Grubhub Fees Eating Into Restaurant Profits, NYC Councilman Says

New York City Council Member Mark Gjonaj says the food delivery app Grubhub is hurting restaurant profits by charging fees that are too high, The New York Times reported on Monday (Sept. 30).

Grubhub, the parent company of Seamless, maintains that the fees charged to restaurants — 15 to 30 percent — are justified because app customers end up becoming dine-in patrons.

Restaurant owners grumbled about the fees at a June meeting of the New York City Council’s small business committee. They said app-based delivery services don’t bring more customers to their dining rooms but actually lure people away.

“I would love for Grubhub to do the right thing and do more,” Gjonaj, chairman of the small business committee, told the NYT. “If they don’t, we’re going to be looking at serious legislation as we move forward that will make this a much more fair playing field.”

Grubhub spokeswoman Katie Norris told the news outlet the app delivers more business to restaurants, attracting people who would have cooked instead of ordering out. 

“The incremental sales and traffic with higher average checks more than offset commission rates,” she said.

A federal investigation is being launched in New York by Sen. Chuck Schumer to address restaurant complaints that Grubhub levies fees when phone calls don’t become orders. Most customers use the app for ordering, but Grubhub also lets people place orders by phone.

Gjonaj said the small business committee is looking into capping the fees food delivery apps can charge. 

The volume of orders placed via mobile apps increased 130 percent between 2016 and 2018, representing approximately 60 percent of all digital food orders, according to the latest Mobile Order-Ahead Tracker. Industry experts have predicted that the mobile order-ahead market will reach $38 billion by next year.

While large chains are developing their own in-house apps to capture revenue, regional chains and independent restaurants can partner with third-party platforms, as they often do not have the resources to support their own.