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Sharing Economy

Singapore restaurants rail against 30% delivery app fees

Platforms like Grab and Foodpanda take big share of revenue during dining ban

GrabFood and similar delivery platforms have provided a lifeline for Singapore's restaurants amid coronavirus restrictions, but at a steep cost.   © Reuters

SINGAPORE -- With Singapore's restaurants relying more than ever on delivery platforms due to coronavirus-related restrictions, concerns are growing that the astronomical fees charged by these apps could drive many eateries out of business instead of saving them.

"You call yourselves our 'partners,' but we truly wonder if you know what that means,"  a coalition of over 600 restaurants has said in an open letter. Delivery platforms usually charge around 30% in commission for each order, which can wipe out profits for restaurants already operating on razor-thin margins.

The restaurant coalition is rebelling against these fees, and have asked Prime Minister Lee Hsien Loong for help in negotiating lower rates.

Many restaurants have turned to delivery platforms to keep their lights on amid the coronavirus outbreak. Of the more than 10,000 restaurants offering delivery through GrabFood, a leading platform run by ride-hailing app Grab, about 1,500 signed up since January as the outbreak began to spread.

The trend accelerated after Singapore banned dine-in service at restaurants in April as part of efforts to combat the virus. Since then, orders on food delivery apps have increased about 20%, making the platforms among the few businesses experiencing a surge in demand amid the outbreak. Grab and rival Foodpanda have expanded their fleet of drivers to keep up.

But as delivery orders increase, so has resentment over the fees. Deliveries made up a small percentage of restaurant revenue before the coronavirus, and many businesses tolerated the fees in order to expand their customer base. But the dine-in ban means these fees carve a much bigger slice of revenue from the restaurants.

"Almost 90% of restaurants are at risk of shutting down," one restaurateur said.

Delivery platforms acknowledge the restaurant industry's plight and have offered perks to ease the pain. Grab is selling ingredients and equipment to restaurants at wholesale prices, and the company offers a tool that helps them track their finances. Foodpanda is waiving fees for food stalls during their first month on the platform.

But a universal fee cut likely would deal a heavy blow to the drivers working for these platforms. The platforms hope to mollify the restaurants by promoting the benefits of the extra services they provide.

Tensions between restaurants and established delivery apps also have created an opening for up-and-coming platforms. Hong Kong-based Lalamove charges a commission of just over 10% for food delivery, and has expanded the number of drivers in Singapore by 11,000 in April alone to over 30,000.

Delivery app fees have become a hot topic in other markets as well. San Francisco capped commissions for these platforms at 15% in April for the duration of the outbreak, and New York has followed suit. It remains to be seen whether Southeast Asia can resolve the issue without regulatory intervention.

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