The Merits and Trials of Faustian Deals between Restaurants and Sending Giants

A pandemic that forces people to stay home looks like a godsend gift to the food delivery industry. But it may fundamentally alter the power balance between restaurants and food delivery platforms in Malaysia, and even Southeast Asia.

Before Covid-19—when dine-in was the main income source for restaurateurs—commission rates were viewed as a “marketing fee” to boost customer loyalty. Today, with thinning margins and delivery becoming the only source of revenue, the commission rates are beginning to hurt businesses.

F&B businesses are now exploring alternative options that take a smaller chunk out of their revenue.

Option 1: Take orders over WhatsApp/other chat apps and deliver yourself.

Option 2: Get on Beep Delivery—a food delivery platform that was launched within 48 hours of the MCO announcement by cloud solutions service provider StoreHub. It charges a 2% fee for each transaction.

But a clean break from full-fledged food delivery platforms would mean restaurants handle their own marketing and customer service issues.

Steep price to pay

Steep price to pay

Splitting a third of one’s depleting revenue with food delivery partners isn’t easy. Especially for smaller or newer restaurateurs. Superfine.kl, a boutique cafe located in the suburban town of Petaling Jaya, for instance, has decided against working with foodpanda and GrabFood. The 30% commission rate is just too high for the cafe, which opened only in January.

There are also those that chose to try things out on their own to lessen their reliance on major food delivery platforms.

This is not a Malaysia-only phenomenon. In Singapore, too, F&B merchants have been lamenting that high commission rates are hurting their decreased revenue. In the US, Uber Eats is facing a backlash from merchants for refusing to reduce their 25% commission rate at this time. The situation is not too different in China either.

In an interview with local business radio station BFM, Grab Malaysia’s country head Sean Goh claimed most of the commission usually goes to the riders.

Currently, restaurateurs are faced with a huge financial dilemma and are struggling to keep their lights on. Many are also starting to consider a different business model that would have a better chance to survive—or even thrive—in a post-Covid world.

Shifting gears

Ride-hailing demand has shrunk significantly since the MCO period started on 16 March. As a result, Grab Malaysia has introduced car-based delivery service to accommodate the surge in food delivery orders and to ensure the livelihood of its driver-partners.

Bari Hsiung, an F&B consultant, ran three Kedai Kopi Malaya outlets under The Awesome Food Co. across Kuala Lumpur and Selangor until recently. About 35-40% of Kedai Kopi Malaya’s daily orders come from WhatsApp, while GrabFood accounts for the rest. Hsiung left the company on 16 April to start an online cooking show and a lunch catering business.

Before leaving, his plan was to discontinue GrabFood’s service when orders from WhatsApp exceed that of GrabFood. For WhatsApp orders within a 3km radius, Hsiung delivered himself. For orders beyond the radius, third-party delivery partners such as Lalamove and GrabExpress have been doing the job, and the charges are borne by consumers.