Food truck owner shares how much GrubHub deducted from earnings to encourage people not to use delivery appsBy Mark Pygas
May 4 2020, Updated 6:12 p.m. ET
It's no secret that coronavirus and subsequent lockdowns have been devastating for the restaurant industry. In most states, dine-in establishments have been forced to close their doors, and even after the country begins to reopen, restaurants will have to abide by social distancing rules and keep many tables empty. Food trucks have also faced a significant decline in traffic as people stay home.
As a result, an increasing number of restaurants are now offering delivery through apps like GrubHub and UberEats. But while these have been great tools for keeping many restaurants going during these difficult times, they continue to face criticism for taking large commissions in an industry that already has thin margins.
Giuseppe Badalamenti, the owner of the Chicago Pizza Boss food truck in Westmont, Illinois, recently took to Facebook to share the March GrubHub payment for a restaurant that he's consulting for. The statement shows that the restauranter did just over $1,000 in sales, but only ended up getting $376.54 of that amount.
According to GrubHub's documentation, they charge a 20% commission for marketing on all orders made through the app, in Badalamenti's case, that led to $206.51 being deducted.
Delivery commission sits at another 10%, leading to a $94.99 deduction in this case. This cost does not apply if restaurants use their own drivers.
Processing fees stand at 3.05% and $0.30 per transaction, Badalamenti saw another $38.52 deducted for this.
An additional $231 was deducted for promotions, these can be set by the restauranter and by GrubHub, though restauranters need to opt into app-wide promotions.
GrubHub did recently come under fire for offering a $10 discount on orders of $30 or more, with business owners having to eat the cost if they opted in. To take part in the offer, business owners also had to allow GrubHub to charge them commission on the total cost of the order before the discount. After outrage, GrubHub offered to cover the cost of the discount for the first 25 diners at each restaurant.
On top of those previous costs, a further $131.19 was deducted for "order adjustments," according to the bill. This appears to occur when an item is deducted from an order for some reason, such as a customer complaint.
"Stop believing you are supporting your community by ordering from a 3rd party delivery company," Badalamenti wrote in a caption alongside his post. "Out of almost $1,100 of orders, the restaurant you are trying to support receives not even $400."
In Badalamenti's case, this doesn't appear to have covered the cost of making the food. "It is almost enough to pay for the food," he added.
Badalamenti told the Chicago Tribune that he posted the receipt because he was frustrated. “It was just so outrageous,” he said. “The frustration out there with all these independent operators is unanimous.”
In a statement to the Tribune, GrubHub said: “Restaurant owners select the services they want and only pay a commission to GrubHub when we help generate sales. GrubHub is happy to work with restaurant partners to help them manage costs and grow their business.”
GrubHub explained further that restaurant owners have to opt-in to promotions, the single biggest expense in this case, and that it should be considered as a marketing expense.
Badalamenti's post attracted some 2,000 shares and over 120 comments on Facebook. It was also shared on Twitter by Susie Cagle, a journalist for The Guardian.
In an editorial posted last month, Cagle highlighted how delivery apps are profiting from struggling restaurants.
“These sites live off of restaurants, they need us to survive. But I don’t feel like they’ve been especially supportive of the industry. They’re not proving to be good partners right now,” one restaurant owner told Cagle. “It feels like a very shortsighted decision not to be helpful, and that as soon as business returns to normal, people are going to look to really eliminate these things.”
Another added: “The most successful restaurants run on a margin of about 6%, so the more people order from you, the more you’re losing money. We don’t need to be giving over 30% of our already very small margins.”
Grubhub reports that 10 to 15 times more restaurants than usual are signing up for their app. Cagle explains that while they have temporarily deferred commissions for some restaurants, they are not waiving or reducing them.
“We know these are tough times for independent restaurants because people are not eating out. Our mission here is to help keep their doors open,” Grubhub said.
Unsurprisingly, social media users were shocked to see just how much of their money doesn't make it to the restaurants they purchase from.
"That’s why folks should be calling/ordering direct from restaurants," one user wrote. "I assume everyone knows that but some restaurants are encouraging customers to use [delivery apps]."
Another added: "I get it. My family was in the restaurant business forever. in 2020 there is no excuse why a restaurant does not have an online ordering system on their website. Grubhub/doordash take advantage of the fact that restaurants do not do it. their commissions would go down if they did."
While one user concluded: "This is why I never order delivery anything ever. I don’t have to see stuff like this to know it’s a scam. I’ll drive my happy ass over and pick up my own damn pizza."
Others were quick to point out that restaurants would still be paying some of these costs themselves anyway. "The restaurant is outsourcing their online ordering, cc processing, sales tax administration, advertising/promotions, delivery & refunds to a third party, all these things cost money," one user added.
Whatever your stance on delivery apps, I think we can all agree that we should be picking up the order in person if possible.
An earlier version of this article stated that the receipt was from Badalamenti's food truck, Chicago Pizza Boss. The receipt is from a restaurant that Badalamenti is consulting for.