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Is Grubhub a scam? Should I start using Grubhub or UberEats for take-out orders at my restaurant? These are questions asked daily by restaurant owners looking to add additional revenue or expand into delivery offerings. Unfortunately, the answer to whether or not these app based takeout companies are a scam might seriously surprise you.
Grubhub (& most similar delivery apps) are HORRIBLE for a restaurants’ bottom line. There, we said it. In case you were wondering “why, how bad could it really be?”… I mean it’s a commission of 20-30% right? WRONG. Let’s take a look at some facts, hard numbers, and real user submitted documents outlining their fees, hidden fees, and more fees.
This is an actual screenshot submitted to Chicago Bar Shop from a restaurant that uses Grubhub. This is an actual screenshot that indicates how much the restaurant was actually left with after Grubhub’s commissions, processing fee, delivery commission, and their “promotions.”
In this particular instance, out of $207. 50 in sales- the restaurant was left with…. $86.71. That’s a commission of near 60%? Let that sink in for a minute.
Breaking it down into numbers that make sense… So Grubhub takes a commission of 25% PLUS about 9% for delivery fees, PLUS 3.83% for processing (average high volume credit card processing is around 2.7% now-a-days), PLUS another 21% in “promotions” to drive traffic to the restaurant.
In all actuality, the Grubhub commission shown here is nearly 60%.
So, is it worth it? Is Grubhub a scam? Is it worth it for a restaurant to use UberEats, Grubhub, Postmates, Doordash, Caviar, or any of the other large togo order/on-demand delivery food apps?
Most profitable restaurants operate somewhere between 28-40% food costs. Some profitable restaurants and high end steak houses or seafood places do operate around 50% (higher cost of raw materials, etc.)
There are a lot of questions you need to ask yourself as a restaurant owner when it comes to deciding to use a delivery service like Grubhub.
- Does it make it worthwhile? So if you look at 40-60% off the top of your sales based on the example above, and assuming you are a profitable restaurant with food-costs between 30-50% that’s really a toss up because you might just break even.
- How much of your business is coming from these delivery apps?
- Can you afford to write off this delivery business as a marketing expense? (After all, they are exposing your business to their clientele who may or may not have heard of you or experienced your food.)
- Is the food they are getting from takeout the absolute best first impression you’d want from a marketing expense or campaign? (Some food doesn’t translate or travel well- might they get soggy fried food and a poor taste in their mouth?)
- Are you relying on this as a form of income?
- Is the added order volume putting a strain on your kitchen staff and quality due to the orders coming in only during your peak operating hours?
As an example, based on the numbers above: if your restaurant operates at 35% food costs and gives another 60% to Grubhub as commission… you are left with 5%. So for every $100 you sell, you make $5.
Worth mentioning, not to forget though, these numbers above don’t take into account your operating costs, employees staffing costs, overhead like rent/mortgage, rented equipment like dishwashers and ice machines, taxes, permits, city fees, utilities, or any of the other countless overlooked necessary expenses required to operate a restaurant. So you’d have $5 of every $100 to pay for all of these things if you were relying on take-out as your sole form of restaurant business.
Is Grubhub a scam for restaurants? Or are they just a bundle of deception wrapped up in pretty marketing?