Contributing editor, Peter Backman is a long-term foodservice sector guru and founder of theDelivery.World, a platform that connects the delivery sector and makes sense of the myriad changes and challenges that affect the sector across the globe.
In the dynamic landscape of global restaurant delivery, a decade of evolution has woven a complex web of charges, driven by the essential pursuit of breakeven and eventual profitability. As competition intensified, both established players and newcomers faced the challenge of determining acceptable commission rates.
Navigating two distinct markets—restaurants and customers—delivery companies globally have paved the way for a myriad of charges. The scene may seem to resemble a wild west of fees, both overt and hidden, with constant model tweaking in response to trials, competitor actions and customer interactions.
Restaurants globally employ strategies to charge more for delivered meals compared to dine-in options: directly raising prices, offering a smaller menu of higher-priced or higher-margin products, including exclusive items on the delivery menu, and providing additional options for customers to add to their meals.
The net result is an average uplift in prices for delivered meals globally, estimated to be around 15 percent more for online meals compared to typical dine-in meals. But there are differences. For instance, in European countries like France and Germany, this margin may vary between 5 percent and 10 percent—in the UK it may be well in excess of 15 percent.
But the crux lies in intricately structured commission charges. There’s the “search” fee, where the delivery company finds the customer for a fee of perhaps 15 percent. “Search and delivery” fees charge for both finding the customer and delivering the meal for up to 30 percent. Alternatively, if the restaurant finds the customer, the delivery fee is subject to negotiation, closely related to rider fees.
Commission rates vary globally, reflecting a combination of “tariff” fees and the restaurant’s market power. Across the world, powerful brands that wield significant influence are able to negotiate lower commission rates. Smaller or independent restaurants face higher fees.
And then there are “service charges,” ranging from 5 percent to 10 percent, that work as surcharges, driving restaurants up the delivery company’s search rankings.
Customer interactions become a canvas for constant tweaking globally. Incremental changes, such as a 1-percent tweak on prices or adjustments in customer options, impact the final decision. Top charges on customers include a straightforward customer charge, typically 5 percent or 10 percent, added to the final bill. Additional service charges, small order charges, or delivery fees, ranging from 7 percent to 12 percent, further augment the total.
Customers globally contribute directly to rider fees, alleviating the burden on the delivery company and the restaurant. Tips play a pivotal role, especially in countries like the United States, where tipping is the norm. Delivery charges may be overtly added to the final bill.
In essence, customers globally may pay up to 70 percent more than dine-in customers for the same meal. The percentage increase typically hovers around 40-50 percent, resulting in a significant additional cost on a standard meal price.
Meanwhile, the constant tweaking of algorithms and the countless charges needed for profitability pose a risk of alienating customers globally. While existing customers might accept these non-transparent activities, attracting new customers might be jeopardized.
In the intricate world of global restaurant delivery charges, success hinges on striking a delicate balance between profitability and customer satisfaction. The journey continues, with delivery companies exploring avenues for growth while mindful of potential customer concerns worldwide.