Trouble cooking? GrubHub, Uber Eats get pushback from restaurants on fees

NEW YORK: In a letter to investors before its share price plunged last week, online food delivery service GrubHub Inc cited its profitable ties with small and medium-sized , saying they generate 80per cent of the orders on its platform.

“This is a highly lucrative relationship for both parties,” the letter said.

But some restaurants think otherwise and have begun pushing back against what they see as the relationship’s unfair distribution of profits.

A growing number of small and mid-sized food chains want to reduce ordering and delivery commissions as high as 30per cent charged by the big four third-party platforms – GrubHub, Uber Technologies Inc’s Uber Eats, DoorDash Inc and Postmates Inc, industry sources say.

“They hate the relationship and they are getting raked over the coals,” said Ben Gaddis, president of T3, a digital marketing and tech consultant to restaurants such as Pizza Hut and Schlotzsky’s. “The smaller they are, the more it impacts their margins.”

The delivery platforms charge restaurants for having their menus listed on their sites, which customers can use to place orders – similar to the way consumers book hotel rooms through third-party online marketplaces like Priceline, Kayak or Expedia . Restaurants pay higher fees if they want to be listed more prominently, or if they use the services to deliver the orders placed through them.

“They’ve become this necessary evil,” said Bareburger Group Chief Executive Euripides Pelekanos, referring to the delivery platforms. The organic burger chain with 46 stores mostly in the northeast hopes to be rid of all third-party platforms by 2020.

In 2017, Bareburger booked US$20 million in revenue from orders placed through third-party platforms, Pelekanos said, but it also spent about US$2.5 million to US$3 million in related fees.

For the restaurant industry, that roughly 15per cent rate “is our whole margin,” Pelekanos said.

Thanks to intense competition among third-party services, restaurants with just 25 to 50 locations recently have found they have more leverage to negotiate better terms, according to Gaddis, the tech consultant.

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