Here’s how much it costs restaurants when you order through delivery apps (Hint: It can be more than they earn)
With restaurants banned from serving dine-in customers amid the coronavirus pandemic, many have turned to apps like Grubhub to help get business, but it comes at a huge price.
With restaurants banned from serving dine-in customers amid the coronavirus pandemic, many owners have turned to food delivery apps — like Grubhub, Postmates and Uber Eats — to facilitate their orders.
Many of those apps have seen a “definite uptick” in business over the last six weeks — but it’s apparently coming at a big cost to the restaurateurs.
In a Facebook post published this past week, Giuseppe Badalamenti, a restaurant consultant and the owner of Chicago Pizza Boss, shared a snapshot of a March statement from Grubhub, which detailed just how little restaurants profit from online orders through the app.
The unidentified restaurant, which is a client of Badalamenti, accepted $1,042.63 in 46 pre-paid orders (42 delivery and four pickup) last month. But it earned only $376.54, according to his post, which has been shared by more than 2,500 people.
“Stop believing you are supporting your community by ordering from a 3rd party delivery company,” Badalamenti wrote. “Out of almost $1,100 of orders. Your Restaurant you are trying to support receives not even $400. It is almost enough to pay for the food.”
Grubhub, which is headquartered in the Loop, charges business owners several hefty fees for its services, including a 20% marketing commission, 10% delivery commission and a 3.05% processing fee, according to its website.
In Badalamenti’s example, the restaurant was also charged $231 worth of “promotions,” though it’s unclear if the promotion was specifically for the eatery.
In April, Grubhub offered its customers a $10 discount on orders of $30 or more. The app covered up to $250 worth of the promotion. After that, restaurants were responsible for funding the promotion, though they had the option to opt out at any time.
“We committed to funding $30 million to restaurants that chose to participate in the optional promotion of $10 off orders of $30 or more, which had the potential to stimulate $100M in food sales for restaurants,” a Grubhub spokesperson said.
The statement also shows $131.19 worth of adjustments, which Badalamenti said are refunds or credits given to unsatisfied customers who complained their delivery wasn’t quick enough or the food was unsatisfactory.
“There’s three thirds of a restaurant service — you capture the order, you make the food and then you deliver great service at the end. Restaurants are missing out on that third [part],” Badalamenti told the Sun-Times in a phone interview. “The food sits for 20 minutes before anybody shows up, the food doesn’t get put in bags. Yeah, Grubhub is going to say, ‘Yeah, we’re training everybody, everybody knows best practices.’ But that’s not the reality on the ground.
“The reality on the ground is that orders are late, orders are cold, people are dissatisfied, and the person that pays for it is the restauranteur who had no part in that.”
But Grubhub said that’s not necessarily true. Adjustments can also reflect special instructions from the diner or be used when a restaurant is out of a selected menu item.
“Restaurant owners select the services they want and only pay a commission to Grubhub when we help generate sales,” a Grubhub spokesperson said. “Grubhub is happy to work with restaurant partners to help them manage costs and grow their business.”
Badalamenti’s post has since gone viral with many commenters stunned at how Grubhub is shortchanging restaurant owners.
“Damn it’s that bad,” one man commented on the post.
“I have used GrubHub and DoorDash in the past but never again,” another person wrote. “I had no idea how much the restaurant gets shorted. When you know better you do better.”
“Create a movement of other restaurants sharing their statements,” one commenter suggested. “This could be a powerful move.”
Badalamenti, who advises his clients not to use third-party delivery apps, said independent restaurants feel pressured to sign up for these delivery apps, especially because customers like them and competitors use them. It also does offer convenience if restaurants don’t have an in-house delivery system.
“The consumer is using these apps under the assumption that everybody is getting a fair shake, but that’s not what’s going on,” he said.