- McDonald's is reportedly in talks with Uber Eats to negotiate lower fees for its U.S. restaurant operators that includes a significantly reduced commission rate, according to an internal memo obtained by Bloomberg.
- The memo also states that McDonald's is working to negotiate franchisees' ability to use other delivery partners.
- Following the finalization of the new terms, Uber plans to provide a large contribution to help support national advertising to help McDonald's build up awareness about the service.
These negotiations show that McDonald's may have finally had enough of the high commission fees charged by Uber Eats. In Uber's IPO filing, the company outlined its take rates (adjusted net revenue divided by gross bookings) for food delivery of about 10%. In 2016, Uber Eats' take rate was 4% according to Skift Table.
High delivery fees are one of the many grievances outlined by McDonald's owner/operators, who formed a National Owners Association late last year. With these renegotiation rumors, it seems corporate is listening to their concerns.
Delivery is now a must-have to legitimately compete in the restaurant space, and the service has added to check sizes for McDonald's, but delivery fees can add a significant amount of pressure on an already thin-margined business.
Uber's willingness to bend a little also underscores the company's increasing reliance on its food delivery platform and McDonald's large footprint specifically. As the company outlined in its IPO filing, a significant amount of Uber Eat's business comes from a limited number of restaurant chains. Also, if restaurant businesses are compromised by high take rates, they'll likely be less inclined to use the service. So Uber has a significant amount of skin in the McDonald's game.
If the negotiations are agreed upon, McDonald's franchisees would be able to use other delivery partners, ending the company's exclusive deal with Uber Eats first signed in 2017. Such added flexibility would allow franchisees to shop the marketplace for the best rates in their specific locations. It would also give McDonald's delivery more exposure in the quickly growing space. Customers who prefer the DoorDash app, for example, might not even know McDonald's delivers because the company's service only exists on the Uber Eats app. Having a bigger audience based on customer preference is why Checkers/Rally's opted to partner with five national delivery aggregates, for example.
Uber may not lose out that much, however. Bloomberg also reports that Uber Eats will start contributing to McDonald's U.S. advertising, in large part to raise awareness that delivery exists at the chain — a major hurdle that has restricted delivery's full potential. McDonald's CEO Steve Easterbrook has said there is a correlation between delivery awareness and order frequency and visits. This could be a strong enough draw to keep the partnership going. Whatever happens from the negotiations, however, one thing is clear. McDonald's seems to have more leverage now than it did when the partnership was initially formed.