'This could be a game changer': Dubai restaurants band together to create new delivery platform

The move comes as F&B outlets fail to convince aggregators to cut their high commission rates of up to 35%

Abu Dhabi, United Arab Emirates, April 24, 2020.    
A delivery man at downtown Abu Dhabi during the first morning of Ramadan.
Section:  NA
For:  Standalone/Stock Images
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As frustration mounts against food-delivery platforms refusing to cut their commission rates during the coronavirus pandemic, several restaurant owners in Dubai are coming together to create their own.

A number of small and medium-sized businesses in the food and beverage sector hope that by cutting out the "middle man", this new food-delivery service will ensure restaurants earn more profit, without having to pay high commissions.

With restaurants in Dubai having spent weeks working on a delivery-only model – though some can now open at a 30 per cent capacity limit – all revenue from dine-in patrons has been wiped out. And if outlets do not have their own drivers, they are liable to pay commissions of about 25 to 35 per cent on every order to delivery aggregators.

While it is standard practice for third-party services to take a cut of restaurant orders, on top of the delivery fee charged, outlets have spent weeks calling on them to revisit their percentages.

Shajeer Parambath, director of Mayfair Restaurants, is one of the restaurateurs involved in the new delivery platform.

In order to accomplish this, participating restaurants will “pool resources”, he says, from initial investments to delivery vehicles.

While the initiative does not yet have a name, or concrete details around how it will operate, Parambath says it is a platform by the restaurants, for the restaurants.

“As restaurant operators, we feel like aggregators do not understand our business model or serve the interest of the restaurant,” he says.

“One good thing about the crisis is that the restaurant community has come together as a fraternity. We started discussing the problems we are facing. This started as a way to find a solution to these problems.”

What will the new online platform do?

The ambitious project is still in its early stages, but owners of more than 100 restaurants are already interested in being part of it.

For now, restaurant owners are in talks with a tech company to create a “seamless and user-friendly platform, with Android and iOS versions and a website”, Parambath says.

The group hopes to roll out the service within three months in a few areas in Dubai, and then expand it to all parts of the emirate in one to two years.

Dubai, United Arab Emirates - Reporter: N/A: A Zomato driver delivers food with a facemask on due to the corona outbreak. Monday, April 13th, 2020. Dubai. Chris Whiteoak / The National
Aggregators such as Zomato are under fire for the commission they are charging restaurants. Chris Whiteoak / The National

“One of the reasons this idea came about is because it gives us a way to optimise deliveries,” says Parambath.

“A lot of restaurants have delivery fleets but, on average, they are only being used at 50 per cent capacity. This technology will help us optimise logistics, allowing drivers to make up to 20 deliveries a day instead of the 10 to 12 they do on an average.”

The commission rate charged for the service will be tailored to each restaurant to ensure that it is equitable for all involved. It will, however, be far less than the 30 to 35 per cent being charged by current delivery companies.

"Our platform is about helping restaurants optimise their resources and staying connected with food lovers. It will be an independent entity with a sustainable business model," says Parambath.

'Creating our own platform will secure our future'

For many restaurant owners this new platform may be a necessity.

“Including their delivery services, aggregators are charging up to 35 per cent of the total cost of the order. On top of this, restaurants are expected to offer discounts. If we don’t give discounts, we don’t get business. A discount has to be at least 20 per cent, making it 55 per cent of the total order. We are not making any profit by being on these platforms,” says Shanavas Mohammed, managing director of the Golden Fork Restaurant chain.

Mohit Bhojwani, co-owner of Spice Klub Dubai and Quattro Ristorante, shares a similar sentiment. "If the restaurant factors in a basic 20 to 25 per cent food cost along with packaging cost incurred, how is there any margin left to make money? Let alone meet other overheads such as rent and salaries."

SpiceKlub, located in Mankhool, one of Mohit Bhojwani's restaurants
SpiceKlub, located in Mankhool, one of Mohit Bhojwani's restaurants

Mohammed says the idea for the new platform also stemmed from a fear that aggregators could further increase associated costs in the future. “If there are any more increases, we will not be able to survive,” he says.

“Creating our own platform might be a huge one-time investment, but it will secure our future. Overheads and logistics can be better managed and synergy of scale can be achieved if this is done right. It could be a game changer for the F&B industry to share a common platform that has been developed by us, while sharing delivery resources to keep costs in check.”

How to support your local restaurants

Placing an order directly is an obvious way to help restaurants right now. But, with an increased emphasis on digital payments over cash, if customers are looking to order online, while being supportive, they can look at using platforms such as Chatfood and Radyes.

Dubai restaurants have been calling food delivery platforms to slash commisson rates since the coronavirus pandemic started affecting their businesses. 
Dubai restaurants have been calling food delivery platforms to slash commisson rates since the coronavirus pandemic started affecting their businesses. 

“They have far more economical and affordable rates for restaurants,” says Mohammed. “They are also supporting restaurants during this difficult time.”

Meanwhile, Bhojwani encourages customers to also “show some love on social media”.

"Order in or, trusting the new norms in place, dine at that place you always frequent with your family. Post a throwback picture and tag them. Your gesture towards your loved restaurant would go a long way. This is an industry that has been hard hit by the pandemic and not all outlets will survive a prolonged period of incurring overheads without a solid revenue stream."