Hospitality, Startup Opinion

Why are food delivery apps biting the hand that feeds them?

Mark Calabro /

tech in hospitality industry

HungryHungry co-founder Mark Calabro. Source: supplied.

Australia’s hospitality industry is dying at the hands of the tech it has employed to save it. Despite their ubiquity, delivery apps are now cannibalising the food industry’s already slim margins.

Platforms such as Uber Eats and Deliveroo once started with reasonable rates of commission, however, now take approx 20-30% of the order.

Most merchants are today making a financial loss on every app-based order, unable to offset this and directly market themselves to new customers. They have lost control of their business to the tech.

The result is apps and tech platforms patting themselves on the back for giving restaurants a voice… all while slowly starving them.

While tech disruption is not a new phenomenon, a warning must be served. The best tech companies seek to serve the greater good, rather than cannibalise industries for their own benefit.

Online graphic design portal and Australian unicorn, Canva, has made headlines for equipping local schools and SMEs with an affordable design solution, despite scooping revenue away from costly in-house and agency designers. While stripping work from some, the greater collective good to society is empowering and disruptive.

Netflix is renowned for dethroning Blockbuster, not in a bid to monopolise video content consumption, but to better serve consumers and axe costly late fees. In doing so, it has opened a new market of subscription-video-on-demand services, propelling consumers into a realm of personalised entertainment. Welcome Stan, Disney+, hayu and more.

Somehow, this desire to help the greater good has been lost by tech in the hospitality and food industry. Platforms such as Uber Eats and Deliveroo are being slammed for spruiking people into restaurants, only to pocket a large chunk of change themselves.

For the already-hurting hospitality industry, tech apps have positioned chefs and restaurateurs as ancillary rather than main attractions.

Of course, most customers don’t know this.

Most customers assume the delivery drivers are paid from the delivery fee. However, if this was the case, perhaps we wouldn’t have such a problem. 

High commissions mean tech is biting the hand that feeds it. It is eating into the narrow profit margins of the hospitality sector — the margin food businesses live or die by — simply because it is putting itself first.

The disruption mindset of the tech industry needs to change. 

If the technology industry is serious about helping hospitality, it would seek to support merchants rather than skim already tight profits.

Hospitality-related apps should seek to understand the real issues felt by restaurant and hospitality owners.

What delivery apps give customers is choice and access. What they give restaurants is simply a line on the menu. 

And when a customer orders that menu item, the restaurant never sees who that is from, nor is able to form any real relationships with them.

The transaction is conducted through the third-party as if restaurants were vending machines — the product is secondary to the convenience.

The challenge for many restaurants today is they cannot compete with giants such as Uber Eats.

The all-you-can-eat mindset of the tech industry is only really benefiting tech companies, and it’s only now the hospitality sector is realising just how much tech can ‘actually eat in one sitting’.

Collective success is the only way to keep the food and beverage industry alive and strong.

NOW READ: “Hardest it’s ever been”: Disrupted but not dejected, Australia’s restaurant owners discuss what’s next

NOW READ: “Someone has to pay”: Restaurateurs warn of price hikes as wages and UberEats crush margins

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Mark Calabro

Mark is the co-founder of HungryHungry, and the co-founder and former head of sales at OrderMate.