When Chris McColl ran the numbers at his Glasgow eatery, NY Slice, the shocking financial impact of using food delivery apps became clear.
Forced to rely on delivery platforms due to a steep decline in footfall and paying commission on each order, the circumstances were neither ideal nor sustainable. Then Covid happened.
Footfall plummeted and delivery orders naturally increased as the population began the long slog through the pandemic. But with every order there was a fee charged, and with every charge his business lost out and a faceless tech giant further solidified its market dominance.
This has been the reality for thousands of eateries and small businesses across the UK over the past year.
Yet as many struggled to stay afloat during one of the most challenging periods in living memory, the ‘Big Three’ food delivery apps, Uber Eats, Deliveroo and JustEat, have all weathered the storm with relative ease.
While decades-old, family-run businesses scrambled to access government grants, Deliveroo embarked on its ill-fated IPO and JustEat plastered our screens with ads featuring Snoop Dogg.
All of this, McColl says, has been made possible by the commission rates the Big Three charge, as well as an unsustainable culture brought about by our insatiable need for easily accessible takeaway options.
A business using Deliveroo and/or Uber Eats, for example, can expect to pay up to 35% commission on an order. With JustEat, which is often acknowledged as being the ‘fairest’ of the Big Three in terms of fees, an eatery will still pay up to 30% commission.
That’s not commission on profit, either. That’s on the overall value of any given delivery order – even without factoring in VAT.
“This means that from the gross profit on a £20 order, when you’re left on average with £11.11, Deliveroo will receive £7 while the eatery itself earns £4.11,” McColl explains.
“It’s very frustrating for many small business owners. When we run our numbers at the end of each week, we realised just how much we are paying out. It’s unsustainable.”
The numbers are quite staggering. Each year, eateries across the country pay out more than £1 billion in commission to the Big Three, and this is an issue that has been festering unseen within the hospitality industry for a while.
In May 2020, restaurant owners across the country called on food delivery apps to reduce their commission rates following the onset of the coronavirus pandemic.
This wasn’t the first time hospitality businesses have questioned the practices of the Big Three. However, during the early days of the pandemic the situation was dire, and McColl says many businesses were forced with a choice – go it alone during an unprecedented period or remain with the heavyweights strangling their profits.
“A lot of companies will have been forced to consider their options during this period. And, in all honesty, the market dominance that Deliveroo, JustEat and Uber Eats have created means that as a small business you have to be on them to survive,” McColl insists.
“That all comes at a cost, as well. And that’s a big cost in the form of profitability and efficiency.”
It was this catch-22 that prompted McColl to launch Gravyy, the Scottish delivery platform which aims to disrupt Britain’s Big Three and create a more equitable culture across the hospitality industry.
“The situation last year sparked a conversation around how we can draw attention to this problem, not just for us specifically, but for the market in general,” he says.
McColl says the platform, which is still in early development, will operate in a similar fashion to your average food delivery apps; providing customers with the benefits of driver tracking or integrated menu options.
The key difference here though is that Gravyy won’t charge commission fees like other food delivery apps and will actively encourage consumers to buy directly from businesses.
Gravyy will facilitate orders for partner firms that prefer the convenience of operating through a centralised platform, but for others it will act as a directory from which eateries can still promote themselves and their products.
Initially, the idea was to create a community-style platform aimed at urging customers to buy directly from small, independent businesses.
Platforms such as these have launched to great success over the past year, with the Edinburgh Lockdown Economy site proving to be a lifeline for many small independent businesses across the Lothian area.
However, McColl knew from his own experiences as a business owner that separating from the Big Three is easier said than done.
“We realised that it’s a big ask for businesses and customers to stop using these platforms, so we thought the best way to support the industry and allow independents to flourish would be to build a fully competing platform that facilitates orders,” he explains.
“So we will act similarly to Deliveroo or any other app, but charge zero commission. For us, it’s a way of unifying restaurants, takeaways and a whole range of businesses under one banner of fairness and equity.”
At its core, McColl says the startup aims to provide an alternative platform to the Big Three which gives greater control to the businesses themselves – one that will boost revenue streams and brand confidence in the wake of the pandemic.
It’s all very idealistic, he concedes. And it won’t be easy prying consumers and eateries away from the apps upon which they so rely. But it’s a worthwhile fight, and one he believes could change the dark direction in which the hospitality industry is travelling.
“We’re looking to disrupt this area of the industry because, if we’re being brutally honest here, hospitality businesses simply cannot continue operating like this.
“I think this is hugely important for the hospitality industry, not just for monetary reasons, but for everyone’s way of life. The pandemic has underlined how important hospitality is to the economy and to society as a whole,” he says.
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The impact of the coronavirus pandemic on the hospitality industry cannot be understated. Data from the latest Market Recovery Monitor survey, conducted by CGA and AlixPartners, highlights the devastating impact of the pandemic on the sector.
Across the country, consumers now have 9.7% fewer restaurants to choose from compared to before the pandemic. Similarly, nearly 20% of ‘casual dining’ venues have also closed during this period.
The hospitality industry is now entering a critical period, which McColl says makes an endeavour such as Gravyy even more important.
With fewer businesses remaining, the scramble to recover from the pandemic will likely offer the Big Three an opportunity to further strengthen their grip on the industry.
“My fear is that the Big Three will end up dominating the industry even more as we move out of the pandemic. We should be using this period as a learning curve in the industry,” he says.
“JustEat, Deliveroo and Uber Eats are now in a three-way fight to outweigh each other, to out-market each other. And that fight is only for their market share, it’s only to take it from each other, not to benefit small independents.”
Encouraging customers away from JustEat, Deliveroo or UberEats to use a platform which puts more money in the pocket of small businesses makes sense.
However, for an independent it does raise the question of why not just go it alone? Why is Gravyy needed?
McColl insists this is – in part – about prompting culture change and building an ecosystem that works for the people who matter, business owners, employees and customers. Not third-party apps whose main responsibility is satisfying shareholders.
“This is all about building an ecosystem organically for hospitality businesses to operate within,” McColl explains. “We’re not looking to just replicate the status-quo here, and we know this won’t change overnight, but we want to show that there’s an alternative to the restrictive system in which thousands currently operate.
“When a customer orders through Gravyy, we want them to interact with the business and see what they’re made of. Their branding, their quirks, everything that makes a small business so appealing.
“And when they place an order, they’ll know that they’re fully supporting that small business, not paying the lion’s share to a faceless behemoth.”
Other than a fixed weekly subscription fee, which is waved if a business generates less than £100 in revenue, inclusion on the platform will be free.
“Operating under this model will allow businesses to reap the rewards of their hard work,” McColl says. “Which after the last year, I imagine many will view as an exciting prospect.”
Spreading the word
Interest has been mounting thus far, he adds, not least among hospitality business owners, and the startup is preparing to launch a crowdfunding campaign via Crowdcube.
McColl is also seeing tentative interest among consumers, which is a promising signal and perhaps highlights the changes to consumer culture that the pandemic has prompted.
Over the past year, consumers have become increasingly supportive of local businesses, with many opting to shop and eat local rather than gifting conglomerates with their custom.
Already, McColl says the limited messaging from Gravyy is one that resonates with consumers.
“These huge businesses can’t hope to push the same type of messaging, in my opinion. With, Gravyy we’re saying support local, support independent and help create this new, more open ecosystem,” he says.