Careem CEO considers 0% commission food delivery model

Consumers have been disadvantaged as delivery volumes increased through the pandemic, said CEO Careem, a Dubai-based surfing company that provides food delivery services.

“It helped us a lot to get rid of the pandemic but, as I said, what happened was that the restaurants got the short end of the stick,” Mudassir Sheikha said.

High commission rates for each order made it difficult for restaurants to survive, and restaurants did not have good contracts with delivery collectors, he told CNBC’s “Capital Link” on Thursday.

“We recognize that the industry is not in a good place, and we are completely changing the business model,” he said.

Careem, owned by Uber, announced this week that they will charge a monthly fee based on consumers being listed on their app, instead of a percentage – based commission.

In the region, food delivery companies charge up to 30% of the value of each order, Sheikha said. That pushes the restaurant’s profit margins for delivery, which make up “a lot of their business” as a result of the pandemic.

“We’ve seen a lot of restaurants go under, and even the restaurants that survived are struggling to survive,” he said.

Under Careem’s established tax model, the effective commission can come down to 6% or 7%, Sheikha said.

“If the value of the order goes up, it comes down even more,” he said. “This model will help restaurants retain more of their earnings, improve what they offer, and ultimately lead to a better customer service experience.”

Sheikha said this would be a winning solution.

“If we take a long-term view… of this industry, of this industry, there is a lot of room to continue to grow,” he said. “What we could lose in margins, will we make it up in books over time. “

In addition, Careem will benefit from having a robust and competitive food delivery service on its app, he said. “That gives people more reason to come to the Super App and hopefully, do other things on the Super App as well.”