MONTGOMERY COUNTY, Md. — The Montgomery County Office of Consumer Protection (OCP) took aim at third-party online food delivery services this week by warning customers about the impact of high commission costs on local restaurants.
In a statement released on Tuesday, the OCP said big online food delivery companies typically charge restaurants between 20-40% of each order through their website or app.
"We think and believe that consumers are unaware of these charges that are being imposed on restaurants," OCP Director Eric Friedman said. "It’s really decimating some restaurants that are having a hard enough time making up for the loss of in-dining revenue.”
The impact of the high commission costs has hit restaurants like Trapezaria Kuzina in Rockville.
After first opening the Mediterranean eatery in 2013, owner Billy Kay said that the pandemic forced the restaurant to depend even more on online ordering.
"There's a lot more deliveries and a lot more carryout orders," he said. "You’re transitioning basically to all online. People are scared to leave their homes so they’re ordering online, and it forces us to use all the outsourcing.”
Kay said a third-party online food delivery company takes 25-30% from each order at the restaurant. While the hit to revenue hurts, he said the big-name food delivery companies offer some benefits.
"It’s a form of advertising where people that have never been here get to see us," Kay said.
However, with the pandemic now dragging on for months, the constant impact to orders takes a toll.
"We used to all have it just to get the extra business, but we never really counted on it," Kay said. "Now, you have to count on that but you’re taking a lot of your profits away.”
With the spread of coronavirus still bringing challenges to restaurants, Friedman said the impact of high commission rates could end up trickling down to the customer.
"The restaurant may be forced to raise their menu prices in order to accommodate the loss that they are going to suffer when they sign up with these apps," the OCP director said. "It affects all consumers and especially the ones that want to keep their small restaurants in business.”
Moving forward, the Office of Consumer Protection urged customers to call restaurants directly for their orders.
For Billy Kay, the high commission rates were a cost of doing business in an already challenging year.
"I don’t like it but it’s something that we have to do," he said. "There’s no real telling on what’s going to happen.”