Delivery Apps Aren’t Getting Any Better

To order delivery food in the olden days, a person would consult the oracle of paper menus piled up by the landline (that’s a phone with a cord that’s mounted to the wall), call the restaurant (which was often too noisy to hear), and eventually a delivery person would arrive and they could only accept cash.

But then, the “problem” of takeout was solved with the internet. Seamless launched in 1999, Grubhub in 2004, Postmates in 2011, and Uber Eats in 2014. (Grubhub and Seamless would merge in 2013, and the company, while still maintaining separate sites for each brand, went public on the New York Stock Exchange as GRUB in 2014.) Chances are you’ve used one of these sites, or one of dozens of smaller apps like Slice or Foodler to get your lunch without having to ever speak to another human being.

In the beginning, these apps appealed to both businesses and customers. They allowed restaurants to offer online delivery without having to build their own sites from scratch. They allowed customers with mobility issues, inconvenient schedules, or those who just don’t feel like leaving the house to have a greater variety of dinner options available to them. But sadly for restaurants, this access to a bigger consumer base comes at a cost. Commissions can run as high as 30 percent, and some restaurants say not only that it’s not worth it — but that the apps are engaging in some shady practices to actively rip them off. As one Harlem restaurateur put it, “Sometimes it seems like we’re making food to make Seamless profitable.”

The Lawsuit

A number of restaurant owners have joined a class action lawsuit against Grubhub, alleging the service is sneakily charging restaurants up to hundreds of dollars more a month. The suit, brought by Minush Narula, who owns Tiffin in Philadelphia, argues Grubhub has been counting non-order calls as orders, and charging restaurants for things like customer questions or complaints.

When restaurants join Grubhub (which also owns Menupages), Grubhub sets them up with its own POS system — the more apps a restaurant is on, the more independent systems it has to manage, which is already a hassle. Grubhub also gives the restaurant a new phone number, which is displayed on Grubhub’s app and website, and reroutes to the restaurant’s existing number. If a customer wants to call a restaurant before placing an order, likely they’ll use the number listed on the app, and Grubhub uses an algorithm to determine whether or not the call is an order. But according to Narula and other restaurateurs, they’re getting charged up to $9 (that’s like, a wholeass entree) per call for calls that are not orders. In a statement, a GrubHub representative noted that its algorithms use “a number of factors” to identify phone calls “driven by our marketplace... including the duration of the call and the number of times a diner has called.” The lawsuit, which was filed in January, argues that “Diners primarily call the restaurants to check on the status of their delivery orders or to ask questions about the menu.”

A spokesperson for Grubhub says the suit is “without merit,” and that “restaurants have the ability to review and audit recordings of phone calls through their dedicated portal and can easily dispute any charges by providing context details.” Narula claims Grubhub refused to provide him and others transcripts when asked.

Grubhub also argues restaurants typically see their revenue grow by partnering with them. According to its own research, Grubhub is the cheapest for diners to use, “which in turn helps restaurants drive even more digital orders to [restaurant] locations.” That’s largely because services like Uber Eats and Doordash charge diners service and delivery fees to cover the overhead of the app. The lack of fees may keep customers coming back, but it also usually means the restaurants are the ones to cover the costs.

Other problems

Even if these apps aren’t charging for bogus calls, restaurants still need to contend with the huge chunk that these services take out of their bottom line. According to Chris Webb, CEO of ChowNow, some apps are charging as much as 50 cents per dollar ordered. Most hover between 15 to 30 percent per order. Seamless introduces a pay-to-play system — it allows restaurants to choose between four commission levels, but promises higher search results if restaurants choose a higher commission percentage. If a majority of a restaurant’s orders are take-out or delivery, those become incredibly tight margins to work with, especially when even take-out orders are routed through Grubhub phone numbers, allowing them to collect commission. When Gaslamp Cafe in San Francisco closed in February, it explicitly blamed delivery apps for its shuttering, and implored customers to go to the restaurants themselves, or at least call directly if they wanted take-out. “Ordering online does more damage to businesses than it helps,” they wrote in a sign after their closing. “Any profit from sale is stripped away by the fees they charge the restaurant, which leaves only enough to cover the cost of food.”

Taking on these delivery services requires major adjustments in terms of operations, pricing, and expectations. But even restaurants who don’t sign up for these apps have to get in on the fight, since some say they’re appearing on delivery sites without their permission. Canadian restaurants have been fighting Doordash, which says they add restaurants in high demand for a “trial period,” sometimes without contacting the restaurant first, but emphasizing “we’ll always attempt to get in touch.” This leads to customers thinking they can get delivery from restaurants that don’t offer it, and sometimes leaving negative reviews over something a restaurant never promised. In the U.S., Postmates is creating the same problem by sometimes not getting permission from restaurants before making their food available for delivery. Restaurant owners then can’t guarantee their food will be handled properly, and if customers aren’t happy with the quality, they blame the restaurant, not Postmates.

Overall there’s a lack of communication between these middleman apps and the restaurants, as apps focus on building their own profiles. One former employee of a major online delivery app anonymously told Eater that it takes the app days to respond to complaints about orders, and that it was difficult for restaurants to update their profiles to reflect new hours or closures, which could lead to restaurant fines if an order came in and they happened to be closed. “Our system was never set up to be easy for the restaurant; all the investments went toward consumer ends,” they said.

These issues are all exacerbated by the desperate attempt to snag loyal customers by any means necessary — low prices, no fees, free meals. Uber Eats still isn’t profitable, which has resulted in the recent slash in pricing. “Inevitably, Eats and its competitors, which all have similar offerings, will have to stop swallowing their losses and start charging more,” writes Recode. “And when they do, success will depend on which company has the most customers and restaurant partners.”

Can the problem be fixed?

Apps like Doordash and Grubhub still have billions-dollar valuations, and Uber Eats looks to be the only part of Uber that is still growing. Its sales grew 58 percent between March 2018 and March 2019, according to Fortune. And that’s because you can’t really argue with the services offered. On the consumer side, having dozens of restaurants available for delivery without having to make a phone call or carry cash is pretty hard to give up, especially if you live in an area that didn’t have a robust delivery culture before these apps started popping up. According to one survey from Tillster, 85 percent of delivery customers aren’t willing to pay more than a $5 delivery fee, and in cities with a longstanding take-out culture like New York, many aren’t willing to pay one at all.

Some restaurants, however, are fighting back. Karen Heisler of Mission Pie in San Francisco has refused to use any delivery apps. Others offer special deals if you order directly through them. And some are opting to list themselves on smaller apps which have the express mission of helping small businesses. Slice, a pizza-delivery only app, charges $1.95 per order to the restaurant regardless of size, and advertises itself as a company focused on keeping independent pizzaiole in business. Slice founder Ilir Sela grew up in his family-owned pizzerias on Staten Island, and says the goal behind the app is to counter the “necessary evil” of apps like Grubhub, which, according to a Slice spokesperson, “were taking the restaurant’s margin, and building a business at the pizzeria’s expense — a non-mutual relationship.” However, Slice only covers pizzerias, and has to convince potential customers that the cost of delivery apps is something they should care about.

There are things that can be done, but sometimes, the issue seems insurmountable. We’d have to fundamentally restructure the modern economy — undo the gig working culture, raise the minimum wage, change expectations for the value of food and labor — in order to make Seamlessing every meal a sustainable option (and that’s not even counting the waste from take-out packaging). Delivery is a necessary service for many, and an enjoyable one for many more, and no one should go out of business or be paid less than a living wage in order to provide it. For now, maybe we just try to call the actual restaurant.