COVID-19: Montreal wants to help restaurants compete with food delivery giants

Click to play video: 'Montreal serves up $4.5 million in relief for restaurants and bars'
Montreal serves up $4.5 million in relief for restaurants and bars
WATCH: Montreal's mayor dished out some much-needed relief on Friday for a sector of Montreal's economy that is still largely shut down due to the pandemic. Mayor Valérie Plante promised millions of dollars’ worth of subsidies to Montreal's restaurant industry to help owners survive the on-going shutdown. Global’s Tim Sargeant reports. – May 7, 2021

Montreal says it wants to help build a home-grown competitor to food delivery giants like Uber Eats, SkipTheDishes and DoorDash to support struggling restaurants during the COVID-19 pandemic.

On Friday, Luc Rabouin, mayor of the city’s Plateau borough, told reporters Montreal will provide $500,000 in funding to help establish a local non-profit or co-operative that can compete with large food delivery services. The city, which has launched a request for proposals, hopes to work with existing local startups, he added.

Rabouin said Montreal’s intention is to help struggling restaurants that are dealing with the high cost of delivery services, which compose up to 30 per cent of a customer’s bill. Quebec introduced a temporary 20 per cent cap on delivery fees in March that applies in regions where indoor dining is banned.

“Some of these (delivery) businesses ask up to 30 per cent of the total bill to make the delivery, which deprives restaurateurs of the majority of their profits,” he told reporters. “Even though the government of Quebec has intervened to limit these exorbitant fees during the pandemic … they will remain too high after the pandemic.”

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Montreal isn’t alone in its concern about the fees that restaurants must pay to third-party delivery apps. In December, British Columbia and Ontario temporarily capped delivery fees at 20 per cent of a customer’s total order, but like Quebec, Ontario’s cap only applies where indoor dining is banned.

Francois Meunier, vice-president of public affairs and government relations at the Association des restaurateurs du Québec, an industry group, said he welcomes the city’s initiative. Restaurants, he said, expect to start paying $30 for every $100 of food they sell on third-party delivery apps once the pandemic-related restrictions are lifted.

Meunier said his organization is already working with local alternatives to third-party delivery apps that charge fixed fees _ which he said is better for restaurants than fees that are based on a percentage of sales.

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Sylvain Charlebois, director of the Agri-Food Analytics Lab at Dalhousie University, said there have been initiatives to create lower-cost competitors to third-party delivery apps in other Canadian cities, though he said Montreal’s is the first one he’s heard of that is government-led.

While restaurants have to pay high fees to delivery apps, they can also raise their prices, he added.

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“I’m of the mind that Uber Eats and other apps like Uber Eats allow restaurateurs to have access to a market which they otherwise wouldn’t have access to,” Charlebois said. “They do generate more revenues for restaurateurs.”

While there may be space in the market for apps that cater to customers looking for independent restaurants, competition is already stiff, he said.

“You’re up against some companies that do know what they’re doing online,” Charlebois said.

Mischa Young, a professor at the Université de l’Ontario français who studies urban economics, said the use of third-party delivery apps has grown during the pandemic and Canadians are unlikely to stop using them afterwards.

He said governments should help restaurants “adapt to this new reality” by supporting non-profit apps.

“It has to be led by restaurants for them to have confidence in it, for them to jump on board,” Young said. “We don’t need another Uber Eats out there, we need something that’s restaurant-led with government support.”

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While capping delivery fees may benefit restaurants in the short term, when fees rise again, restaurants may have little choice but to stay on apps because that’s where their customers are, Young said.

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Roberto Casoli, co-founder and CEO of CHK PLZ, a Montreal-based startup that develops software for restaurants — including a delivery platform — said he thinks Montreal’s idea is a good one, but it’s “discouraging” that for-profit businesses may not be able to participate.

“This idea really makes a lot of sense, to be building these city-centric ordering platforms,” he said. But Casoli said the city’s investment may not be enough to build a new solution fast enough.

“Competing with Uber Eats, Skip and DoorDash is extremely challenging — $500,000 is a drop in the bucket,” he said.

Casoli’s company charges restaurants $30 a month to use its platform and then lets restaurants decide how much they want to pay for delivery — provided by separate companies — and how much of the delivery cost they want to pass on directly to customers.

The city also announced it will give $4 million in grants to bars and restaurants. Those businesses will be able to apply for up to $25,000 to build patios and make other preparations for summer. Groups of restaurants can make joint applications for up to $50,000.

Montreal Mayor Valérie Plante said she hopes restaurants will be able to open their patios on June 1 if the COVID-19 situation in the city permits.

On Thursday, Quebec Health Minister Christian Dube partially brushed off her request to open restaurants by the beginning of next month. He implied the mayor’s idea was influenced by her desire to glad-hand with voters ahead of November’s municipal election, adding that city politicians should “remain calm.”

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Plante told reporters Friday she had been in touch with Dube and while she understands his concerns, she said restaurants need predictability to hire staff and buy supplies.

Opening patios can be part of a “progressive” reopening plan for bars and restaurants, she said.

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