Delivery fees are on top of that if the restaurants choose to use Grub-less' delivery network. I dont know the breakdown but most I know use their own. Uber-eats is different.
The alternative marketing+order management costs for a restaurant to generate and fulfill that demand on their own is even higher on average, or else restaurants would be using alternatives.
And there is a ton of work involved on GrubHub's part of operating/maintaining the sites/apps, handling customer service (frequently), moderating reviews, provide support to restaurants, combating fraud, marketing, and so on.
Believe me. If you could create a GrubHub/Seamless clone only charging restaurants 5% to use it and still be profitable, then competitors would have already done so.
"While neither Uber nor Grubhub turns a profit delivering food, they are nonetheless venture-backed and raking in mountains of cash: Grubhub reported revenue of $362.98 million during the first quarter this year, a year-over-year increase of more than 12%. Uber Eats’ revenue surged 53% from the same quarter a year ago, to $819 million.
Restaurants, meanwhile, are facing utter devastation. The restaurant industry lost 5.5 million jobs nationwide in April, according to the Bureau of Labor Statistics. In L.A., the overall unemployment rate now stands at 24%, an increase from 4.7% in February."
edit: additional context from article
Focusing on jobs in the context of gains and losses is a bad idea in general as the only real measure you'd get regarding jobs is 'how many people can support themselves by working' which is the actual real-world impact. And if you want to take survival in to account or basic living standards you could even go a little more abstract and try to report on 'how many people are stuck in poverty'.
It doesn't matter how many jobs you have if people barely get by. Same goes for having less jobs: if people are still doing OK it's not as strong an indicator of anything to report job counts.
If you lose money on every order, you're not thriving in any sense. You're hoping to thrive some day in the future. The fact that they're venture-backed is irrelevant. Restaurants are backed by investors and bank loans too.
Generally, yes it does. The up-front costs for building and marketing a platform so that it ultimately becomes profitable are enormous. In today's climate, the idea that a company could just "choose" to be profitable now and in the long-term rather than grow is disingenuous: over the following few years, other companies will eat their lunch and they'll fold.
But with delivery apps, answering your question is not hard. First, paying delivery people is expensive. Crazy expensive. That's obviously the main variable cost. Then there are huge fixed costs with creating and maintaining a multi-platform app, customer service to deal with late/missing/wrong orders, sales and support for restaurants, marketing, and all the normal business stuff.
That's your answer. Food delivery apps aren't spending half their revenue on frivolous side projects like space rockets or cities of the future, or questionably/fraudulently siphoning revenue to a founder. They're just trying to operate as normal businesses, and there's zero evidence to the contrary.
Food delivery can be profitable, and they could switch to being profitable if they wanted to. That's what the parent company is saying - they chose not to as they want to operate on the hypothesis that investing in growth as early as possible will put them on an expontential trend in a network effect -based business. Which is true.
However, what you say is right as well. If they switched to a completely profit skimming model, their competitor would keep them in check very fast.
However. what data that I've seen in ridehailing shows, is that if you invest in growth and achieve the 1 or 2 position in volume, you can grow and reap profits simultaneously - at least for some time. It's a massive juggling effort.
GrubHub's stock price isn't much different from where it was 5 years ago. UberEats isn't expected to turn a profit for another five years as they continue to lose money on every order.
There are no monopolies here taking advantage of restauranteurs. There's an entire ecosystem of food delivery apps competing with each other.
The reality of the situation is that delivering meals is extremely expensive. It doesn't have meaningful economies of scale the way package delivery does. Both restaurants and customers have to pay these huge delivery fees because that's just what delivery costs. (In fact, many are still being subsidized by massive VC.)
Running a restaurant is always a precarious business proposition in the first place. Adding delivery is another precarious choice -- you can massively increase revenue but only at the cost of massively decreasing profit percentage, and if you don't calculate exactly right it'll seem like a big waste-of-time wash in the end, or you'll even lose money. That's just how it works.
I have tons of sympathy for restaurant owners, but just because it's hard -- not because they're being taken advantage of, because they're not.
But laws that restrict the ability of food delivery apps to charge what the market will bear isn't going to solve anything. They don't have these extra profits lying around they can just moderately reduce. The inevitable result will be them dropping the restaurants that are least profitable for delivery entirely, and reducing deliverypeople so your food will take two or three times as long to deliver. That's just Econ 101 -- if your revenue is reduced to where there's no path to profit, you need to cut quality. End of story.