NEW YORK (Reuters) – In a letter to investors before the stock price dropped in the previous week, the online food delivery service GrubHub Inc. and others, cited its profitable relations with small-and medium-sized restaurants, they say they generate 80% of the orders placed by it on its platform.
FILE PHOTO: An Uber Eats, food delivery, courier service picks a bike from the city centre of Kiev, Ukraine on the 9th of September 2019. REUTERS/Valentyn Ogirenko
“This has been a very rewarding relationship for both parties,” the letter said.
However, some of the restaurants have a different opinion, and have begun to push back against what they see as the relationship between the unfair distribution of income.
A growing number of small and medium-sized chains have to reduce it to order, and the delivery of the commissions to be as high as 30%, will be charged by the four major platforms of third – party GrubHub, Uber Technologies Inc. Uber is Eating, DoorDash Inc. and Postmates Inc., industry sources say.
“They hate the relationship, and they want to have a buy-in of the fire,” said Ben Gaddis, president of T3, a digital marketing and technology consultant to restaurants such as Pizza Hut and Schlotzsky’s. “The smaller they are, the more impact it has on their margins.”
The delivery platforms will expect restaurants to have their menus listed on their website, so that customers can use to place orders – this is similar to the way in which the consumer can book hotel rooms through third-party online market places like Priceline, Kayak, or Expedia. Restaurants can pay higher fees if they would like to be listed, more in the foreground, or, if they are to make use of the services, and to be able to deliver the orders placed by them.
“You’re such a necessary evil,” he said Bareburger Group’s Chief Executive, Euripides Pelekanos, pointing to the platform. The organic burger chain with 46 stores, mainly in the north-east is hoping to get rid of all of the third-party platform in the year 2020.
In 2017, Bareburger booked $20 million in revenue from orders placed through the platforms of third-party, Pelekanos said, ” but it also brought roughly $2.5 million to $3 million in other related costs.
For the hospitality industry, which is at about 15% of the charge, it is in our margin,” Pelekanos said.
Due to the intense competition between the services provided by third parties, in restaurants, with only 25 to 50 locations, which have recently been found, they have more power to negotiate for better terms and conditions, according to Gaddis, is the technical advisor.
Last week, GrubHub shares today, closing the week up more than 40% after the company reported weak sales and lowered forward guidance, with an indication of the hyper-competition of the rivals.
When the Uber reports earnings on Monday, investors are expected to show that price competition is at the core of ride-from business has faded, even if it’s to heat up the food delivery business.
Uber may be spread too thin, with Uber you Eat, especially in a market where there is no company in the u.s. has shown sustained profitability, some analysts say.
“Some of the investors prefer Lyft’s, with higher growth in the presence and absence of exposure is food, which is still very competitive,” Bank of America analyst Justin Post said in a note to clients. Lyft Inc. is in the Uber market-leading rival on the stage-from a business that Uber has acknowledged it may never be profitable.
Uber said it could not comment on the food, the delivery of the goods in the quiet period ahead of earnings.
When faced with demands for lower costs, GrubHub acknowledged in a statement to Reuters that the commission rates are negotiable, depending on the level of service required.
Chicago-based GrubHub said there was something “more and more orders with a higher overall ticket prices, via our platform, a year-on-year basis,” for the year 2014.
“Not only do restaurants get more orders, but each order is also increasing. This in turn is reflected in higher incremental revenues, which we believe off-sets, a negotiated commission,” the company said.
Still, some of the restaurants have been building their own apps, and they are turning to alternative delivery operations. It’s for their own apps as well to enable them to hold on to the valuable data of the customers who have placed orders.
In February, Bareburger rolled out its own app, and the web site, by means of a startup project called the Box, which it helped launch. The service costs about $ 750 per month for each site.
The burger chain is also a company called Relay, which will cost $5 to deliver. The cost is well under $8,000 per month for each of the Bareburger outlet spending on third-party platforms, and other related apps, Pelekanos, told Reuters.
Bareburger staff are the staple of advertising cards for orders to be delivered via GrubHub and the redirection of customers to Bareburger for the site.
Bareburger is still taking about 80% of the supply transactions via GrubHub, but the chain is planning to ditch the platforms of third-party once you have your own Bareburger channels to begin with, the process is at least 50% of all digital orders.
It took some of the restaurants that offer dishes from all of the platforms, the last year for a month on a trial basis. The volume of sales declined, but earnings remained the same, Pelekanos said.
Reporting by Hilary Russ; additional reporting by Nate Bellon, in New York; Editing by Tom Brown