COVID-19 has turned the world upside down.
In Australia, our economy has been devastated by the necessary restrictions put in place to counter the virus, with the restaurant industry one of the hardest-hit sectors.
It’s now been seven weeks since restaurants across the country were told to shut their doors. Their dine-in revenue ceased. In that time, restaurant owners, like so many businesses, have been forced to adapt and, most critically, reassess how they do business, now and into the future.
For Uber, this crisis has only sharpened our focus on how we can better support our marketplace – for consumers, for driver and delivery partners, and for restaurants.
COVID-19 has placed food delivery platforms like Uber Eats in a unique situation, with new responsibilities towards the marketplace we serve. People are relying on us to get the food and essentials they need while staying at home. Restaurants are turning to us to help them keep trading. Delivery partners are using food delivery to get extra income during these uncertain times. We take these responsibilities very seriously.
When the pandemic first hit, we focused our support on helping restaurants stay open, driving demand and providing earnings opportunities across the market. This was critical in the early stages of the crisis. But now, as we look to the future and the long road to recovery, more sustained measures are needed.
That’s why we are introducing new options for restaurants that change the way they engage with us, and the fees we charge for our service.
From 18 May restaurants will be able to use their own staff to deliver Uber Eats orders received via the app. This will enable restaurants to choose delivery fees and coverage areas, and pay less than half the current commission to Uber Eats (8% for independent restaurants until 31 July, before moving to the long term rate of 16%).
Restaurants will be able to divert staff to deliveries and keep more people in work. Importantly, restaurants can still use Uber Eats delivery partners during busy times – as a last minute fallback – when they can’t meet the demand with their own delivery staff.
People can also choose to cut out delivery all together and use the pick-up option. In March, we announced a 0% commission fee on all pick-up orders (until 31 July before moving to the long term rate of 13%). Here people can order via the app and then walk, cycle or drive to their neighbourhood restaurant themselves and collect their food.
Along with regular delivery using Uber Eats partners, this means there is now greater choice for restaurants with three different ways they can use the platform to build their business, with three pricing options. This is in addition to changes we have already made to give restaurants control over the pricing of their online menus.
We understand that commission fees are a key concern for restaurants, and one that has only intensified since the onset of COVID-19. After careful consideration, we are lowering our standard rate by 5 percentage points to introduce a new standard fee ceiling of 30%. This is not a temporary reduction, we are making this change for the long term to relieve pressure on the bottom line of our restaurant partners.
But we know there are many who will want us to go further. Some businesses are calling on us to reduce commission fees by as much as half. This might sound like an easy solution. However, the issue isn’t as simple as it has sometimes been presented.
The fees charged by Uber Eats help cover the costs of three things: enabling reliable and consistent earnings opportunities for delivery partners, generating demand for restaurants, and the revenue needed to support our business operations.
On the delivery partner side, this includes signing up new delivery partners, enabling earnings opportunities, and maintaining high safety standards, including education and insurance costs for delivery partners. Many people don’t realise that much of the commission fee paid by restaurants is reduced to cover the actual cost of food delivery. This is because delivery fees paid by consumers at the check-out can be as little as $2.99 (or $0 for promotions) and don’t always cover the restaurant’s cost of paying delivery partners for the work they do.
Of the remaining commission fee, more than half is reinvested back into the marketplace to generate demand and ensure existing customers keep coming back. This is done through advertising and marketing campaigns, the funding of consumer promotions, and teams of specialists who provide support to restaurants, delivery partners and consumers who place orders through the Uber Eats platform. Last year, our support agents helped resolve over 3 million consumer and partner enquiries across Australia and New Zealand, making sure our marketplace functions in the best possible way.
The remaining portion of the commission fees goes to Uber Eats to cover things like card transaction costs, investment in our technology, and the cost of running our business – our staff, premises, taxes. And, yes, profit also. But fundamentally, like restaurants themselves, we are a low margin business.
A recent independent study by IbisWorld shows that food delivery platforms in Australia on average make a 3% profit margin. The bottom line here: providing a platform for the delivery of food to millions of homes across Australia, at the tap of a button, in an average of under thirty minutes, as well as providing 24/7 customer and operational support, costs money.
But there is another business reality we need to consider: We can only thrive when our restaurant partners do. That was true before COVID-19, and is even more so now.
As we announced last month, we are continuing to show our support by waiving activation fees for new restaurants coming onto the platform, enabling daily payments to improve cash flow, and making up to $5 million in funding available for independent restaurants to deploy in app promotions. In addition we have provided $1 million in tip matching for restaurant staff as part of our new restaurant tipping feature. We are also supporting our community by giving 25,000 free meals to frontline medical staff, and expanding our four-year long partnership with Feed Appeal to help get more meals to Australians in need.
We will continue to support the restaurant industry as it navigates these immensely challenging times. We have already been working with the Restaurant and Catering Industry Association over the past few months to help deliver positive outcomes for restaurants. But it’s not something business and the industry can do alone. It will require governments, banks and regulators to join with us.
Like millions of other Australians, I’m pleased to see signs that our world is righting itself. Beaches are starting to reopen and kids are returning to school. But for many, the real marker of normality will be when restaurants reopen their doors and our cafes begin to buzz again. And when they do, Uber Eats will continue to support restaurants in every stage of the recovery.