The complaint accuses them of forcing restaurants to guarantee that their prices will be the same whether customers eat there or order over any of the apps, thus absolving the apps from having to compete on price. Grubhub itself is a roll-up of at least 12 separate companies that once competed with one another (including Wallace’s old start-up, FanGo, acquired in 2011).Ī class-action antitrust lawsuit filed last month in federal court in New York alleges that those four big players barely compete at all - keeping commissions high and courier wages low. Four companies with billions in venture-capital backing - Grubhub, DoorDash, Uber Eats and Postmates - dominate the sector if Uber consummates its reported deal to acquire Grubhub, it will be three. All those small players make restaurants extremely competitive - and by extension, not very profitable.ĭelivery apps are the opposite. Fully 68 percent of full-service restaurants are independently operated, and while chains do higher volume, the indies’ sales have been growing faster. A critical reason is that dining has been spared the concentration, consolidation and commodification of labor that are hallmarks of just about every other sector. “And there are no repercussions, because these companies spend more every year on legal fees than they will see in their entire life cycles.”īefore the coronavirus era, restaurants were one of the few American industries that seemed to be getting better for everyone: Offerings in most towns became more ambitious, more consistent, more diverse in variety and ethnicity. “These are, like, salt-of-the-earth people, and they’re being taken advantage of,” says Wallace, the former Grubhub engineer, who was also business school buddies with the DoorDash founders. (I know firsthand my chef husband’s Italian restaurant decided to forgo the apps as soon as it learned about the fees.) Restaurant owners and some diners have started a backlash against the apps, in a struggle that could determine whether they make it out of the pandemic. And chefs and owners have quickly been forced to confront the reality that the delivery apps could kill them. (NurPhoto/Getty Images)īut in the pandemic economy - where some dining rooms that aren’t closed altogether are filling empty seats with mannequins to maintain social distance - takeout is survival. Under Belgium's coronavirus restrictions, dining in restaurants isn't permitted, but takeout and delivery are allowed. Uber Eats delivery couriers wait outside a McDonald's in Ghent, Belgium, on May 14. Chefs thought selling a few delivery orders was like offering a pre-theater menu or selling $1 oysters after 10 p.m.: It brought incremental revenue that didn’t involve filling a seat at prime time. The math was never appetizing: Profit margins for full-service restaurants are typically around 3 to 5 percent, and delivery app fees tend to hover around 30 percent, so the commission charges clearly weighed against the services. Until recently, most restaurants didn’t think too hard about Grubhub and DoorDash. They give you the sensation of cash-flow, but at the expense of your long term future and financial stability.” In many ways, they are like payday lenders for restaurants and drivers. And in the comments on another viral post about delivery apps, Collin Wallace, Grubhub’s former head of innovation, wrote that the platforms are “not actually in the business of delivery. A pizzeria owner with his own fleet of delivery drivers posted a $41,230.47 invoice showing Grubhub taking a 27 percent cut - just for processing orders. A DoorDash driver posted a screen shot of the $4.75 fee the service had offered him to deliver an order 10 miles away. He posted an image of the invoice on Facebook, touching off a rebellion among disgruntled delivery service users and workers. Maureen Tkacik is a senior fellow at the American Economic Liberties Project.
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