What attracts customers to restaurants

Lieferando and Wolt in the criticism : How food delivery services are benefiting from the plight of restaurants

Savior in need or beneficiary of the suffering of others? Sometimes that's a matter of perspective. The relationship between restaurateurs and delivery services is an example of this in times of crisis. Basically, the bill for the food couriers is simple: for the delivery of an order, they collect 30 percent of the receipt from the restaurant, for an order that the customer picks up, around 13 percent. In addition, the hungry is usually charged a delivery fee.

Since in the current lockdown, as in March, all restaurants have to be closed and food can only be sold "to go", they like to present themselves as the savior of an entire industry with this business model. "We are doing our best to support our partners during this time," says the Finnish delivery service Wolt, which has been active in Berlin since this summer. Numerous restaurants “approached us in order to be able to keep their business going through delivery,” said Lieferando, the second major supplier, already in the first lockdown.

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Three points of criticism from the restaurateurs

But if you ask around among Berlin restaurateurs, there is great displeasure with the two top dogs among delivery services. Many feel less saved, but much more ripped off. In view of their market power and their dominance on Google, numerous restaurateurs see themselves at the mercy of Lieferando and Wolt. Most restaurateurs do not want to read their name in the newspaper, but there are mainly three points of criticism that are repeatedly mentioned.

First, the amount of commissions: 30 percent is often the entire margin of a restaurateur. “I can't actually live off that anymore, but what else should I do in this situation?” Says a restaurant owner from Kreuzberg. Second, interventions in the price structure: restaurateurs report several times that Wolt forbade them to raise prices in order to be able to run their business economically despite the 30 percent commission. Thirdly, this leads to a non-transparent cost structure.

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Because in the industry there are well known examples of restaurants that only have to pay Wolt a 25 percent delivery fee and also raise their prices on Wolt's platform, but were allowed to leave the old prices for self-collectors. "I'm not sure that I understood correctly, that I shouldn't make the dishes more expensive," says a restaurant owner, therefore uncertain. “But anyway I have no other choice but to do it the way they say it is.” It is well known in the industry that many restaurateurs have no other option than to save on the quality of the ingredients. "It would be nice if more customers were aware that delivery is at our expense and possibly even at the expense of quality," says another restaurant owner.

Wolt and Lieferando with special offers in lockdown

At Wolt and Lieferando one cannot understand the criticism, but confirms some of the points mentioned. "When restaurants go to the Wolt platform, they undertake not to raise their prices above the usual level," said the Finnish provider. Lieferando says that every restaurant can of course continue to set its prices. Should the dishes become more expensive, however, this would also have to apply to order prices on other channels.

The providers do not want to know anything about individual discounts on delivery commission. The Germany boss of Lieferando, Katharina Hauke, defended the amount of almost a third of the income in the Tagesspiegel interview at the beginning of December: "We can quickly and easily open up large order volumes to restaurateurs and expand their customer base." Some restaurants confirm this. A restaurateur in Berlin-Mitte reports an 80 percent increase in sales compared to the beginning of the lockdown since he started working with delivery services.

In addition, both Wolt and Lieferando are advertising lockdown specials this winter. Existing restaurants at Lieferando currently only pay 75 percent of the usual delivery commission. Restaurateurs who are new to Lieferando can use the platform's services free of charge for the first four weeks. But that also means that anyone who was listed at the beginning of the current lockdown has now been paying the full price for four weeks. Wolt, in turn, is currently lowering the delivery commission by 1.50 euros and - like Lieferando since March - has waived the commission for self-collection orders.

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However, the proof that delivery platforms can operate sustainably has not yet been provided. Despite the high commissions, hardly any provider is profitable; numerous brands such as Deliveroo had to withdraw from the German market in recent years because the business was not worth it.

Dehoga does not recommend working with delivery services

The German Hotel and Restaurant Association (Dehoga) does not think much of such lock offers from delivery services. "We are aware of the problems," said Dehoga CEO Ingrid Hartges to Tagesspiegel. “Both the opaque cost structure and the interference with the restaurants' own pricing policy.” In January, her association will start a survey to quantify how big this problem really is and to shed light on the opaque pricing.

"It is clear that the delivery service only pays off for very few restaurants," says Hartges. “30 percent - the restaurateur cannot exist there. That is not how it works!". She recommends every restaurateur to use other sales channels if possible. "Anyone who has a business in a good location and with regular customers should always try to offer the pick-up service themselves," she says. "It's definitely worth it more because there are no commissions and direct contact with the guests is maintained."

She also finds it worrying that the delivery services also keep all the data. In fact, the delivery service Deliveroo, for example, has already used it and set up its own large kitchens in London, in which the most popular dishes were prepared in containers and then delivered. Amazon has also developed algorithms that use such data to calculate which dishes customers are hungry for and when. "In other words, with the help of the data, the restaurants could even be deprived of their entire added value," Hartges fears. There are also such "ghost restaurants" in Berlin, and some dishes are also listed on Wolt for which you search in vain for a restaurant that belongs to them.

It also works without delivery services

Jonathan Margulies has therefore chosen a different path. He opened his restaurant "Magic John’s" in the first lockdown and delivers his New York-style pizza himself - mainly because of the contact with customers. “With the delivery services, the customer clicks on their website, he gets the food from them: We have no influence whatsoever on how the interaction with the customer is and how the food is really received,” explains Margulies. Financially, too, it would not be worthwhile for him to work with Wolt or Lieferando. “A 30 percent fee is just a lot,” he says. "If you offer dishes with a lot of meat or a lot of personnel expenditure, that actually cannot be done at all."

But he also observes: If a restaurant does not have a strong USP, it is hardly possible for customers to be found on the Internet. But a restaurant cannot adjust the prices so much that working with Wolt or Lieferando is worthwhile. “The customer immediately notices when a dish suddenly becomes 30 percent more expensive.” Just as the restaurateur immediately notices when 30 percent of sales suddenly no longer belong to him.

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