Thursday 19 May 2022

Restaurants See Less Profits In The App Era

Uber Eats Costa Rica says the orders through their service are mostly chicken (60.1%)

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The growing tendency to order food through apps  for delivery is causing a decrease in profits, as restaurants must assume the cost of delivery commissions and sometimes those of additional promotions offered by the digital platforms, such as Uber Eats, Hugo App, Go Pato, Glovo and Rappi.

Uber Eats Costa Rica says the orders through their service are mostly chicken (60.1%)

In Costa Rica, the home delivery of food and other items, has gained popularity among consumers, so restaurants have had to adapt their internal processes to this new trend that are having an impact on profits and cash flow.

Gabriel Gutierrez, Sushi To Go’s marketing manager, told La Nacion that “… We went from being a daily liquidity business to an accounts receivable company. In some cases, the amount billed (less commission) is recovered between 10 and 12 days, and in other cases (in the app that is currently generating more orders) we are liquidated only twice a month.”

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Gutiérrez added that “… Apart from the fact that the commission is high, a number of additional promotions are implemented internally (by the app) that are attractive to the user but that the business must assume, so that the usefulness of the product will always be altered.”

Commission percentages charged by apps range from 20% to 35% of the final price, depending on provider of the service.

According to Uber Eats Costa Rica the orders through their service are mostly chicken (60.1%), followed by beef hamburgers (34.2%), fisth (2.8%), pork (1.07%) and egg (1.07%). The company reports it has more than 800 associated restaurants in the country, and more than 700,000 downloads in less than one year.

The trend of ordering in instead of going to a restaurant is growing, forcing businesses to have to adapt, understanding that it would be worse to resist digitalization, but resent consequences such as reducing jobs and the commissions for delivery.

Another threat faced by restaurants is unfair competition, that is, the emergence of clandestine kitchens for the dispatch of orders, where, due to the nature of their business, they do not assume costs such as rental of space, costs of social security for employees, and supply with safety standards, among others.

To make the point, a problem that is not only faced in Costa Rica, but worldwide, last June, BBC  news opened a fake restaurant in Uber Eats and delivered a meal without any real supervision.

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Carolina Coto, communication manager Uber Central America, assured that in Costa Rica this is not possible. Coto said that they require restaurants a health (Salud) certificate, licenses, and identificaiton of the legal representative(s) of the business, a liquor patent (in case the business sells alcohol by way of the app), a signed contract accepting the terms and conditions and tax information.

“For Uber Eats, the safety of users is a priority. In order for a restaurant to be enabled on the platform, it must meet the requirements,” Coto said.

For its part, the Ministry of Health (Ministerio de Salud) had rules that delivery apps must comply with along with the provisions that already exist for the delivery (express is the Spanish term) services of restaurants

  • Use of disposable first-use containers containing food and beverages.
  • Properly packaged dressings and sauces.
  • The containers of the vehicle must be hermetically sealed and kept closed with a safety system that does not allow manipulation by unauthorized persons.

“Food for delivery is properly packaged by our partners (restaurants) and our Hugos comply with the strict handling of them to ensure that they are delivered to final consumers as they were packed by restaurants,” sAlejandro Argumedo, CEO and co-founder from Hugo App told La Nacion.

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The newspaper said it tried to obtain comments, but did not receive replies, from other digital platforms such as Go Pato, Glovo and Rappi.

 

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