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Dinner is served – but not like before

As people are dining out again, food delivery apps need to rethink their model

Belgian Beer Cafe, Dubai Creative Commons/TCS digitalworld
The Belgian Beer Cafe in Dubai. Post-lockdown, dining has to feel special again

During the pandemic, many food and beverage businesses turned – some, for the first time – to delivery services such as Talabat, Uber Eats and Deliveroo to get their products to customers in a quick, reliable and safe manner. 

The food aggregator apps proved vital for cash flow in that period. In the long term, however, there is a question mark over how sustainable they are for both restaurants and themselves. 

Despite the volume of orders doubling or even tripling during the pandemic, delivery companies are yet to be profitable. A business model that is solely reliant on commissions from restaurants is clearly not working. Now, with more and more people dining out again, this is unlikely to change any time soon. 

In a crowded marketplace, there has been a clear focus on driving revenue growth, by undercutting delivery charges and commissions at the expense of profitability. When the power is no longer with the delivery companies, it is hard to see how they can redress this balance. Is an increase in commission really the answer? 

Small restaurants that are struggling to cover existing commissions – generally around 20 percent – already charge an average of 23 percent more than if a diner orders with them directly. The convenience of a seamless door-to-door delivery is worth it for many, but continuing to pass increasing costs on to the consumer rarely ends well, even in the UAE.

Where else to turn? Drivers simply cannot complete more deliveries per hour than they currently do. Indeed, drivers from more than one delivery company in the region went on strike in May over pay and conditions. 

If there is any cloth to be cut, it isn’t here. At present, technology cannot offer further cost savings.

Many seem to be putting their hopes in faceless “dark kitchens”. Essentially a shared workspace for restaurants, they have prompted concerns over quality, as well as accusations that they kill restaurant culture. Are they the answer? 

In a city of people who are constantly on the go, delivery apps will always have their place but it is clear that, in order for them to still be around in the future, they need a rethink. 

For restaurants, now more than ever, it is the time to focus new time and money on making sure that dine-in experiences are the best they’ve ever been.

Naim Maadad is chief executive and founder of Gates Hospitality and a board member of UAE Restaurants Group

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