Israelis Fall in Love With Takeout Apps, but Restaurants Not So Much

Wolt came to Israel at the end of 2018 and has set off a dining revolution that restaurateurs can’t afford to resist

A Wolt courier, December 12, 2018.
Courtesy of Wolt

Israelis are quickly learning to love takeout, but restaurant and café owners aren’t quite sure they feel the quite the same way.

Since Finland-based Wolt entered the Israeli market at the end of last year with its takeout app, Israelis no longer have to wait 90 minutes for delivery of lukewarm food and place orders one restaurant at a time. Wolt promises 30-minute deliveries, and from a long list of restaurants.

In June, Wolt’s general manager in Israel, Imri Galai, revealed that the company offered takeout from about 200 restaurants, up from 30 when it began, and has about 1,000 delivery people. And that’s only in Tel Aviv, where the service was launched. Plans are to expand to neighboring towns like Ramat Gan and eventually go nationwide.

But if customers are happy, the costs are steep for the restaurants that use Wolt and similar services, ranging from 20% to 30% of the menu item. After they reach a certain volume of business, Wolt also requires them to buy a dedicated tablet computer at a cost of 1,600 shekels ($454).

“We’re seeing that at least the end-user customers very much like the services,” said Shai Berman, head of the Israel Restaurants and Bars Association.

“On the other hand, as its popularity has grown, so have the fees it collects. They started at about 20% of the value of the order and today they’re collecting 27% to 30%. That’s a big increase in the short period of less than a year.”

A 100-shekel order entails fees of as much as 30 shekels, which is too much for restaurants to bear when the most successful of them have profit margins of between 5% and 10%. Berman said that over the long run a fee of 20% was the most that could be sustainable.

“They collect a 27% fee on each order and my ability not to get hurt in terms of revenues is knowing that I can get more turnover with the same cost structure,” said Harel Blau, who owns the Tel Aviv restaurants Seatara, Hilton Bay and Fishop.

In fact, Blau said his number of takeout orders has risen 1.5-fold to 2.5-fold since he started working with Wolt in the past six months. On the whole he’s satisfied with Wolt.

“I would be happier if the fees were lower so I could make more, but both sides have to make a profit,” Blau said. “They’ve given me access to customers I never had before, provide excellent service, deal with customers and operate professionally – that’s what’s important.”

Avi Avital, who owns the Hamalabiya restaurant chain, said he was happy with Wolt and not only because of the added business.

“I have no fixed costs, I don’t have to deal with logistics and I don’t have customers wasting 20 minutes of my time with a telephone order,” he said. “It’s all fast and efficient – very 2019. We package the order, the delivery person shows up, we give him the bag and off he goes.”

In any case, restaurateurs are increasingly finding they have no choice but to join Wolt or lose business. “If you’re not with them, it’s as if you don’t exist and you lose sales,” said one restaurant owner who asked not to be identified.

He pointed to an unnamed chain that had operated its own takeout service with a big team of delivery people but found its takeout business dropping quickly after Wolt entered the market.

“Customers go into the app and want pasta or sushi, and if you don’t have it, they order from somebody else,” he said. “That chain is now in talks to join Wolt.”

Cecilia Sivan, who manages marketing for 30 restaurants, said most chains without their own delivery system usually rely on more than one app.

Wolt – and another service called Takeway.com, a Dutch company that acquired Israel’s 10bis last year – could set off a dining revolution in Israel. Eating out is big business, with Israelis spending between 19 billion and 21 billion shekels a year, according to the market research firm Czamanski & Ben Shahar.

No one knows how much is for eating at tables and how much is for takeout orders, but the latter is estimated to be between 10% and 15%. By comparison, in the United States takeout comprises about a quarter of all restaurant spending.

If Israel grows to the U.S. level, restaurants will have to make big changes. Menus will have to be more takeout-friendly, more space will have to go to food prep, and work routines will have to change. The new normal could even give rise to the phenomena of “ghost kitchens” devoted solely to takeout orders.