# Understanding UE/DD/GH delivery fees to Restaurants



## Seamus (Jun 21, 2018)

I hesitate to even post this as I know many will criticize me as a shill or worse! But I see a lot of misinformation when lambasting UE/DD/GH fees of up to 30%. People use words such as "greedy" etc.etc. and think they take all the profits from the restaurants. This is just a realistic perspective to keep in mind.

Keep in mind that is not as simple as it sounds. I'm NOT defending UE/DD/GH fees and I realize that small businesses especially, get their profit eaten into but in reality for medium to large businesses the deal might not be as bad as you think.

Many drivers tend to think of the fees as only representing "Delivery". In reality the fees make up:

Credit Card payment processing. These fees paid by a restaurant without delivery are going to be approx 3.5% and there is usually a "swipe fee" on top of that of up to 30 cents per swipe.
Marketing  Think of the cost to a restaurant to advertise in print, radio, or TV. Many have pulled back on marketing expenses as UE/DD/GH are in effect marketing for them. Industry standard is 6% of sales for restaurants. Again, small mom and pops don't spend much on marketing so they get bit into the worse.
Delivery  Well this speaks for itself. Many restaurants don't offer delivery so this is a cost of doing business for top line growth. While mom and pops that offer delivery are paying drivers in tips and cash most must pay on on the books wage. In states like NY that means about $15/hr plus payroll taxes. Add that, WC, UI, etc. and your talking more like a real cost to the business of $17/hr and consider on average that person makes 3 deliveries per hour. More during peak but less during dead times.
Add it all together and it's not quite as bad as you think, except to small mom and pop businesses.

Also keep in mind the GROSS MARGIN on food is 200-300% although the NET MARGIN is 5-7%. UE/DD/GH are biting into the GROSS MARGIN which most restaurants will easily make adjustments for.

setting all things equal, Example:
Order for restaurant with own delivery person
+$20 food order
-$6.50 food cost
-$1.00 Credit card fee
-$1.20 marketing
-$5.70 delivery driver cost
-----------
$5.60 

Order for restaurant with NO delivery offered
$5.60
+$5.70 add back delivery driver cost
--------
$11.30

Order for restaurant with using UE/DD/GH at 30% fee 
+$20 food order
-$6.50 food cost
-$6.00 UE/DD/GH fee of 30%
---------
$7.50

So the real questions are:

Is a 30% hit to the GROSS MARGIN of 200-300% worth it for top line revenue growth? (maybe)
If restaurants add more GROSS MARGIN to cover fees who pays? (consumers)
How can mom and pop small restaurants use UE/DD/GH? (only by raising prices)
Will restaurants that DON"T participate lose business to participating competitors? Yes
It's become just another cost of doing business for many restaurants.

In the end it's the consumers who pay the price in higher prices!!!

Q Why do UE/DD/GH charge up to 30% fees?
A Because they can.


----------



## jaxbeachrides (May 27, 2015)

Um yeah if it's a high profit business, like pizza where you're selling flour and toppings, or Starbucks where you're basically selling flavored tap water.

Some of these places have no place taking a hit. If you sell a $12 prime steak for $20, and are only getting $14 for it, delivery makes no sense.

It really doesn't make sense at all if only the customer wins. Customer has no transportation. Orders delivery for $5 no tip. Restaurant loses money on the order because of no drink sale, DD loses money because of promotions, driver loses money because of theft of free labor by company.

So really only the customer benefits 100% of the time.


----------



## Rickos69 (Nov 8, 2018)

Seamus said:


> I hesitate to even post this as I know many will criticize me as a shill or worse! But I see a lot of misinformation when lambasting UE/DD/GH fees of up to 30%. People use words such as "greedy" etc.etc. and think they take all the profits from the restaurants. This is just a realistic perspective to keep in mind.
> 
> Keep in mind that is not as simple as it sounds. I'm NOT defending UE/DD/GH fees and I realize that small businesses especially, get their profit eaten into but in reality for medium to large businesses the deal might not be as bad as you think.
> 
> ...


I remember a long long time ago, I had written about this as well.
Back then I had focused on the marketing (free advertising), and on the
economies of scale, keeping their staff busy (cooking / packing / bagging)

However, the flip side is that many restaurants get hit with other costs that are not immediately visible.
For example, a Mexican Restaurant that I pick up from, forgot 1 item.
Grubhub gave the customer a full refund and hit the restaurant with it. $70.

Another situation.
I was there, picked up a delivery, came back 20 minutes later, and the owner was still on the phone with Grubhub,
because there was an order that had not been picked up in 4 hours, and it was worthless, and the owner was trying to get payment approval for the order from Customer Service.


----------



## Seamus (Jun 21, 2018)

jaxbeachrides said:


> Some of these places have no place taking a hit. If you sell a $12 prime steak for $20, and are only getting $14 for it, delivery makes no sense.


If you're selling a $12 cost "quality" prime steak for $20 you're a complete idiot.

Take a look at the price of a "quality" prime steak at a nice restaurant or steakhouse, the price is no where near $20.

If you are selling a steak for $20 than you are selling a "lower quality" piece of meat and paying a lot less for it.

You can get steaks $20 or less at some chains IHOP, Chili's, Applebees, etc.etc. but they are not even close to selling "prime" cuts of meat. For FS a quality Burger with higher grade beef (such as Angus) is hard to find for less than $16 let alone a quality steak!


----------



## Ms. Mercenary (Jul 24, 2020)

Rickos69 said:


> I remember a long long time ago, I had written about this as well.
> Back then I had focused on the marketing (free advertising), and on the
> economies of scale, keeping their staff busy (cooking / packing / bagging)
> 
> ...


Or the owner could have just delivered it himself in way less time. It really depends on the owner in these cases.

If I were one, I’d likely find a way to incentivize drivers to deliver those no-tip offers, be it asking a driver to grab it for $5 or whatever (in fact, I’d be friends with acouple and have their numbers, just in case). This needs to be a new way of looking at things.

I appreciate what @Seamus said. Those mom & pop shops get exposure and traffic they could never even dream of, as in the vast majority they never could afford to offer delivery.

I pick up my own orders - I’m way too cheap to pay fees. And on several occasions I had ppl talk to me about not using yelp ordering (GH, essentially) and order from them. Yet they don’t even have web ordering and expect me to find their paper menu and order on the phone. Um. No. I will order online. And that’s what they pay for.


----------



## Rickos69 (Nov 8, 2018)

Ms. Mercenary said:


> Or the owner could have just delivered it himself in way less time. It really depends on the owner in these cases.
> 
> If I were one, I’d likely find a way to incentivize drivers to deliver those no-tip offers, be it asking a driver to grab it for $5 or whatever (in fact, I’d be friends with acouple and have their numbers, just in case). This needs to be a new way of looking at things.
> 
> ...


The delivery services charge the restaurants 30% so they don't have to deliver the food themselves.
If they are going to deliver all the orders themselves because of all the lowballers, what do they need the delivery services for?
Also, not all restaurants have their own delivery people. That is why they signed up.
And you can forget about the owners doing this themseleves. They have stores to run


----------



## Uberisfuninlv (Mar 22, 2017)

Most restaurants have gotten smart about recovering the delivery fees. Some cities have enacted caps on delivery fees that the big delivery companies can charge restaurants. My city capped it at 15%

Also it seems every restaurant now prices the same items on the delivery apps around 20% higher than the in store price if you bought the same item in person

if you combine those two things, along with the advertising the restaurants get from the apps, they actually might be breaking even cost wise from the costs and getting lots of free advertising from the delivery apps


----------



## bobby747 (Dec 29, 2015)

I got 21 years night delivery. I just stopped doing. After 6 plus years away. I can only speak for mom and pop food places. 
Their rake thur G.H. is 30 % it will bankrupt the small business. 
But if the small business is 30 years plus old like ours. 90% slice and g.h. with very small carry out DD. AND EATS. 
People use g.h direct to our store I deliver..
So your post is very good.
But an example only.
$10 pizza they get $3 we go bankrupt. 
But if you are big like we are. G.H GIVES us those $100 orders so $70 we can swallow. New places cannot.
Our app only store did not last 1 year. As drivers were late and surges caused customers to order somewhere else. 
I avg..40 deliverys in 6 hours money was decent. Up to $300 a night. Very high pressure..as many as 10 orders per hour in a small area.
I did it so many years . I grew tired of it. I did as good with my private wheelchair customers at my own pace.
But you post here is a very good intelligent one. 
I just got the non app experience..
I will say think a great mom and pop store drivers can earn $1300 a week plus 5 days @Only $4 hr .50 cents delivery as covid tips are super sick..some 3 block $40 orders got $10 tips plus the other 4 in your car 70% are paid for..just some info for food guys. These #s are for busy city places in small delivery zones..


----------



## Seamus (Jun 21, 2018)

Ms. Mercenary said:


> I pick up my own orders - I’m way too cheap to pay fees.


Keep in mind there are 2 parts to the fee. The part they charge the _restaurant_ and the part they charge the _customer. _I usually pick my own up as well but we are just saving ourselves the fee they charge the customer. Indirectly, you are still paying higher prices with this change to the business model. If the restaurants adjust their gross margin to cover the cost of UE/DD/GH fees then _all _customers pay more for their food, not just app users. The only way you don't is if the store has 2 different prices which most don't.


----------



## Ms. Mercenary (Jul 24, 2020)

Rickos69 said:


> They have stores to run


Which he is clearly not doing spending 20+ minutes on the phone with support. Right?

So spend 20 minutes with support and get a fraction, or 20 minutes to drop off and get the full amount. Hmmm.

Note I never said it was right. But lets face it - those offers are not getting delivered for a very specific reason. So someone needs to address that specific reason.


----------



## Ms. Mercenary (Jul 24, 2020)

Seamus said:


> Keep in mind there are 2 parts to the fee. The part they charge the _restaurant_ and the part they charge the _customer. _I usually pick my own up as well but we are just saving ourselves the fee they charge the customer. Indirectly, you are still paying higher prices with this change to the business model. If the restaurants adjust their gross margin to cover the cost of UE/DD/GH fees then _all _customers pay more for their food, not just app users. The only way you don't is if the store has 2 different prices which most don't.


No, i’m not. If their menu prices were cheaper, I would order directly. They’re not. I have zero incentive to order from them except the goodness of my heart (one of my usual spots has online ordering, but it’s very glitchy and messed up, yet I still use it rather than a generator).

In fact I think Iheard it’s part of their contracts with generators that their house prices cannotbe lower. Iread that here somewhere.


----------



## Ms. Mercenary (Jul 24, 2020)

P.S. to previous post about same prices: oh, and one place has direct web ordering, but also has the balls to add a $2 “convenience fee”. REALLY?!? You bet those cajones they have to charge it I’m ordering on GH for free.


----------



## Seamus (Jun 21, 2018)

Q: If UE/DD/GH are taking 30% from the restaurants and also charging customers fees how is it that _everyone_ in the mix is losing money on this business model?
A: The high % of _garbage orders_ allowed!

Any system that allows a customer 12 miles away to order a cup of coffee or 1 Happy Meal and have it delivered is broken financially! No one can make money on small orders, low value orders, or too far away orders.

The only way to financially fix this basket case of a business model is to change the parameters so everyone can make some money.

MINIMUM ORDER VALUE. Obviously, at a certain point the order value is just too low to be worth delivering. There are plenty of examples of people ordering food/drinks with a value way under $10. Ridiculous!
MAXIMUM DELIVERY DISTANCE. C'mon really, someone on the internet can order food delivered from 18 miles away? Stupid!
TIPS REQUIRED. Years ago when I did private delivery for a Chinese Food Restaurant if the customer didn't tip the driver we would tell the owner. The owner's wife would call up the people and tell them if they didn't tip the drivers they would be cut off from getting orders delivered! Close to 100% of the customers tipped!


----------



## bobby747 (Dec 29, 2015)

Our biggest flaw was prices were the same p.u local and g.h. as per eats food each item is alot higher


----------



## Ms. Mercenary (Jul 24, 2020)

Seamus said:


> Q: If UE/DD/GH are taking 30% from the restaurants and also charging customers fees how is it that _everyone_ in the mix is losing money on this business model?
> A: The high % of _garbage orders_ allowed!
> 
> Any system that allows a customer 12 miles away to order a cup of coffee or 1 Happy Meal and have it delivered is broken financially! No one can make money on small orders, low value orders, or too far away orders.
> ...


I don’t know. While I agree in theory, I also think that one should be able to order that one cupof coffee from 20 miles away if one craves it. However, one should also be required to pay for that sort of diva behaviour.

But if it becomes in any way a per-mile charge, we can forget about tips. Notgonna happen.


----------



## Seamus (Jun 21, 2018)

Ms. Mercenary said:


> I also think that one should be able to order that one cupof coffee from 20 miles away if one craves it


----------



## Rickos69 (Nov 8, 2018)

@Ms. Mercenary
Which he is clearly not doing spending 20+ minutes on the phone with support. Right?
So spend 20 minutes with support *and get a fraction*, or 20 minutes to drop off and get the full amount. Hmmm.
*He will not get a fraction. He will get full payment for loads not picked up.
And how does he know that load will never get picked up in the first 20 minutes?*

But lets face it - those offers are not getting delivered for a very specific reason. So someone needs to address that specific reason.
*Its not his job to address that issue. The restaurant has a contract with the delivery services.
HE/SHE makes the food, the services pick up and deliver.*


----------



## Nats121 (Jul 19, 2017)

Rickos69 said:


> And you can forget about the owners doing this themseleves. They have stores to run


Actually, some owners are delivering themselves.

I know of at least a few family-owned restaurants whose drivers are family members and part owners. They often times cherry-pick the best deliveries and give the rest to the gig companies.


----------



## Rickos69 (Nov 8, 2018)

Nats121 said:


> Actually, some owners are delivering themselves.
> 
> I know of at least a few family-owned restaurants whose drivers are family members and part owners. They often times cherry-pick the best deliveries and give the rest to the gig companies.


My remark was in regard to delivering orders that were supposed to be picked up by the delivery companies.


----------



## Nats121 (Jul 19, 2017)

Rickos69 said:


> My remark was in regard to delivering orders that were supposed to be picked up by the delivery companies.


Suffice to say the restaurant's own drivers won't touch those orders with a 10 foot pole, LOL.


----------



## Nats121 (Jul 19, 2017)

bobby747 said:


> I got 21 years night delivery. I just stopped doing. After 6 plus years away. I can only speak for mom and pop food places.
> Their rake thur G.H. is 30 % it will bankrupt the small business.
> But if the small business is 30 years plus old like ours. 90% slice and g.h. with very small carry out DD. AND EATS.
> People use g.h direct to our store I deliver..
> ...


UberEats charges much lower fees from restaurants that have their own drivers. I'm guessing Doordash and Grubhub do the same thing.

In addition, unlike their "take it or leave it" approach to the drivers, in some cases Uber is willing to negotiate service fees with restaurants.


----------



## Ms. Mercenary (Jul 24, 2020)

Seamus said:


>


Well that just hurt my feelings. I’m gonna go sulk now.


----------



## bobby747 (Dec 29, 2015)

Well for about 30 years our place and many about 4 big time local best joints charge $1 delivery...no one can match that. And if we forgot you xtra milkshake. Or soda. Like g.h and all app drivers not reading the orders..bad drivers. We bring it back. G.H and apps give you credit. Many customers dont want credit they want thier meals.
I did this 20 years at night. Buying selling homes and rehabbing on my own. Reason no pizza hut shirts. And the pay was killer. At 59. I came back like 9 months. Just got tired of it. Many professionals who have familys try to grab 1 to 2 nights a week. Everyone thought I was nuts giving in up a few weeks ago. I dont need the running around so bad. I dont miss it. Now I dont miss the big cash ..I used to years ago. Its SOS to me


----------



## Ms. Mercenary (Jul 24, 2020)

Rickos69 said:


> @Ms. Mercenary
> Which he is clearly not doing spending 20+ minutes on the phone with support. Right?
> So spend 20 minutes with support *and get a fraction*, or 20 minutes to drop off and get the full amount. Hmmm.
> *He will not get a fraction. He will get full payment for loads not picked up.
> ...


My point was that everyone needs to change with the times. Not signing up with generators in this market is acostly mistake. And no system is perfect.

I’ve never been a “it’s not my job” kinda person - it’s one of my severe disabilities, really. I’m very goal-oriented. My mind snaps to the end result, frequently at my expense. It has always been a struggle for me.


----------



## jaxbeachrides (May 27, 2015)

Seamus said:


> If you're selling a $12 cost "quality" prime steak for $20 you're a complete idiot.
> 
> Take a look at the price of a "quality" prime steak at a nice restaurant or steakhouse, the price is no where near $20.
> 
> ...


Completely normal for competitive businesses. Restaurants earn about 10% as their net income.

Let's say you get the 2 for $20 at applebees or chili's, they give you 2 5 oz strips and a couple sides. They probably make a couple dollars off this.

But why? In house sales add huge margins on drink sales.

It's well known that restaurants subsidize the food to some extent, so they can mark up the drinks huge.

Starbucks can afford 30% commission because they're selling you a cup of water for $5.

The only food places that can really afford 30% are foods that are mostly fillers, flour based or cheap starches. Pizza, rice, Asian, Mexican. They can lose 30% and still make a profit on food alone.

This is why restaurants hate DD and uber because they give up their in house drink sales and pay too much commission, but the restaurant is making all the capital investment, doing all the work, and taking all the risk to lose money. There's no incentive.


----------



## bobby747 (Dec 29, 2015)

I can ad this. If you order ..poppers. ravs.. wings.. steak fries. Loaded fries . About 30 sides dishes . We knock you head off.


----------



## Ms. Mercenary (Jul 24, 2020)

I’m curious: do vendors see if an order is a non- or low-tip?


----------



## Seamus (Jun 21, 2018)

Ms. Mercenary said:


> I’m curious: do vendors see if an order is a non- or low-tip?


On which app? I know on GH they can see the driver tip, I've had a restaurant owner show me my tip once.

On DD or UE I don't think so but don't know for sure.

Some places (mainly chains) have a deal with DD that they just request the delivery. On those specific orders where the customer calls or places an Online order direct with the restaurant I believe they would know because they get the order direct from the customer.

On those orders once you accept the offer you will see a message that says "this delivery was requested by the restaurant so we don't know the order content" in the "items" field. That's how you would know it's that type of order.


----------



## 25rides7daysaweek (Nov 20, 2017)

Seamus said:


> I hesitate to even post this as I know many will criticize me as a shill or worse! But I see a lot of misinformation when lambasting UE/DD/GH fees of up to 30%. People use words such as "greedy" etc.etc. and think they take all the profits from the restaurants. This is just a realistic perspective to keep in mind.
> 
> Keep in mind that is not as simple as it sounds. I'm NOT defending UE/DD/GH fees and I realize that small businesses especially, get their profit eaten into but in reality for medium to large businesses the deal might not be as bad as you think.
> 
> ...


You sir are a certified shill or worse
A very informed one but one nonetheless
Say hello to Dara for us....


----------



## Alltel77 (Mar 3, 2019)

Restaurants aren't hurting at all from these apps, only the stupid ones. The service fee is usually 5%-8% when I order off UE , the delivery fee is almost always $0-.49. Nearly every restaurant has the online app menu marked up varying percentages and many use limited menus for on-line. Some restaurants also experiment with smaller portion sizes. I'm pretty sure the apps have different agreements with restaurants especially major chains like McDonald's etc. I just don't know who takes the hit for the promos I constantly receive for $20 off $30. I did order from a Peruvian restaurant recently with that promo and the restaurant had a bogo so I received two half chicken meals and two steak meals for $16 (including all fees) if I had gone to the restaurant and ordered it would have been nearly triple that amount. It was a ton of food actually stretched 6 meals and good. Even after tipping it was $26 which is still a good deal for 4-6 meals IMO.


----------



## Gone_in_60_seconds (Jan 21, 2018)

Seamus said:


> I hesitate to even post this as I know many will criticize me as a shill or worse! But I see a lot of misinformation when lambasting UE/DD/GH fees of up to 30%. People use words such as "greedy" etc.etc. and think they take all the profits from the restaurants. This is just a realistic perspective to keep in mind.
> 
> Keep in mind that is not as simple as it sounds. I'm NOT defending UE/DD/GH fees and I realize that small businesses especially, get their profit eaten into but in reality for medium to large businesses the deal might not be as bad as you think.
> 
> ...


You also didn't mention the delivery fees that Uber, DD and Grub Hub charges the customers. DD its a flat $4 - $5, Uber can vary, but averages about $8-$11 and not sure about Grub Hub.

So, Greed is very appropriate to describe these companies. 

Of course for costs especially for DD, you also have to factor in the refunds that they must process for the cheap customers that don't tip and the order are not picked up by the driver. As well, there is also compensation for the restos when the order is not picked up? Not sure how much that costs. When you analyze, its extremely wasteful for DD to process the refunds and wasteful for the environment, as the food goes into the dumpster.


----------

