Most business owners, ourselves included, started their business for a variety of reasons: to be independent, to work for ourselves, and of course to make a decent living.
Unfortunately, restaurants today are facing a revolution that makes these goals more and more difficult to achieve. The exploding popularity of ordering and delivery through mobile apps has led to diminishing margins and reduced independence at local restaurants across the country. These apps have become unavoidable middlemen, cutting restaurants off from their customers and extracting high commissions.
Let’s break down the cost to the restaurant of working for one of these apps. Here’s a typical cost structure for a quick service restaurant:
|Labor Cost (including payroll & taxes)||25%|
|Overhead (rent, supplies, utilities, etc.)||15%|
That means that looking just at operating costs, most restaurants only make about a 30% margin. (We’re excluding other standard costs like licenses, insurance, marketing, etc.) When a restaurant pays up to 35% in commission to a 3rd party ordering app, that means they could be losing money on every order.
Now this could work out if it were just a marketing fee for helping to acquire new customers. But the fact is that many restaurants now see over 60% of their total takeout and delivery volume coming in from these apps on an on-going basis, meaning that they are paying these high commissions even on existing and repeat customers. That’s just a bad deal.
Here at the Texthood, we’re proud to provide restaurants the tools they need to level the playing field and fight back. Small and local businesses are an essential component of healthy communities, and when we support them we support our communities as a whole.