Grubhub marketing fees leave Pittsburgh restaurant owner shocked, upset

PITTSBURGH — A downtown Pittsburgh restaurant owner was shocked when he got his first bill from Grubhub after signing up for the service in April. The third-party delivery service took nearly 60% of his company’s total sales.

“Out of $16,000 (in total sales), we got a little under $7000. That’s equal to 42%, so they took 58%," Spencer Warren, owner of The Warren Bar & Burrow said.

Warren said his restaurant’s revenue is down about 75% due to the pandemic, so he decided to sign up for Grubhub to try and generate business. Despite the tough financial times, he’s continuing to make free meals every week for hospital workers and the restaurant industry. He said having embraced that spirit of generosity during this crisis made him even more upset to see the high fees from Grubhub.

"It makes me angry cause we're trying to help everyone during this time, and they're just being greedy at this point," he said.

I am a small business owner trying to help our community in everyway possible, we have provided over 7000 free meals to...

Posted by Spencer Warren on Friday, May 15, 2020

The bill from Grubhub showed multiple fees, including including a $3563.11 promotions fee that Warren said he didn’t agree to.

“We didn’t sign up for promotions but they tell you (the customer) free delivery. We pay that delivery fee. 10% off? We end up paying it every time.”

Grubhub’s Response

Grubhub said it clearly spells out its fees in its contracts and that restaurants select the services they want, so they should not be surprised by any fees.

“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,” Grubhub said in a statement released to 11 Investigates.

Grubhub declined to comment on whether they believe The Warren’s bill was fair and said marketing fees are negotiable. Spokesperson Jenna DeMarco also insisted it is a restaurant’s choice to participate in promotions. She said The Warren opted-in to the promotions it was charged for.

“This restaurant chose to run and fund a 25% off promotion for first time diners that resulted in 224 redemptions,” DeMarco said.

Warren disputes that he agreed to participate in the promotions. Instead, he said Grubhub sent him emails about marketing campaigns, but he did not answer or agree to take part in them. When he saw the bill, he said he immediately called Grubhub’s customer service to complain but got nowhere.

“They said their account exec is allowed to sign us up for promotions without our permission. They send us an email, if we don’t respond, that counts as us signaling it’s OK,” Warren said.

Grubhub denied that is their policy. The company did say The Warren’s invoice “is an extreme outlier and not representative of an average Grubhub invoice, which results in a restaurant receiving 75% of the sale net of commissions.” Adding, “We could not stay in business if we charged restaurants this much.”

Growing Complaints

Warren is not alone in his frustration with Grubhub and other third-party delivery apps. He posted his bill on Facebook and it went viral. He also found similar complaints from a Chicago pizzeria, which also posted on Facebook.

Some cities are responding to the growing frustrations from restaurants. Washington D.C. just passed a law capping the fees third party delivery companies can charge. Other cities, including Seattle and San Francisco are considering a cap as well.

Warren said he’d like to see a similar law in Pittsburgh.

“We signed up during this pandemic just any way to get income to have cast on hand to be able to keep our staff," Warren said. “We knew there were costs, but not to the point where every order we’re losing money.”

Statements from 3rd party delivery apps of fee policy

Grubhub:Our platform is free for any restaurant owner who wants to join since we have a fee-for-service model. If a restaurant wants us to deliver on their behalf, there is a 10 percent fee to provide this service that is used to pay the driver and cover the logistics of Grubhub’s drivers transporting the food from the restaurant to the diner. This is optional; a restaurant can choose to perform its own delivery. But the costs associated with delivery are not optional. For instance, it costs money to coordinate drivers, perform driver background checks, and create/update delivery technology.

We also allow restaurants to market themselves on the platform and each restaurant owner determines the right level of marketing for his or her business. The average marketing fee is around 10-15 percent, and restaurants can choose to spend more if they believe it will drive more orders to them. Additionally, there is an ordering processing fee of 3.05% + $0.30 on each order received on our platform to cover credit card processing, fraud protection, undeliverable orders, customer care inquiries and other support requests we handle on behalf of the restaurant.

We're committed to helping restaurants, drivers and diners through this challenging time, and we created the Grubhub Community Relief Fund to provide financial relief for our restaurants and drivers. With this fund, all contributions through our Donate the Change program – amounting to more than $1 million per month on average – go to charitable organizations that support restaurants and drivers. The organizations we are donating to can be found here. Additionally, as soon as the pandemic began impacting restaurant operations more than a month ago, we offered a temporary marketing fee deferral that eligible restaurants could choose to enjoy for immediate cash flow relief.”

Postmates:Commissions are privately negotiated agreements between the restaurant or a consumer goods business and the Postmates platform. We work closely with our business partners to build a custom agreement that reflects the services they ask us to provide to their business, these services are things like paying and providing benefits to delivery couriers, marketing, customer service, courier support, exposure to new customers, and insurance. Commissions are not “fees”, they are the main source of revenue for our company and they are how we pay for the services that we provide to businesses and our customers. Arbitrarily setting on-demand delivery prices has real consequences that undermine our ability to operate, fund relief efforts and benefit programs for merchants, couriers and customers, and kills the whole industry’s ability to provide the services restaurants need to stay open during this national emergency.”

Doordash: "Over the past seven years, we’ve created a suite of services that help merchants access the online convenience economy. Our commission structure is personalized for each merchant to match their unique needs, which can depend on the breadth of merchant services each restaurant owner uses to expand their reach and revenue. Merchant fees help pay for a variety of business costs to support all three sides of our marketplace including paying Dashers and driving volume and sales to merchant partners. DoorDash knows that doing our part during this unprecedented time, when delivery is an essential service, is vital, which is why last month we announced that we are reducing commission fees for eligible local restaurant partners by 50 percent on both DoorDash and Caviar. This commission relief program will benefit more than 150,000 restaurants throughout the United States, Canada, and Australia through the end of May. This estimated $100 million injection from DoorDash is dedicated to helping merchants respond to the acute financial threats they are facing right now."

For more information on our broader COVID-19 community response, see messages from our CEO Tony Xu here and here.

Uber Eats: “Restaurants have the option to choose different services at different commission levels. With Uber Eats, they can choose to pay a lower commission and pay for full-time delivery people themselves. Many restaurants don’t have the resources to do that and they choose to have Uber Eats cover all the costs and logistics of delivery. This law would simply shift the costs back onto small, local restaurants who can afford it the least.”

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