a lot of people are getting concerned about the amount of these fees, especially during the pandemic we’re in. Some of them eventually turn away from deliveries altogether, leaving restaurants with no customers to serve at all.
- Deliveroo has access to your customer database
When a restaurant signs up with Deliveroo, they gain full access to the customer database. They get in between the restaurant and its customers, and that’s never going to be good news. Your customer database – their email addresses, phone numbers, and order history, is vital to your restaurant’s success.
- Deliveroo’s Dark Kitchens
If you’re not aware of dark kitchens, they’re typically housed in shipping containers placed in car parks with fully functional kitchens inside. They make a very low cost investment and are very low maintenance too.
They don’t need much staff, there aren’t any diners to think about, and it’s generally just a place to prepare food that will be delivered when customers order them.
- Deliveroo doesn’t take accountability for their riders
Deliveroo works with contract riders who deliver the food from the restaurants to the customers. With that being said, the restaurants should no longer be responsible for whatever happens from the moment the food gets picked up to the moment it gets delivered to the customer. That’s how it’s supposed to work, but Deliveroo doesn’t take accountability for their riders. They pin the blame on the restaurants for any issues with delivery and charge the restaurants back for any refunds or compensation they’re providing the customers.
- Deliveroo doesn’t pay fair wages
With all the fees they’re charging and the level of popularity that Deliveroo has achieved, you may think they’re pretty profitable and their riders are earning good money. That’s how it’s supposed to be. However, upon confirmation from different sources, it turns out that Deliveroo is paying a lot lower than the minimum wage required. Their press release claims that their riders earn up to £13.00 an hour when in reality, they earn an average of about £2.00 an hour only.
There are a lot more smaller reasons why Deliveroo is shutting down the restaurant industry, but here’s the ultimate reason: Dark Kitchens.
Deliveroo has Dark Kitchens all over their serviced locations.
As each restaurant signs up with Deliveroo, they are giving away access to their customers’ information. This is what Deliveroo uses to place their dark kitchens strategically across the board, gaining up to 75% of the customers you currently have.
Let’s say you’re selling a sandwich that people rave about in your neighborhood and another one sells a similar kind in the next neighborhood, Deliveroo has the data to tell whether it’s a product that’ll be profitable enough and when it is, they place a dark kitchen in the middle of those two locations. Being within close range of both neighborhoods that have a high volume of orders give them access to a lot of customers that may switch if the price is right.
Deliveroo also takes away the experience that people pay for.
On a Friday night, after a long, hectic week at work, you may want to sit down with a nice meal at home and relax. That’s not something you’d do on Saturdays though, because Saturdays are meant to be for going out.
The word “restaurant” itself means “to restore oneself”. Restaurants give people an experience with their friends and family, along with good food and drinks to cap it off.
As Deliveroo gains the majority of many restaurants’ customer data, they are able to send marketing and persuade them into choosing delivery services over the actual experience of dining in a restaurant with friends and family.
The reality is that delivery aggregators are stealing customers from restaurants.
Now, these things don’t only happen because of Deliveroo. Along with the evolution of technology and the recent pandemic, a lot of new delivery aggregators have been in business and it’s the same thing that they’re doing.
They may not be as unfair as Deliveroo, but they’re also taking your customers from you by receiving all their information on your behalf, controlling the influx of orders you’re receiving, and playing God in the success or demise of your restaurant.
The lack of transparency, incredibly huge commission rates, and other disadvantages are very obvious, but most restaurant owners remain on these platforms because it is where customers are. Restaurant owners are left with no choice, and that’s what’s killing the restaurant industry.
Don’t forget to check out our free Restaurant Website Audits. If you think you’re missing out on your fair share of customers, maybe your web developer has made some of the common mistakes. Book a free 15 minute no-obligation chat with one of our team and get some ideas on how to find more customers.
Check out the Secret Sauce podcast shownotes for more information on this episode.
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