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Third-Party Delivery Apps Charge High Fees For Restaurants, Businesses

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(AP Photo/Lee Jin-man)

Food delivery has skyrocketed during COVID-19, as people still stay away from dining in restaurants. 

That means UberEats, Postmates and other delivery services are doing great business.  But local restaurants say they are taking too big a bite out of their profits. 

Several cities have passed a cap on the fees these apps can charge  -- and there’s a push in Clark County to do the same.  

Kristen Corral is the co-founder of Tacotarian. She presented her case for a cap to those fees to Clark County commissioners at their meeting this week. 

Corral told KNPR's State of Nevada that fees vary depending on the service and the restaurant but they hover between 28 and 30 percent.

“It’s kind of astronomical when you think about how much they’re taking from each restaurant not to mention what they’re taking on the customer side as well,” she said, "They’re essentially double-dipping.”

As an example, on a recent bill from her restaurant's Ft. Apache Road location Postmates charged them $14.98 in fees on a $50 bill.

Corral said that before the coronavirus pandemic the fees were not a big deal for most restaurants because such a small percentage of their orders were through a third-party app.

“The fee wasn’t as big of a deal but now almost everyone is relying on these apps if they want to do take out or delivery,” she said.

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Business through delivery apps has tripled for Corral's business. Some restaurants that never offered delivery started during the lockdown order just to stay alive.

“This affects everybody who is using these third-party apps, and at this point, most people are being forced to use those apps,” she said.

Corral noted that setting up a in-house delivery system is not easy. Besides the extra expense of hiring a driver, many restaurants aren't able to get the insurance needed to cover delivery people.

Plus, breaking customer habits is not easy.

“When you talk about, ‘okay let's just get rid of the apps,’ people are so used to ordering from those apps, they’re not going to know how to find you,” Corral said.

In addition to habits, people often don't realize there is a fee for restaurants. When Corral started talking to customers about the fees restaurants are charged, they were shocked.

"They think that they’re paying a delivery fee and that’s it. They have no idea that the restaurants are paying 30 percent,” she said.

Customers also don't know that when they use the review app Yelp to order food, it is being routed through one of the largest delivery apps GrubHub. 

In addition, Grubhub has been accused of charging extra fees for phone calls people thought were going to the restaurant directly, but instead, were routed to the app. 

Corral said business practices like that have been going for a while but it wasn't until the skyrocketing demand for services did anyone take notice.

“I think the pandemic has just put a spotlight on a lot of them and I think restaurant owners are just, in general, fed up, especially when we’re operating with such low margins,” she said.

Corral said the average profit margin for restaurants is between 3 and 5 percent, which is why giving away 30 percent in fees is a big deal.

In other cities, ordinances have capped the fees at 10 to 15 percent. The ordinance before the county commission would cap it at 10 percent.

“Commissioner [Tick] Segerblom and his team are working on a really fair ordinance that helps protect the driver and includes a lot of language that, I think, makes it a fair trade for both sides,” Corral said.

The ordinance could come up for a vote in August.

Guests

Kristen Corral, co-founder, Tacotarian 

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