If capitalism is driven by a search for profit, the food delivery business confuses the hell out of me. Every platform loses money. Restaurants feel like they’re getting screwed. Delivery drivers are poster children for gig economy problems. Customers get annoyed about delivery fees.
And then, seemingly at the blink of an eye, restaurants across the country had to shut their doors for everything except for takeout and delivery to comply with social distancing requirements related to the coronavirus. Some restaurants in Mill Valley simply shut down, while others slogged through months of constantly iterating on their business model at skeletal staffing levels.
That extremely precarious formula – urging your customers to come pickup their takeout orders, all while knowing that the astronomical levels of anxiety surround the coronavirus made most people uninterested in doing so – meant turbocharged growth for the likes of Grubhub, which saw double digital year-over-year revenue increases for the period that only included a few weeks of the shelter in place. Restaurants had little choice but to play along, though Dine-In Marin remained a localized, less rapacious delivery option.
The arrival of outdoor dining this month has allowed a handful of restaurants to add some tables and chairs to the mix, but not enough to offset the continued prohibition on indoor dining. And even when County of Marin officials allow the reopening of indoor dining, which could come as soon as the end of June, it will be with significant social distancing requirements that could reduce seating by as much as 50 percent in some cases, depending on floor plan configurations. That’s assuming customers will return confidently, depending on the state of COVID-19 health indicators like coronavirus case counts, hospitalizations etc.
From the major players in Mill Valley to the tiniest of mom-and-pop shops, “all of the above” business models will be necessary for restaurants to survive.
It’s with all of that in mind that the Marin County Board of Supervisors is set to consider a resolution on June 16 that would cap the fees charged by restaurant delivery apps like Grubhub, which just reached a deal to be bought by Just Eat Takeaway, a European food delivery service, for $7.3 billion, at 15 percent of the purchase price of the order.
The resolution could mark a significant departure for restaurants and the delivery services, as 15 percent is far less than what many restaurants have been paying those services. Matt Majesky, owner of Pierogi Mountain restaurant in Columbus, Ohio, told the New York Times that Grubhub took more than 40 percent from the average order, flipping his restaurant from almost breaking even to plunging deeply into the red. The restaurant ended up closing in late April. During the shelter in place, delivery apps like Grubhub and UberEats “became essentially the only source of business for the restaurant,” and “the fees to the delivery companies turned into the restaurant’s single largest cost — more than what it paid for food or labor.”
“You have no choice but to sign up, but there is no negotiating,” Majesky added. “It almost turns into a hostage situation.”
The county’s proposed resolution acknowledges that the shelter in place order that went into effect March 17 “placed a sudden and severe financial strain on many restaurants, particularly those that are small businesses that already operate on thin margins, adding to financial pressures in the industry that predate the COVID-19 crisis.”
It also notes that “restaurants, and particularly restaurants that are small businesses with few locations, have limited bargaining power to negotiate lower fees with third-party platforms, given the high market saturation of third-party platforms, and the dire financial straits small business restaurants are facing in this COVID-19 emergency.”
The regulation would not have a widespread impact in Marin, as it would only cover delivery services for restaurants in unincorporated Marin. Cities and towns would need to pass their own respective resolutions for broader impact. The lifespan of the regulation is also in question: It would remain in place until the county lifts the order prohibiting indoor dining, which could come as soon as late June, AND the board rescinds it. But it holds out the possibility that it stays on the books for a while:
“Even when dine-in service is allowed by the Public Health Officer in the future, it is unclear how rapidly dine-in service will begin to resume and restaurants may continue to see a significant loss of revenue for an ongoing period of time as dine-in service is reintroduced,” according to the proposed resolution.
The regulation would not apply to delivery services delivering orders from chain/formula restaurants with 11 or more locations and/or standardized array of merchandise, a standardized facade, a standardized decor and color scheme, uniform apparel and standardized signage
If the supervisors approve the resolution, it would take effect June 22.