Careem changes food delivery business model, eliminating per-order commissions

Careem changes food delivery business model, eliminating per-order commissions 

By: Abu Dhabi SME Hub

Careem’s disruptive new model replaces traditional high-percentage aggregator commissions with a 0% commission.

On the same day Noon announced a reduced commission offer for restaurants, Careem publicly revealed a new, disruptive food delivery business model it has quietly been working with restaurants to implement since late last year. The new model is set to revolutionize Careem's relationship with over ten thousand restaurants.

Commenting on the new model, Careem CEO and Co-Founder Mudassir Sheikha said, “The traditional commission model in food delivery has become unsustainable for restaurants, especially as deliveries have become a large percentage of their business. At Careem, we have always been passionate about creating opportunities for Captains and small businesses. As such, we are launching a new business model that can help restaurants thrive in this new environment while being sustainable for us. We believe the new model gives restaurants of all sizes fair and transparent pricing to profitably grow while offering customers a more responsible choice. “

Careem’s new fixed monthly charge to restaurant partners replaces the percentage-based commission that food aggregator apps conventionally charge. Restaurants have become increasingly vocal about the negative impact high commissions are having on their business as some apps in the industry now take 30% or even 35% of each order’s value. Careem designed its new model to support businesses of all sizes, especially the smaller UAE-founded and based local eateries. The new bundle model creates a lower barrier to Careem’s Super App and leaves the merchant with more revenue and control.

Careem’s UAE GM Victor Kiriakos-Saad added more saying, “We share Mohamed Alabbar’s concern for restaurants in our region. 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.”

Careem’s new zero-commission partnership model maintains all the benefits of an aggregator while allowing merchants to keep more revenue and scale their business in partnership with the aggregator. The new model replaces the traditional commission structure with three easy parts: First is a fixed monthly fee, second, a fee for the processing of all digital payments and third the actual cost of delivery minus what the customer has already paid, is charged to the restaurant. For small-value orders, restaurants will keep about 5% more of the value, while for larger orders the difference grows dramatically with restaurants keeping over 17% more by switching to Careem’s new model. Depending on the size of the business and the volume of orders the merchant can choose from 4 bundles that suit their business needs. That way the partner pays a fixed monthly fee that doesn’t change with the increment of orders, giving restaurants more control and the ability to do better financial planning.

All of this is made possible by the Super App strategy Careem announced last year. Benefits included in a restaurant’s bundle are discoverability by millions of Careem users, data analytics and insights, marketing support, customized to the merchant’s preferences, the utilisation of Careem’s payment system, customer support through the Careem CARE call centre, and website technology integration.

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