Since it launched in 2013, Louisiana-based Waitr has been a game changer in the regional dining sector, with many restaurants seeing substantial new sales through the company’s delivery platform. Local diners by the thousands, charmed by convenience and loyal to the homegrown concept, routinely order from Waitr. By mid-year, the company had enrolled 785 Baton Rouge restaurant partners.
But the normally rosy mood surrounding Waitr darkened earlier this month when the company announced new contract terms that restaurant partners would have to sign by the end of the month. These include a new fee structure that replaces the current 15% commission with a sliding scale commission ranging from 15% to 25%, depending on sales. Restaurants with monthly sales of $1,000 or less will pay 25% per transaction—a rate Waitr contends is still less than what national vendors Uber Eats and Grubhub charge. Meanwhile, restaurants with $20,000 or more in monthly Waitr sales will pay a 15% commission. The rate will be adjusted each month according to the previous month’s sales.
Restaurants will also have to absorb the credit card transaction fee, adding another 3% to the cost of doing business with Waitr. And restaurant partners will not be allowed to charge a higher price for food ordered through the Waitr app than through any other carryout option. That means restauranteurs who had already increased prices to accommodate a previous commission jump from 3% to 15% must lower prices to be consistent with their regular menu.
“These are very frustrating changes, and I think a lot of restaurants are going to reject the new terms,” says Jim Urdiales, owner of Mestizo Louisiana Mexican Restaurant, which does about $7,000 in monthly sales through Waitr, a rate that will require a 23% commission, not including the credit card processing fee. “I would bet that about half—if not a majority—of restaurants are going to drop out with terms like this. No one has a dish on their menu that has a 15 percent profit margin, much less one with 25 percent.”
Urdiales said he had scheduled a meeting with a Waitr sales rep to discuss the terms, and was also planning to reach out Uber Eats, one of the national third party deliverers now operating in Baton Rouge. UberEats typically charges restaurants a 30 to 35% commission and does not allow them to offset those costs with higher prices to the consumer.
However complicated things have gotten lately for Waitr, it’s unlikely consumers will opt out of third-party restaurant delivery anytime soon. According to the National Restaurant Association’s 2019 State of the Industry Report, one of the biggest sources of new revenue for restaurants is from off-premise sales. Thirty-eight percent of adults in the U.S. and 50% of millennials say they are more likely to opt for restaurant delivery than they were two years ago, according to the report.
“Consumers are going to continue to use the platform,” says Meaux. “If a restaurant drops out, they will find another restaurant they want to order from.”