Restaurants Sour on Delivery Apps

Restaurateurs say exorbitant fees from third-party apps hurt their future.

June 10, 2020

COLUMBUS, Ohio—During the pandemic, more restaurants turned to delivery apps to stay afloat as stay-at-home edicts shuttered dining rooms. But that “help” came with a high price tag, the New York Times reports. For example, Pierogi Mountain restaurant owner Matt Majesky quickly noticed that its primary delivery service, Grubhub, gobbled up more than 40% per average order.

“You have no choice but to sign up, but there is no negotiating [with delivery app companies],” said Majesky, who had to close his restaurant. “It almost turns into a hostage situation.”

All across the United States, restaurateurs are complaining on social media about the high fees charged by delivery companies, which have positioned themselves as helping restaurants stay in business during the pandemic. While much of the country is slowly reopening and allowing dining rooms to seat guests, delivery will likely remain a big part of a restaurant’s business.

These restaurant owners also allege that DoorDash, Grubhub and Uber Eats deliberately mislead consumers with unauthorized restaurant websites. Freshcraft has sued Grubhub, alleging the service created restaurant websites without consent, then noted on those sites the restaurant was closed or “not taking online orders” when that wasn’t true. “The fact that they misrepresented my brand in these times and pushed Grubhub clients toward other restaurants—it’s deplorable,” said Erik Riggs, Freshcraft owner.

The margins at many restaurants are razor thin, with fixed costs of rent, food and labor taking the largest slice of about 90% of the menu prices. That leaves little leftover for delivery service charges, which can be 20% to 30% per order. Some cities, such as San Francisco, Seattle, New York, Los Angeles and Chicago, have capped the fees apps can charge until after those areas have completely reopened.

Coronavirus Resources

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