More like INconvenience fees, amirite?
The diners are finally subsidizing convenience
Maybe you can put a price on innovation.
Last week, a report from Reforming Retail said Clover, a point of sale provider for restaurants, was adding a $1.50 consumer charge to online orders over $30. The fee is paid by the diner, bypasses the restaurant, and goes directly to the tech company.
When I asked Clover about the charge that was reportedly set to go into effect earlier this month, a company rep told me it actually wasn’t:
“When Clover Online Ordering was introduced in April 2020, we waived all order fees because of the pandemic. This fee is still being waived for all orders through Clover Online Ordering, and at this time we do not have any plans to introduce this fee,” the a rep for the company said [emphasis mine].
This structure, noting that the fee exists, acknowledges the cost of the service, even if Clover isn’t charging the diner.
This news surfaced shortly after a different point of sale company, Toast, added its own customer fee: $1 to online orders over $10. In both instances — Clover’s almost-introduced charge and Toast’s confirmed charge, a restaurant can’t turn off the fee. The restaurant brings the customer to the table, but the tech company profits from use of its customer-facing software.
Here’s a hard truth about this new phase of restaurant convenience and on-demand everything: we can’t have it all of the ways.
It is not fun to pay more money for anything; it is even less fun to pay more for something you’ve previously gotten for free. But market realities have forced tech companies to put a price, an actual dollar amount, on their convenience.
When Toast finally started talking about its 99-cent order fee, it framed the charge as necessary to fund continued innovation in restaurant technology. I found this to be dubious logic — isn’t it Toast’s job, as a top restaurant technology provider, to fund continued innovation in restaurant technology? Why should I, or anyone, have to help a company make more money off of my lunchtime salad or (more realistically) burrito? Plenty of people agreed.
The answer is complicated. That’s because Toast is still losing money — $252 million in 2022. But it’s possible this charge could move the needle; the company is forecasting potential 2023 profitability by one adjusted measure, which would be a first.
Mass coverage of Toast’s new fee — which began in the Boston Globe, Toast, Inc’s hometown paper — framed the charge as an extra cost for diners during a time when post-purchase add-ons dubbed “junk fees” by President Biden’s administration have been under scrutiny. Restaurant ordering and delivery fees haven’t been specifically called out by the White House (yet!), but it’s no stretch to say they could end up a target of our leaders’ ire, especially if they keep adding up. It’s also not a stretch to wonder if Clover rolled back its own diner fee after seeing what happened when Toast did it first.
Is this also a power move?
Toast’s fee — and Clover’s, I guess, if it ever decides to levy it — give the companies an entirely new tranche of customers in restaurant diners. But the newest generation of point of sale providers have been actively crafting a consumer brand for some time, even if they didn’t yet count diners as their own customers. I covered this last September when I posited that Toast was angling itself to be some sort of restaurant-tech monolith with strong consumer branding across its products.
Fittingly, a recent post by a contributor on a hospitality investment firm’s website invites readers to “imagine a world where restaurants can be entirely powered through a single company.” It continues:
Imagine: Food procurement through Toast supply chain analytics, delivered to restaurants on Toast trucks, staff labor and food costs managed by Toast analytics, served to guests exactly in their preferred way through Toast guest analytics.
Pressure on restaurant tech companies like Toast to make money and grow are certainly pushing the behemoths in this direction. DoorDash, which also generally loses money every quarter, is rumored to be creating a restaurant point of sale system, presumably to take over more of its current customers’ tech stacks. By its own admission during the first quarter earnings cycle, Toast is working to pull more money out of its current restaurant partners in the name of growth.
The new fees are a pretty loud signal that even the biggest restaurant technology companies need to pull cash from both sides of the transactions it supports — from restaurant and diner — in order to succeed. That means all of us are on the hook to fund a future of convenience and innovation.