Grubhub isn’t cheating restaurants, it’s breaking even on orders, CEO says
CHICAGO – As Grubhub contends with upset restaurateurs, and social media ire over the fees it charges, the company must make clear what costs are associated with food delivery, CEO Matt Maloney said during an earnings call earlier this week.
The coronavirus pandemic has forced dining rooms around the country to shutter, and restaurants are relying entirely on pickup and delivery orders. Operators have argued the commission fees Grubhub and its competitors charge are too high, especially during a time of struggle for the industry.
“Unfortunately it’s a crisis situation and the tensions are heightened,” Maloney said Thursday. “But we’re really going to focus our effort on educating and making people understand the valuable role we play.”
Maloney said there is a disparity in pricing models among food ordering platforms “that is not properly understood.”
The restaurants on Grubhub’s platform can choose what services they want and pay only for those. For example, if the restaurant has its own delivery drivers, Grubhub won’t charge them for that service. If they want more exposure on Grubhub’s platform, they might have to pay a higher fee.
Costs associated with delivery pile up, Maloney said. Drivers must be paid, there is underlying technology to support, and there are some fees associated with online ordering regardless of who delivers the food. There is some confusion around that, he said.
“It is frustrating when you see a lot of the social media posts that are inaccurate,” he said. “I think what people forget and one thing we’re going to try to do better is to highlight that the costs are real.”
Maloney said during the call that the Chicago-based company is roughly breaking even on orders during the pandemic. Grubhub’s profit is about 1.5% of gross food sales.
The company has taken other measures to help restaurants, he said, such as temporarily suspending commission fees for independent restaurants to help them meet payroll and rent until federal aid came through.
“We are bending over backward, deferring revenue, giving profitability,” Maloney said. “We are doing everything we can imagine to help restaurants.”
Grubhub reported $363 million in first quarter revenues, up 12% year over year. The company also reported an uptick in new diner acquisition and an increase in order sizes, driven by the coronavirus shutdown.
That increase in new diners could fall off when restaurants start opening back up, the company predicted. A pandemic-scarred economy could also play a role, if people have less disposable income to spend on delivery.