coronavirus

Restaurants Say Third-Party Delivery App Commissions Are Too High

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As people look to support restaurants during the coronavirus pandemic by placing delivery orders, criticism has surfaced of third-party apps that connect establishments with customers - for a price.

Chicago Pizza Boss food truck owner Giuseppe Badalamenti posted a Grubhub invoice on Facebook last month to share just how much it costs restaurants to use third-party apps.

Badalamenti's invoice showed that from 46 GrubHub orders totaling $1,042.63, he received $376.54 after commission and fees were taken out.

"Stop believing you are supporting your community by ordering from a 3rd party delivery company," Badalamenti wrote. "Out of almost $1,100 of orders. Your Restaurant you are trying to support receives not even $400. It is almost enough to pay for the food."

😉Stop believing you are supporting your community by ordering from a 3rd party delivery company Out of almost $1,100...

Posted by Giuseppe Badalamenti on Wednesday, April 29, 2020

A spokesman for GrubHub said in a statement that the company's revenue on that invoice was less than 20% and that "restaurant owners select the services they want and only pay a commission to Grubhub when we help generate sales."

"Grubhub is happy to work with restaurant partners to help them manage costs and grow their business," the statement continued.

But Badalamenti said the issue with the third-party apps has been around before the coronavirus forced all restaurants to switch to takeout and delivery orders only.

"For the past two or three years pre-pandemic... everybody’s been rumbling that we need to get rid of third-party apps because it is eating away at profit margins," he said.

Bill Thanoukos, who owns Hub's in Skokie, said he was not surprised to see that criticism of GrubHub surface.

"They are leeching onto us in order to take some profit," Thanoukos said.

Thanoukos’ family-owned restaurant uses GrubHub, but he said that third-party delivery apps “hurt business with cash coming in if they are taking out 20% or 30%, it does hurt.”

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Before the pandemic, restaurant groups say third-party delivery apps made up less than 10% of restaurant's business - but that's since changed. 

"Now maybe it is 20% of their sales but they have to watch every penny just so they can try to make payroll," said Sam Toia, president of the Illinois Restaurant Association.

Badalamenti said customers should order directly from restaurants and avoid third-party apps. For restaurant owners looking to use the apps, Badalementi has some advice.

"Put in a leaflet… Tell them we really appreciate your order, but we would really prefer if you go to [the restaurant’s] website and place your order. That would really benefit us the most," he said.

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