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The Negative Effects of Grubhub on Small Business

An actual snapshot of Celebrity Delly's sales with Grubhub for one month

Normally we would never give anyone this much insight into our business. Partnerships are what make businesses thrive. We rely on other third-party networks to put our name out there as they are larger than us and have more of a reach nationwide and in our local communities. But there is a fine line between a partnership and clear extortion.

Grubhub used to be a helpful partner when their commission rates hovered around 12-15%. It is still a hard pill to swallow as restaurants notoriously have razor thin profit margins. Typically 30% of the cost of an item can represent the restaurant's profit, but out of that 30% comes rent (about 10%), utilities, repairs, maintenance, etc...After all is said and done if an establishment is watching their margins, we can expect a 5% return on our food. It's a tight business.

But once Grubhub bought up Seamless and Yelp, they increased their commissions to 30%. This doesn't include the maze of "ranking systems" put in place which require businesses to run a promotion so you can get more orders by being noticed on a higher level. These higher rankings (which the small business must pay to be in) are reserved for larger corporate chains who can afford to write off these commission rates as marketing fees. At that rate, a small business restaurant could lose everything if they are not careful. As you can see in the above screenshot of our sales with Grubhub, the advertising power these companies have has greatly benefited our overall sales numbers. But when the overall sales of $21, 579.53 could be going directly to us, in the end, we only see $13,141.19 in actual money. This doesn't include taxes and delivery fees. When Grubhub has the marketing power it does, this amounts to an absolute extortion of the restaurant industry.

See, when you order from Grubhub or UberEats, these companies provide their own delivery drivers typically. These are drivers who hold no loyalty to the small business you are ordering from, rather, they are more interested in getting as much money as they can into their own pockets. When you choose to go through these third-party sites, drivers typically pick up other orders along the way while they're delivering your food...sometimes from other online third-party platforms. But when you order through Celebrity Delly, we select our own drivers who are dedicated solely to Celebrity Delly orders. So when you place your order through Celebrity Delly, we do not take ANY delivery fees for ourselves. That delivery fee goes directly to your driver. We are about putting more money in our drivers' pockets rather than in ours. It's a difficult market where we must compete with UberEats and Grubhub to maintain our own drivers, but we believe having dedicated drivers solely for your orders is the best way to do business as it ensures the quality of your order without the occasional pitstop for a driver to pick up an order from another company.

When all is said and done, the final distributed share of our orders from Grubhub, that money STILL is not all ours as we must pay our drivers their delivery fees from that amount. That $8,000 Grubhub takes could go to pay raises for our employees so they can feed their families during this time. It could go to the hiring of new staff members during a time when so many or out of work. Perhaps it could go into repairs to our facility so when we open up we can be ready to see our loyal guests once again. Why else would so many small businesses need to apply for Economic Disaster Relief and be forced into owing the government. These commission rates put small businesses in a difficult position.

Listen, every business has to make money somehow, it is the nature of capitalism. But 30% isn't a partnership during a time when carry-out and delivery is the sole means of a business's income. If we can be sure of anything after all of this coming to light, it is that your money isn't staying in the small business's hands. The sad truth is when someone orders from these sites, it is NOT supporting the local business you've loved for 45 years, it goes to more commercials designed to woo you, the unsuspecting customer into buying into their seemingly "altruistic" message of "buy through us to support your local business". So the next time you order from Grubhub or any third-party delivery site, remember it can be a double edged sword for that business. Try looking up to see if they have their own online ordering platform or call in. For more info on how to protect your hard earned money from going to the corporate fat cats, see our previous article about it all here.

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