Uber will offer fee relief to Australian restaurants by permanently reducing the standard commission it takes on deliveries from 35 per cent of order value to 30 per cent. The ride sharing and food delivery giant has also given a breakdown of its delivery commission model in response to criticism its share is harming local businesses.
Uber this week announced its food delivery arm, Uber Eats, will reduce some of the fees it charges restaurants to process and deliver orders following calls for the tech giant to do more to support struggling local restaurants during the COVID-19 crisis.
When restaurants were forced to shut their doors to dine-in customers under social distancing rules, business for delivery companies like Uber eats, Deliveroo and Menulog surged. The delivery companies responded with incentives and free marketing for restaurants to get them onboard their platforms.
But companies like Uber Eats were criticised by food franchisees and restaurant owners for not reducing the delivery commission they take on orders during the pandemic, which can be more than a third of the total order value.
Which-50 revealed in late March that none of the major platforms companies were planning to reduce delivery commissions, despite the disruption to the restaurant sector and strong criticism from the Franchise Council of Australia.
But on Sunday, Jodie Auster, Uber Eats Regional General Manager for APAC, announced the company is now permanently decreasing its 35 per cent fee by five percentage points.
In a company blog post, Auster also details other temporary fee relief and a new option for restaurant owners to take orders via Uber Eats but conduct deliveries themselves. For that service restaurants will pay Uber Eats 8 per cent of the order value before it reverts to its long term rate of 16 per cent from July 31.
Uber Eats will also temporarily waive its commission for pick up orders until July before reverting to the usual 13 per cent.
“But we know there are many who will want us to go further,” Auster writes. “Some businesses are calling on us to reduce commission fees by as much as half. This might sound like an easy solution. However, the issue isn’t as simple as it has sometimes been presented.”
‘And, yes, profit’
Auster argues the fees Uber charges restaurants cover three main things: paying its delivery “partners”, generating demand for restaurants, and Uber’s own business operations and profit.
While consumers typically pay an additional delivery fee on top of the food order, Auster says this won’t always cover paying the delivery drivers and Uber sometimes makes up the difference with the commission it takes from the restaurant.
When the actual delivery is paid for, including safety and new delivery driver and rider signups, “more than half” of the remaining commission is used on marketing, promotions, and support.
Auster writes, “The remaining portion of the commission fees goes to Uber Eats to cover things like card transaction costs, investment in our technology, and the cost of running our business – our staff, premises, taxes.
“And, yes, profit also. But fundamentally, like restaurants themselves, we are a low margin business.”
Exactly how much profit Uber makes in Australia is unclear. Last year, the AFR reported Uber Australia holdings, which includes its ride sharing and food delivery entities, made a gross profit of $785 million. But most of that was wiped out by a “service payment” to its US parent and the Australian entity ultimately paid $8.5 million in tax.