Small restaurants are pushing back against delivery apps such as GrubHub (NYSE: GRUB) and Uber Eats (NYSE: UBER), pointing to the exorbitant cut the apps take out of every order. Some cities are taking action to protect small businesses by placing caps on how much delivery apps can take per order.
Restauranteurs across the United States are chafing under the burden of having to rely, in some cases, almost entirely on delivery apps such as Uber Eats, GrubHub, DoorDash, and Postmates. With apps taking as much as 30% from each order, and foot traffic nonexistent across much of the country, many family-owned restaurants, and small chains are struggling to make ends meet even with a high volume of deliveries through popular apps.
Pitas and Sticks, a Greek restaurant in Brooklyn, New York, has made headlines recently for owner John Stamos' campaign to bring customers away from delivery apps to support local restaurants. For each order on GrubHub, Stamos leaves a note trying to draw the customer's attention to the plight he and many restaurants across the country face. "Small businesses like us need your support in this time of crisis. Online apps such as GRUBHUB ARE CHARGING US 30% of each order and $9 or more on orders made using phone numbers on their app or website ... please help save the restaurant industry by ordering directly with us," writes Stamos.
Chef Ashish Alfred, the owner of several restaurants in Maryland, has struggled with delivery fees at his businesses as well. "Look up your favorite restaurant, give them a call, see if they will deliver to you, and if they don't deliver and you can't leave the house, then do what you need to do," Alfred told NBC. Marcel Bedoya, the owner of Black & Blue in Pennsylvania, told WFMZ news he initially didn't mind delivery fees because deliveries only accounted for a fraction of his business before the pandemic. Bedoya, like many restaurateurs, really began feeling the pinch when delivery became the majority of his business. Fees initially start at 30%, but Bedoya reported that the cut taken by GrubHub, whom we partnered with for delivery, can get as high as 50% of an order once additional fees pile on.
The razor-thin margins left to restaurants are barely enough to make ends meet, though some restaurants have reported not making any profit with delivery. Many small restaurants are now asking customers to bypass delivery apps and order directly from restaurants instead. The efforts by many like Stamos seem to have caught traction as of late. Stamos reported that many of his customers were unaware of the exorbitant cut taken by GrubHub and were willing to support him. David Singh of Mesa Pizza Company in Santa Barbara, California, launched a similar campaign online and was so successful in his endeavor that he was able to cut his contract with GrubHub with no loss in business, and reported that his situation improved.
Politicians have also caught wind of the situation, and some city governments are taking action to protect small businesses by placing caps on the cut delivery apps can take. The Cincinnati City Council passed a measure that limited the cut for apps such as GrubHub, Uber Eats, and Door Dash to 15%. Similar measures have been enacted in San Francisco, Seattle, and even the nation's capital of Washington, D.C. Los Angeles and Chicago were weighing similar measures.
The potentially exploitive pricing was so severe that a lawsuit was filed in New York. The lawsuit alleged exploitive pricing as well as anti-competitive practices by the companies behind popular delivery apps.