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Restaurant Revenues Take a Hit from Online Orders Through Grubhub

LUCAS BRADY WOODS, HOST: Ordering in tonight? You’ve got lots of delivery options, like UberEATs, Doordash, and Postmates. In New York, Grubhub and its subsidiary Seamless are the most popular. But 80% of restaurants reported that orders from Grubhub are either “barely profitable” or result in a business loss. That’s according to a recent survey from the New York Hospitality Alliance, a trade group representing restaurants and bars. Emily Pisacreta reports.

EMILY PISACRETA, BYLINE: Last year, Fallon Flaherty lost a fight. She was the general manager at a new cafe in Chinatown, and her boss wanted to offer delivery services. Flaherty fought against it.

FALLON FLAHERTY: I was afraid that people would just start using the delivery service instead of coming in.

PISACRETA: Then they’d have to pay a 15 to 30% fee to Grubhub on orders from existing customers. And that’s exactly what happened when the cafe started offering delivery through the platform.

FLAHERTY: To me it was like we're basically like paying you to eat our food. You know, it’s like, that doesn’t work.

PISACRETA: So the cafe stopped offering delivery but they still offer pick up orders.

FLAHERTY: People can use the app to order and just pick up in person and Grubhub only takes 11% of those sales, because we wanted to offer the convenience, but without losing so much ourselves.

PISACRETA: Customers have gotten used to the convenience of click-to-order platforms, so hese are the kind of tough decisions restaurants in New York are having to make.

Sophie Nguyen owns a Vietnamese restaurant in the Financial District, and says her first months working with Grubhub were tough. But she also saw some big advantages. She didn’t have to hire her own delivery staff. And some companies offer their employees perks or discounts on orders through the platform. To make it work, she decided to bend Grubhub’s rules.

SOPHIE NGUYEN: So one of my friend actually running a Japanese restaurant told me that you must raise the price on Seamless and Grubhub, and that’s what I did. I raise like 15% of the normal price just to cover half of what I pay Grubhub.

PISACRETA: Sometimes price increases are more like 20%. Which isn’t technically allowed by Grubhub, but Nguyen hasn’t gotten in trouble yet.

But even with all the fees Grubhub charges restaurants, it still lost money last year — nearly 28 million dollars — as it competes with other platforms. The company declined a recorded interview for this story. But here’s founder and CEO Matt Maloney on a recent call to investors:

MATT MALONEY: Everyone is kind of at the same plateau of efficiency, and so, you know, even if we quadruple our delivery scale, it’s not going to have a dramatic or even material change.

PISACRETA: Grubhub isn’t moving away from delivery service, but is hoping to grow through big fast food partnerships and selling touch screen check-out kiosks. Emily Pisacreta, Columbia Radio News.


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