Grubhub's profits come directly out of local restaurateurs' pockets. It's easy to be profitable when you get to set your fees and have platform lock-in.
> It's easy to be profitable when you get to set your fees and have platform lock-in.
That's exactly the VC playbook isn't it? Subsidize the market until you achieve lock-in, then stop the subsidies.
Now the market has nowhere else to go but to pay almost whatever you want. A restaurant can't afford to not be on GrubHub. A diner doesn't even consider non-grubhub options due to habit.
I'm really replying just because I wanted to say: Swizec Teller!
But, yeah, you're right. The problem is, the harder you squeeze a lemon, the less juice is left in it. And in times like this, they're squeezing harder and they've nearly squozen their whole supply.
> The problem is, the harder you squeeze a lemon, the less juice is left in it
An apt definition of a number of the world's current issues, unfortunately. I've never heard it described that way before but I really like how simple the imagery is to grasp, thank you!
This. Most restaurants are lucky to make 10-15% profit on each order and these "services" are charging the restaurant 20%, plus other fees like credit card processing fees etc. My wife runs a restaurant and she has used all the major delivery services, including GrubHub and they take a huge cut. It's not sustainable and it's driving small restaurants out of business. They also don't manage their drivers well at all. We've had drivers show up 2-3 hours late to pick up an order, with angry customers calling asking where their food is the whole nine yards. The bottom line is they can't justify the huge cut they are taking from every order, they are simply not providing a good service. And of course when there are issues customers call the restaurant, there's no way to get ahold of anyone at GrubHub. Any smart restaurant owners are going to bail on these guys and hire their own drivers as quickly as they can.
How is that margin any different than what they would pay to the front of the house? Is the only difference that people don’t order alcohol via GrubHub which is the only way restaurants actually make money?
Yes partly alcohol, but also the front of the house is cheap to run. In the old, old days you only had to pay waiters $2.13/hour and they made the rest off of tips. Now it's like $8/hour in our state (Colorado) but that's still nothing, when you consider how many tables (and entrees per table) a single waiter can take during a busy hour, far less than 20% of each entree for sure. The problem is demographics are changing. Our restaurant 20 years ago did like 10-20% takeout and delivery, the rest was all dine in. Now it's closer to 50-60% takeout and delivery for us, so companies like GrubHub are eating up a lot of restaurant profits. People just don't eat out like they used too. It's not just us, there have been a ton of articles the last couple of years complaining about these companies, this first one says GrubHub takes 30% (yikes):
When I mentioned GrubHub and DoorDash to my wife when I say this article posted, I got a 30 minute rant about how much she hates them. She couldn't even give me a fixed fee she paid from these companies, she started listing off different fees and charges, but she said it was more than 20% per order. These companies have absolutely shot themselves in the foot with how they have treated their customers. What a lot of people really want is to be able to order online or through an app, that's the value these companies provide. For us we already had a WordPress website, so I paid a small fee to install the Woo Restaurant plugin to handle the online menu and ordering. It really wasn't much trouble to setup and it's been way less trouble than any of these middle men, and we get to continue to keep the profits.
This changes the game. Restaurants are forced to price higher; now, customers will have to decide if the higher prices are worth it for the type of food they get and the frequency they get it.
There was a 24hr local place that had things like marinated beef + rice for $30 ubereats total, which is exorbitant compared to my usual $12 meals. But I'd order there 2-4 times a week because of deliciousness, habit and convenience.
> In the old, old days you only had to pay waiters $2.13/hour and they made the rest off of tips.
I guess most of the restaurants I go to in SF don't actually have waiters any more, just runners. None of them are particularly well positioned to take advantage of how we eat food now, either. They are in expensive locations for foot traffic with large dinning rooms and small kitchens when you'd want just the opposite.
That doesnt happen much, theres high competition and theres a race to the bottom to lower the price. For delivery most orders come through grubhub/seamless so a restaurant has the option to make no deliveries or cave in to ubers cut and price the food competitiely on the platform. Lots of small restaurants will probably go belly up. Grubhub sucks the market from under their feet and all the profit from their pocket. It doesnt help that people want free delivery too and the prices low.
Except that local restaurants are already operating on razor thin margins. And when the only surviving restaurants are Perkins and Applebee’s, the delivery services lose a lot of their value proposition.
They have no choice. People used to have a stack of menus form local
deliveries. Nowadays the convenience made ordering food through apps the thing to do. The thin margins that restaurants operate on gets sweeped under grubhub’s and the landlords rugs. This will kill most small food business which rely on deliveries.
