Dining app contracts put some Columbus restaurants in a tight spot

Patrick Cooley
The Columbus Dispatch
Tablets display incoming orders for GrubHub, UberEats and DoorDash at Ritzy's in Clintonville.

In November, Columbus City Council approved a 15% commission cap on third party delivery services like DoorDash and UberEats. Two months later, Andes Bar and Grill owner Jorge Nisthauz hasn’t noticed a difference.

“I never knew that,” he said when a reporter told him about the commission cap.

His Downtown restaurant continues to pay fees exceeding 20%.

On the other side of this equation, Kyle Nelson, general manager for Service Bar in the Short North, said the cap “was a huge help for us and a lot of restaurants around Columbus.” Before the cap, such services were charging as much as 30% of a customer’s bill to deliver their food.

Restaurants negotiate commission fees with third party delivery services when they sign up for them, and the rule approved by council applies only to agreements and contracts finalized after its passage.

Restaurant owners say some companies use the law’s language as a workaround. A DoorDash representative said the company is complying with the law as it is written, which affects new contracts — not existing agreements between the delivery service and restaurants.

Some delivery services altered existing agreements to comply with the rule, but which ones did so depends on who you ask.

Pat and Gracie’s owner Matt Rootes said he uses GrubHub, DoorDash and UberEats, and only DoorDash stuck with its old commission fees. Ritzy’s co-owner Corey Webb said the Clintonville burger restaurant also uses those three services, and all of their commission fees stayed the same.

Corey Webb prepares a customer's order at Ritzy's in Clintonville. Like many other restaurants, Ritzy's uses online ordering services such as DoorDash, UberEats and GrubHub. Some of these third party delivery services are using a loophole in a cap city council enacted to charge a higher fee.
A DoorDash sign at Ritzy's in Clintonville.

A GrubHub spokesman said the company does not have long-term contracts with restaurants.

“Any restaurant can end their agreement at any time,” the spokesman said in an email.

A representative of UberEats did not respond to messages seeking comment.

Restaurateurs largely consider the delivery companies a necessary cost of doing business. They provide a crucial service during the coronavirus pandemic, a service restaurants in dire straits are willing to pay dearly for, even as their profit margins disappear.

“We’re grateful that our guests are able to enjoy (our meals) through the convenience of those companies. I just wish it was a little more economical,” said Carla Epler, COO of Schmidt’s Sausage Haus in German Village.

DoorDash and UberEats charge Lexi’s on Third a 22% commission, owner Dan Georges said.

Georges estimates his Downtown deli and sandwich shop could save $1,500 a month — during a time when he’s lost nearly two-thirds of his customers — if those companies charged only 15%.

“That's huge,” he said.

The restaurateur said he called and left messages with both of the services to talk about reducing those fees, but had not heard back from either of them as of Tuesday morning.

Lavash Cafe co-owner Jamal Latif said his Clintonville restaurant is effectively at the mercy of third party companies. Prior to the pandemic, around 20% of the Clintonville cafe’s orders came from third party services. Now it’s between 45% and 50%, Latif said.

“They have all the leverage after you sign up, especially these days,” he said.

The fees were less of a problem when delivery accounted for a smaller percentage of the cafe’s business, Latif said. 

Lavash’s current situation “is not ideal, but we don’t really have any alternative if we want to stay open,” he said.

Columbus City Council wanted to write a rule that would give companies immediate relief, council spokesman David Miller said.

“We were given a legal opinion that superseding the contracts would be more difficult,” he said. “We wanted to make it an easier, more straightforward process for restaurant owners.”

Contracts between restaurants and third party services are fluid, and Miller recommended that restaurants consult their lawyers about renegotiation.

Some companies are modifying existing contracts, he said, singling out UberEats.

Matt Crumpton, a Columbus small business attorney and restaurant owner, applauded the city council for addressing the issue, but wishes the council’s public statements about the commission cap were more thorough.

“There was not a single mention that it only applies to new contracts,” he said.

Crumpton said owners likely are reluctant to terminate contracts and start over. If a restaurant ends a contract with DoorDash or GrubHub, “they don’t have to accept you back,” he said.

Third party companies say their fees are necessary to cover expenses. A recent blog post on the DoorDash website said the company needs to pay drivers, buy insurance, conduct background checks, pay credit card costs and provide customer support.

The blog post emphasizes the advertising and marketing support the company provides that help restaurants reach new customers, and stresses that in-house delivery services are prohibitively expensive for most restaurants without DoorDash or other third party services.

A company survey found that 75% of restaurants reported reaching new customers thanks to DoorDash, and 65% increased their profits by using the delivery service.

A DoorDash representative said the company might have to pass costs directly to customers if forced to lower its commission.

However, several restaurant owners said they already charge additional fees to offset third party commissions.

Webb said his burger restaurant tacks on a small fee to third party orders so the eatery can make a profit.

“It's not the full percentage, but it’s enough to make up for it a little,” he said.

Restaurant owners and their advocates said customers eager to keep their favorite eateries in business should order carryout directly from the establishment without going through a third party.

That lets an eatery “keep as much of the money as possible during these tough times,” Latif said.