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.
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 food delivery option.
“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 posted his discontent about Waitr’s changes on Facebook, prompting a handful of other restaurateurs and patrons to chime in, including White Star Market vendors Jay Ducote, who owns Gov’t Taco, and Jordan Ramirez, co-owner of Chow Yum Phat and Yuzu. Both expressed hesitation about renewing their contracts.
Waitr founder and CEO Chris Meaux says he’s surprised at the negative reaction among some restaurant partners, since Waitr brought new sales revenue that didn’t exist before the platform. He also says the commission is still lower than national competitors.
“We’ve brought incremental sales to our restaurant partners—new sales they didn’t see before their relationship with us,” says Meaux. “If we’re bringing a company $5,000 in sales, and they’re paying us $1,150, it’s still sales they wouldn’t have, and they’re still paying less than they would with something like Uber Eats or Grubhub.”