Why You Should Stop Hating on Grubhub
By now, you’ve likely seen Giuseppe Badalamenti’s 4/29/20 viral Facebook post (or the countless regurgitated news stories) where he states…
Stop believing you are supporting your community by ordering from a 3rd party delivery company. 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.
…and then posts a screenshot of his pizza truck’s March Grubhub invoice.
Mr. Badalamenti’s comments around “stop believing you’re supporting your community” is likely directed at Grubhub’s latest national TV ad which is called “Restaurants Are Our Family”
In the TV spot’s accompanying digital copy, Grubhub states “together we can help the restaurants we love. Right now, restaurants are facing a crisis and they need our help. That’s why we need everyone to order takeout or delivery to support your local restaurants.”
Is Grubhub Evil?
If you were only reading “mean Facebook comments” like these…
- “That’s legal robbery! I won’t use them anymore!”
- “Biggest scam going!”
- “These services are the devil. All they care about is getting paid, they have no interest in the survival or health of the restaurant.
…you’d 100% believe it is and likely join the trending #boycottGrubhub movement on Twitter with the rest of the WOKE American public 🙄
Entrepreneurship 101
As an entrepreneur, everything that happens to you is your fault! Do you know what is awesome about everything being “your fault”? The outcomes within your life are completely up to you. That might seem daunting, but it should actually be a liberating revelation. The more responsibility you take for your life, the more you’ll see the results you want out of it.
So, is Grubhub evil (or even at fault)? No. This is 100% on the owner.
Why?
Firstly and Lastly, he signed the Grubhub contract. By signing, it means he read it and fully understood its contents. I am sorry to be hard on Mr. Badalamenti, but he is getting a crash course in what it’s really like to be a business owner.
Numbers Aren’t Sexy…Until They Are!
I’ve worked with 100s of entrepreneurs over the span of my almost 8-year management consulting career and I can say with confidence that the biggest weakness is usually around accounting and finance proficiency. In the case of the above invoice, there are a number of considerations…
- Food Costs = according to various sources online, food costs for pizza are usually around 13–16%. Estimated cost of goods sold is around $165 (based on 16% food costs) for the above invoice. This isn’t on the invoice, but Mr. Badalamenti states more than double that of $376.54 “is almost enough to pay for the food.”
- Commission = Grubhub charged 20% for any prepaid order. You might think that is egregious, but Grubhub had 23.9 million “Active Diners” (defined as a unique diner account from which an order has been placed in the past twelve months) and it costs businesses money to potentially reach that large audience. It is the same concept as fees charged to Amazon Sellers, Ebay Sellers, or ticket marketplaces like StubHub.
- Delivery Commission = Grubhub charged 10% for orders that had an additional delivery element attached to it. This is a fee that is paid to access the gig worker element of the on-demand delivery platform.
- Processing Fee = this is a standard credit processing fee that would be charged to business owner on orders placed by phone or in-person. The only way around this fee would be to only accept cash.
- Promotions = any promotion is optional and business owners fund those completely on Grubhub. Even in the case of national campaigns like the current $10 off a $30 order offer, the business owner can opt in or out.
- Order Adjustments = these are refunds and almost certainly the business owner’s fault. If something is wrong, missing, or incomplete about an order, the customer has options within the app to get a refund for all or some of their order. I will say that anecdotally, I’ve found the refund process on these delivery apps to be overly-generous. That being said, you always have to account for “refunds and waste” in your profitability analysis.
- “Add Backs” = the line items below the $131.19 order adjustment are actually money given back to the business owner from customer refunds. As an example, if customer orders $30 in food and he/she uses a coupon for $10 off, but something was wrong, Grubhub would refund the customer his $30. Grubhub would also refund the business owner the coupon cost, processing fee, and commissions. The net result will be that the customer would be fully refunded, Grubhub would lose commissions, and business owner would essentially lose food costs.
Why Use Grubhub?
From the Customer POV, it’s a convenient streamlined marketplace that helps you decide which restaurants in their home city or travel city can deliver. Based on non-branded search, you can drill down to menu items and other features that would take you extra time hacking it yourself on Google, Yelp, and other apps/sites.
From the Business Owner POV, it’s a way to access new customers and new resources without having to shoulder those costs independently. Using the invoice above, Mr. Badalamenti would have to pay 100% of marketing costs on Facebook, Yelp, Google, etc. to acquire customers. Depending on his understanding of digital marketing, he might also have to pay a freelance or agency to run his paid advertising. Additionally, Mr. Badalamenti would need to hire a delivery driver to be available and ready for orders during his operating hours. Those costs could wildly vary, but they are without a doubt going to be over the ~$95 he paid in March.
Why Did I Write This Article?
Today, everyone is quick to share social media content without actually understanding its validity. Similar to Mr. Badalamenti’s responsibility above, it’s society’s responsibility to understand what we are amplifying with our little (or big) soapboxes.
I’m empathetic to Mr. Badalamenti and the thousands of others in his position, but business ownership is not a “right” and more businesses will fail than every be successful. Entrepreneurship is risky and only a select few are built for the wild ride it will take them on. He is probably a great chef and his pizza is delicious, but that does not make him a great businessman. There is a great book by Micheal Gerber called The E-Myth Revisited that explains the fatal assumption that an individual who understands the technical work of a business can successfully run a business that does that technical work. This is why so many small business owners are in trouble today.
Conclusion
I understand that it’s easy to point the fingers at and call large companies like Grubhub, Amazon, Google, Facebook, and so many others, evil…but, there’s no company (or person) that has an impact on your life unless you consent to it.
