‘Nobody is winning’: businesses go cold on food delivery platforms

Cara Waters

December 29, 2019

The Age

The turning point for Vincent Piccolo came when Uber Eats cancelled a gelati order that had already been prepared, even though the delivery driver was standing right in front of him.

“We lost the sale, the driver wasted his time and the diner got no food,” says Piccolo, the manager of Art of Gelati Michaelangelo in Sydney.

Piccolo decided to take family-owned Art of Gelato Michaelangelo off the Uber Eats platform.

“For me, it didn’t feel right,” he says. “Everyone feels like they are winning, but nobody is winning.”

The launch of Uber Eats in the Australian market three years ago 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 less than $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, but he was also 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.

Piccolo is not alone in his concerns.

Andrea Di Fiore, who owns Bianco Latte in Melbourne’s Elwood, said he had issues every day with UberEats, including ice cream melting and tubs destroyed in transit.

After one year of being on the platform, when considering the additional fees to sell his gelati, he said financially it was “probably not worth being on there”.

“We’ve had issues every day. People picking up the food and stealing or eating from the bags, or they drop it off in front of the house and someone else will steal it,” Mr Di Fiore said.

“It’s more for exposure that we do it, because people order it and if they like the product, then they’ll come to the shop.

“We do find it works for us in winter rather than in summer; as soon as the weather started to get better, it kind of died off. People don’t like to go out in winter, they just want to sit on the couch with a tub of ice cream.”

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. Another 2.8 per cent said they had experienced an increase in profit as well as revenue, while 13.3 per cent indicated no change.

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 his 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. “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 such as 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.”

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.

An Uber Eats spokesperson declined to say how many businesses ended their relationship with the platform. “We value our relationship with restaurant partners and work closely with them to ensure their experience with Uber Eats is a rewarding one,” they said.

The spokesperson said more than 24,000 active restaurants choose 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.”