Why Melbourne restaurants are shunning delivery apps like Uber Eats
They were supposed to save the hospitality industry. But now Melbourne restaurants are increasingly turning away from using food delivery apps such as Uber Eats.
Eating Out
Don't miss out on the headlines from Eating Out. Followed categories will be added to My News.
They were supposed to herald a new golden age of hospitality, a way to bring in big dollars from a new audience of diners.
But restaurateurs are increasingly seeing that food delivery apps, such as Uber Eats and Deliveroo, have fundamentally changed the nature of the industry – and not for the better.
Next week, chef Shane Delia will open Maha Bar on Smith St in Collingwood. Serving modern Middle Eastern mezze, it takes the place of his Biggie Smalls kebab shop, which shut last year. It follows a similar rebrand of the Windsor Biggie Smalls into Maha East last winter.
Delia said when it launched in 2016, Uber Eats was initially fantastic for Biggie Smalls, with the store taking thousands of dollars each week in delivery purchases that were on top of in-store sales.
But diners quickly changed their behaviour.
“People stopped going out for a kebab,” Delia said. But as in-store takings plummeted, sales via the delivery platform remained stagnant due to the number of options offered at any time.
“It’s not like a traditional business where you’re competing with, say, 20 other stores on Smith St. On the app there are thousands,” Delia said. “And the commission charged (up to 35 per cent on each order) is a big pill for an operator to swallow.”
It makes for a perfect storm hitting the hospitality industry hard – rising costs, relentless rent increases, fierce competition and the expansion of the on-demand economy.
KordaMetha’s Craig Shepard highlighted the rise of food delivery services as a factor in the downfall of George Calombaris’s Made Establishment restaurant group last week.
But while the taxi industry successfully lobbied government to provide assistance after Uber disrupted it, Delia highlighted the lack of help for the hospitality industry after being similarly overhauled by Uber Eats and other delivery platforms.
“When Uber came in, the taxi drivers got up in arms about their taxi licences and the government cut them a cheque. I don’t see them doing that here. Where’s the safety net for restaurateurs?”
Adapting to a changing landscape is something successful businesses in all industries must do, but it’s that the pace of this change in hospitality is unprecedented, says Commune Group director Simon Blacher.
“It’s obviously a huge disrupter to the industry that’s happened so fast, and the speed with which consumers have taken it up is amazing,” he said.
The restaurant group behind the Hanoi Hannah and Tokyo Tina restaurants will open Firebird early next month on High St, Prahran, which will not be listed on any delivery platform.
Blacher said it wasn’t just the commissions charged by platform that hurt a business’ bottom line, but the extra costs incurred in servicing deliveries, such as packaging, labour and disruption to a restaurant’s diners. Lack of control over quality and brand perception also were an issue.
“If people are ordering in more, they’re going out less. It means places are hurting, communities are hurting. Hospitality is the fabric that holds communities together,” he said.
While the group’s Hanoi Hannah Express Lane in Prahran has evolved successfully to an on-demand delivery-predominant business model, they’ve taken other restaurants, including Hanoi Hannah in Elsternwick, off all on-demand platforms.
MORE FOOD:
FOOD EVENTS COMING TO THE BURBS
Blacher said for restaurants to survive, the dining experience offered had to be unique.
“If people are going out less, when they do go out they go to brands they trust. People need a social fix, so they’ll still go to restaurants and when they do, you want them to come to you. When the quality is there, people are loyal,” he said.
“The rise of delivery caught us off guard, but we’ve adjusted accordingly. We’re not fighting it, we’ve embraced it to make it work. (Delivery) is not going anywhere, it’s here to stay.”