Just Eat commission puts massive pressure on Restaurant Margins

Date: 10-08-2015

The weekends article in the UK Independant puts further light on the serious dilemma facing Restaurant owners in the UK and around the world as they struggle in the face of significant pressure on Restaurant Margins from well funded aggregator sites like Just Eat and Delivery Hero.

Thousands of high street takeaways fear that the huge growth of food-ordering websites such as Hungry House and Just Eat could put them out of business.

Two of the biggest federations, representing Chinese and Asian takeaways in the UK, have described joining the internet platforms, which allow customers to view takeaways that have signed up in their local area and order meals online, as “like taking a drug”.

Yawar Khan, the chairman of the Asian Catering Federation, told The Independent that the websites “were good for our members when it started as it would give a boost to their business, but now so many takeaways are on the platform, it is no longer a benefit, with many of the same customers returning, rather than new customers joining.”

This is very similar as to what is happening in the Hotel industry, as reported in the Financial Review, with Hotels having to fight back as companies like Expedia move to increase commissions.  Globablly, online hotel  booking commissions can be 20 – 25% and booking.com, wotif.com and Expedia are moving to increase their profits.  Accor has responded by offering perks such as $20 a day drinks vouchers in an effort to get guests to book direct.

Restaurant Margins
All types of Take Aways are under threat from aggregators decreasing Restaurant Margins.

Is Just Eat driving decreased quality?

Talking to Restaurant owners using Menulog, Just Eats Australian subsidiary, we have found pressure on Restaurant Margins places pressure on quality food and quality food preparation.  Cheaper meat, cheaper recipes and quicker prep time are all some of the ways that Restaurants are sometimes forced to cut corners in an effort to maintain their margins.

Mr Khan added that Just Eat also pushed its listed businesses to offer 20 per cent off online orders – which the takeaway must cover, further squeezing profits.  It is unbelievable that Just Eat could expected a 20% discount and 20% commission and still expect a Restaurant to be profitable.

Ways to increase Restaurant Margins

The first step is for the Restaurant to get their own website.  It is crazy to think that a Restaurant will not be beholden to Just Eat, Menulog or Eat24 if they are using a website provided by them.  Pricing for Restaurant Websites has steadily decreased and is now very affordable.

Secondly, each Restaurant should start using a Free Restaurant Online Ordering System.  This allows them to take orders for free, build their customer database and not share the customer contacts with any other company.

We believe that there is still a place for Restaurants who can deliver great food at a great price and now with the ability to take orders online themselves, without paying Just Eat Commission, they are much better placed to run a successful and profitable business.

If you are struggling in your Restaurant, please contact us or signup for Secret Sauce, The Restaurant Marketing Podcast and the 5 minute a day Restaurant Marketing MBA.  Both are designed to help you learn more about Restaurant Marketing and both are completely free!

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