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gfweb

Grubhub and restaurant profit margin

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Posted (edited)

A couple of Philadelphia restaurants are suing Grubhub for cheating them on charges. In the article it says that Grubhub charges the restaurant ~15% per order.  From what I've read over the years, that sounds like way

more than half of the restaurant's margin. Am I mistaken?

https://www.philly.com/business/grubhub-class-action-lawsuit-commission-tiffin-philadelphia-20190312.html


Edited by gfweb (log)

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Typically lower than that. I've seen varying numbers over the years, and of course a volume-oriented QSR will have a different scenario than a Michelin-starred destination restaurant, but most of the studies I've seen over the years put retained profit at 5-7% for the industry as a whole.

 

The article says it's the commission rate negotiated for that particular regional chain, so clearly it's  rate they considered viable when they signed the deal. Presumably, their approach to Indian cuisine yields better than average margins.

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"The only questions that really matter are the ones you ask yourself."

Ursula K. Le Guin

 

"Not knowing the scope of your own ignorance is part of the human condition...The first rule of the Dunning-Kruger club is you don’t know you’re a member of the Dunning-Kruger club.” - psychologist David Dunning

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As @chromedomesaid, making 15% profit would be a dream for the majority of restaurants out there. Seems like a case where the restaurants did not read the small prints in the contract.

 

 

 

Teo

 


Teo

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And Grubhub justifies it by saying you're making less per order but by getting orders you otherwise might not have gotten. They are probably correct, but we dropped them after just a few months realizing it could only be of value if you did really high volume.

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Yup. The article pointed out that Grubhub orders accounted for about 15% (that number again!) of the chain's business, which is a pretty healthy chunk and presumably worth it on its own merits. The restaurateur's beef wasn't with the size of the cut, but Grubhub's practice of taking that same cut for calls that aren't orders.

 

As an aside, it's yet another example of the mandatory arbitration clauses that have come under increased scrutiny of late. Gee, signing away one's right to sue turned out to be a bad thing...who knew?

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"The only questions that really matter are the ones you ask yourself."

Ursula K. Le Guin

 

"Not knowing the scope of your own ignorance is part of the human condition...The first rule of the Dunning-Kruger club is you don’t know you’re a member of the Dunning-Kruger club.” - psychologist David Dunning

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Posted (edited)

There's also the issue of presentation in a grubhub meal.  If I'm paying Bulrush prices, I want the whole experience.  If its a plate of wings from Applebee's , that's different.


Edited by gfweb (log)

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In NYC, many restaurants do much more delivery orders (many times through one of the many delivery apps we have: Grubhub, Seamless (owned by Grubhub), Caviar, DoorDash, etc.) than dine-in.  Seamless/Grubhub usually caters to those ordering from restaurants in their immediate neighborhood (and usually the restaurant provides the delivery people).  Others like Caviar have their own fleet of delivery people, and will deliver borough-wide so anyone in Manhattan can order from any restaurant in Manhattan, with delivery fees typically varying based on distance.  Caviar typically is used by higher end restaurants whose primary business is not delivery, and whose higher prices are ok with their customers.  I have also noticed that sometimes (for the same restaurant) the dine-in prices are cheaper than the Caviar delivery prices.  Some restaurants package their food for delivery very well... others, well, not so much...

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2 hours ago, gfweb said:

There's also the issue of presentation in a grubhub meal.  If I'm paying Bulrush prices, I want the whole experience.  If its a plate of wings from Applebee's , that's different.

 

There is zero chance of us doing any carry out. We used them for Squatters Cafe last year.

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