Reading the Fine Print: Part 1
This week, we introduced a series on Food Delivery Aggregators and what they mean for your overall business and marketing strategies. Check out the intro for some background before reading further.
Tech is great, and meant to make your life easier, but with every new tool added, you have to be extra vigilant and sure of what you’re signing up for. Let’s start with a brief description of what aggregators are.
So, what are aggregators?
These could come in any form, a web interface, or more popularly, an app. These platforms allow customers to visit an interface operated by someone other than the restaurant you’re ordering from. They give you the option of ordering from a menu or a pre-set selection (in the case of Ubereats) and make payment easy by allowing direct payment through the app. This payment includes the menu price plus an added service fee. The aggregator then coordinates the delivery of the order from the restaurant to the consumer, takes its commission and remits the balance of the bill to the restaurant.
However, bill collections and accounts receivable are not common to the restaurant industry, and this requires a restaurant to shift its corporate culture. Restaurants are paid by their customers on the spot, often in cash – meaning they will be instantly paid for product purchased and services rendered. If a restaurant has used an aggregator, they need to maintain records of the orders that are fulfilled since the fees owing to that restaurant constitute accounts receivable, and payment is not instantaneous.
Ideally, the aggregator pays you what they owe you within the agreed-upon timeframe, but if they do not they may continue to withhold payment unless you proactively employ collections efforts to get what is owed to you as early as possible. Given the boom-and-bust nature of technology platforms, you will want to stay ahead of your collections. If you are trying to get paid by a defaulting partner at the same time as everyone else is knocking on their door looking for the same thing, it might already be too late.
It would be rare for many, if any, of these aggregators to negotiate the standard terms of their contract with you. After all, these platforms are not mere local plays - the creators have regional, national and international aspirations. As a result, they do not want to keep track of individually negotiated and amended contracts with each of (what they hope to be) thousands of participants. And that, for the most part, is fine, as long as you understand what you are signing.
Keeping track of what you sign is important, overall, as a business owner. Take extra care when dealing with third-party aggregators, which can be great, provided they run efficiently and nothing goes awry.
Next week, check back for the final instalment of this series, where we’ll take a deeper look at payment terms and contract termination.
Chad Finkelstein is a franchise lawyer at Dale & Lessmann LLP (www.dalelessmann.com) in Toronto.