Dubai’s food delivery and rideshare startup Careem is introducing a commission-free model to help its restaurant partners in the United Arab Emirates (UAE) region, CNBC reported on Thursday (Feb. 4).
The move is intended to help local eateries offset some of the economic devastation caused by the COVID-19 pandemic. Careem’s new model removes the percentage-based commission charged by most food aggregator platforms.
Restaurants have been struggling with commissions as high as 30 to 35 percent per order. Eateries have felt the brunt of those fees, especially as delivery volumes escalated amid the pandemic, Mudassir Sheikha, co-founder and CEO of Careem, told CNBC.
“It really helped us survive the pandemic but … what happened was the restaurants really got the short end of the stick,” Sheikha said. “We recognize that the industry is not in a good place, and we are changing the business model completely.”
Uber acquired Careem last year for $3 billion. The platform partners with over 1,000 restaurants and said it will now charge restaurants a fixed monthly fee, which is visible to owners via the app. Merchants can choose from different fee structures according to their needs. The monthly fee is fixed and doesn’t change no matter how many orders are processed.
“We saw many restaurants go under, and even the restaurants that survived are struggling to survive,” Sheikha said, per CNBC.
The new fixed-fee model will reduce the amount of money restaurants pay, he said. “If the order value goes up, it comes down even more,” he said. “This model will help the restaurants keep more of their earnings, improve their offerings, and eventually end up with better service experience for customers.”
Careem’s UAE GM Victor Kiriakos-Saad added, “We’re now offering restaurants zero percent commissions. What Careem provides restaurants; discoverability, delivery, payment and care, doesn’t change whether an order is 50AED or 500AED. With our new model, Careem will accept what’s fair for our services so restaurants ultimately make more.”
In November, Careem laid off 31 percent of its workforce — 536 jobs total — due to the coronavirus pandemic. At the time, the UAE delivery startup had seen an 80 percent decrease in activity.
In July, Careem partnered with Visa to streamline payments and financial management tools in-app for consumers and Careem Captains — the gig workers who comprise its indie workforce.
Careem said in June that despite the pandemic, its “super app” would continue to expand. Its business was down over 80 percent during the height of the pandemic.