Restaurants teaming up against food delivery services' price policies
Dozens of restaurants in Estonia are considering how to stand up together against food delivery services they say are charging them too high of a cut. The biggest and one of the most expensive players on the market currently is Wolt.
Marcus Groth, the Finnish owner of Very Thai in Tallinn, is seriously worried. Not just about his restaurant, either, but about the entire restaurant scene in Tallinn: how is it supposed to survive this year, especially if a new outbreak of the coronavirus should occur this fall?
The coronavirus crisis has forced restaurants to depend on third-party food delivery services. Many dining establishments closed altogether, however those that remained open and continued to sell food did so primarily via food delivery services.
Wolt is currently dominating the dining market in Tallinn. Together with Bolt, they also charge the biggest cuts on deliveries — 20-30 percent, depending on the contract, according to dining establishments. While restaurants were at least able to negotiate with other delivery companies in order to help optimize costs, Wolt remained rigid and did not provide the opportunity to negotiate, the owners of several dining establishments confirmed.
Because it remained open, turnover at Groth's restaurant fell 40 percent during the emergency situation. He would not be able to survive a similar fall, however. He believes that in a bad situation, everyone should stick together and support one another, not see an opportunity in a crisis to wear someone into a coma with their intermediate activity.
"Times are tough for restaurants right now," he said. "Running a restaurant isn't easy even during the best of times, but right now it's even harder. Right now we're increasingly dependent on delivery services; it is a matter of survival for us. If their conditions don't support us, then it'll be curtains for many."
Groth believes that the fees charged by bigger delivery services are disproportionate.
"It is very important to send our clients a message: they don't know that when they use Wolt, then we have to pay our entire profit," he explained. "People think that they are paying in full for the delivery service, but in reality, the restaurant is paying a huge amount on top of that per order."
He himself has requested a reduction in fees from Wolt twice, both times unsuccessfully. The first time, the company cited additional costs incurred due to disinfectants; the second time, they cited the fact that they have a lot of people working for them.
"They are not willing to negotiate at all," Groth said. "Everyone else has reduced their prices: our landlord, taxi service providers and others. Everyone else has met us halfway, to support one another. Just not the delivery service company."
Earlier this week, Groth created a closed Facebook group to which he invited restaurants also partnered with food delivery services to join in order to band together. He will not reveal any more specific plans until at least 100 restaurants have joined that are prepared to participate in a joint effort, but confirmed that their action would be based on the principle of there being strength in unity, and that their initiative would lead to a major change on the market.
Within the first three days, some 80 dining establishments have joined the group already, which is why he is confident that he will get 100 restaurants together that want to save themselves.
Groth stressed that he was not working against anyone, but rather in favor of a positive solution.
"The goal is to come up with a positive plan," he said. "Restaurants have to pull together. Then we can dictate our rules and take responsibility for our own business. I want 300 incredible restaurants to survive."
According to the restaurant owner, that is precisely how many dining establishments currently use third-party delivery services. This means that the biggest of them could stand to lose up to a third of its clientele — or partners, as Wolt calls them — should they decide to give up Wolt's services, for example.
Nonetheless, Groth said that a new delivery service is not in the works, noting that there are enough of them as it is. Rather, the goal is cooperation with existing ones aimed at the best possible result.
While there are quite a few delivery services already, more are still cropping up. One newcomer, for example, is Nosi, which Groth is also testing out. He praised the new intermediary for charging just 5 percent of turnover, a number he finds fair. Should at least 100 restaurants cooperate, he believes it would be possible to tell delivery services that they will pay 5 percent in fees, no more, and the companies would have to agree.
In addition to fees, however, dining establishments also want to direct clients to contact them directly.
"Contact the restaurant and ask them directly how they would prefer you order delivery!" Groth said. "It's often possible to order delivery via the restaurant's homepage."
While Very Thai isn't in the worst position, Groth is still taking action on behalf of those who have been doing worse during the crisis. Why?
"It's during hard times that you find out who your friends are," he explained. "I'm an old punk. I love doing stuff like this — to take from the rich and give to the poor. If you're fighting or the right thing, it's not possible to lose; you either win or you learn."
Wolt: Costs are high
In a written statement, Liis Ristal, Wolt's Baltic general manager, claimed that they have not received many inquiries about reducing their fees. She left unanswered, however, whether the company has agreed to do so for anyone.
"The best opportunity we see for assisting restaurants is bringing them additional clients and turnover," Ristal explained. "An average of six extra orders placed via Wolt per day gives a restaurant the same kind of monetary boost that halving our fees would. For these additional orders, we ourselves are advertising restaurants, we reduced our delivery fees for clients, and increased our delivery range."
She added that these fees are not a profit for Wolt.
"We pay delivery drivers' wages and labor taxes from these fees," the general manager explained. "In addition to our drivers, we also use fees to cover the costs of Estonian-language customer service as well as development costs to keep the app in working order, add new opportunities as well as other operating costs."
Ristal admitted that losing a third of restaurant clientele would have a significant impact on Wolt.
"It is a significant impact on any company if part of your clientele withdraws from your services," she said. "We are trying to operate sustainably, offering our delivery partners dignified service, our restaurant partners additional income, and our clients affordable delivery fees. Under the current business model, the Wolt group as a whole is not yet profitable."
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Editor: Aili Vahtla