UberEats Isn’t Killing Restaurants: They’re Doing it to Themselves
The foodservice industry has always been a challenge. Even non-entrepreneurs know that starting a restaurant is unusually hard and risky, and that the majority fail.
There are many reasons for this problem, including:
High competition
Variable cost of inputs
Tremendous economies of scale
Opportunistic landlords
High regulatory burdens
Consumer fickleness
And now, we have another great evil: the home food delivery services — UberEats, Grubhub, Postmates and their ilk. As the COVID-19 crisis forced people to stay at home and avoid sitting in restaurants, these services substantially increased their importance and consumer food market share. Their existence kept many places afloat during an unprecedented disruption.
At the same time, they’ve been pilloried in the press and social media for their “outrageous” fees — 20–30% of each order. As many restaurant owners and chefs have said in viral videos and op-eds, there is insufficient margin in the restaurant business to give 20–30% away in perpetuity. Many places have a net margin of only a few percent, and survive through brisk, higher-margin drink sales. Take that away, and increase…
