- The sudden 5-day lockdown in Perth has thrown local F&B outlets back to takeaway
- Using delivery services (Uber Eats, MenuLog and Deliveroo) eats into their profitability
- For their sakes, let's hope the lockdown is short and swift
The inevitable has happened. On January 31st 2020, the first case of community COVID-19 transmission over the past 10 months was announced in WA, and Premier Mark McGowan responded with the full force of the State Government. We are now in at least 5 days of lockdown.
As in 2020 when COVID-19 conditions were first being imposed on business owners by our state and federal government, our food & beverage retailers are again put in a precarious situation of being stuck between the proverbial rock and a hard place, with only takeaway permitted to be sold during the lockdown.
This means that operationally, food retailers are still remaining open to provide an essential service to their loyal clients, yet are forced to struggle along with a token takeaway-only turnover that isn’t enough to do anything more than keep their creditors at bay. With customers stuck at home the retailers are forced to rely on food delivery providers such as Menulog, Deliveroo and Uber Eats to create that link between the shop front and the dinner table.
Lower margins, less business
The margins charged by the delivery services can be quite problematic for F & B retailers, with 30% commonly being clipped from each sale.
So for a $15 burger, the business will pay the food delivery service around $5, meaning the retailer with receive only $10. On a $50 food order, that’s $15 on average being paid out as a service fee. With existing margins already tight in this highly competitive industry, food and beverage retailers can find themselves in the red very quickly.
Some food businesses have tried to go without the service, but as with any other booking services – the hotel industry being a good example – if you’re not using it, you might struggle to be seen in a crowded marketplace.
The question those in the F & B industry need to ask themselves is – is this the right kind of exposure? Are the sales worth it to you or are you further diluting your margins into oblivion?
“When normal dine in and bar operations are allowed, generating full price retail sales, the delivery service is a simple way to generate additional volume, keep staff busy and maintain a presence in the marketplace,” said Burgess Rawson retail management specialist Joe Saraceni.
“A retailer having to rely on delivery services for 100% of their sales, for an extended period of time, is a totally different proposition.”
If 30% is going out the door with each delivery and profit margins are around 10%, it could lead to a death spiral for a number of F & B businesses.
Let’s hope for a short sharp lockdown so we don’t lose more of our favourite restaurants cafés and bars.