Some Pittsburgh Restaurants Say Third-Party Delivery Fees Are Too High

May 14, 2020

Third-party food-delivery apps like Grubhub, Doordash and Uber Eats can seem great to diners who don’t want to cook for themselves but don’t want to leave home, either.

The services are less beloved by many restaurant owners, who say the fees are too high – especially during the coronavirus shutdown, when basically every restaurant still operating must rely more heavily on delivery services.

"It's pretty much usury"

“It’s pretty much usury,” said Eric Carroll, co-owner of Napoli, Pizza, in Squirrel Hill, of the services’ fees. “But they bring me business that I wouldn’t have otherwise most of the time. So I’d rather have some of a little bit than nothing.”

“People are tired of paying the high percentage for delivery fees through these companies,” said Dan Bartow, chef and owner of Legends, on the North Side.

The fees can range as high as 30 percent of the total order.

"They just take 30 percent off the top"

“A ten-dollar item, we receive 7 dollars,” said Bartow. “They just take 30 percent off the top, whether it’s one hamburger or two hamburgers.”

The arrangement reduces or even wipes out many restaurants' traditionally thin profit margins. “You make very little on [a transaction like] that,” said Scott Kramer, co-owner of the Double Wide Grill, with locations on the South Side and in Mars.

The services started gaining popularity several years ago, and were growing quickly even before the pandemic. Grubhub, which works with some 1,275 restaurants in Pittsburgh, reported first-quarter sales this year were up 12 percent over last year, to $363 million -- and that time span included just the first two weeks of national stay-at-home orders. (Uber Technologies, which owns Uber Eats, is reportedly in merger talks with Grubhub; together the two groups control more than half the U.S. food-delivery market.)

App users order from participating restaurants. (Some restaurants sign on with multiple delivery services.) The food is transported by drivers or cyclists contracted by the service.

"Restaurant owners select the services they want and only pay us when we help generate sales"

Customers are permitted to order through apps including Grubhub and Uber Eats and then pick up the food themselves, in which case the service is free. Some services also charge a fee – with Uber Eats, it’s up to 15 percent – even if the restaurants’ own staff delivers the food.

Grubhub also levies a marketing fee of about 15 percent, on average, though restaurants can choose to spend more for upgraded marketing, said a Grubhub spokesperson in an email. There is also a credit-card processing charge, usually about 3 percent.

In all, delivery-service fees typically range from 20 percent to 30 percent of the total bill. That’s in addition to delivery fees charged directly to the customer.

Some restaurants don’t offer in-house delivery because prior to the pandemic, delivered food was a small part of their business. Now that take-out and delivery meals are 100 percent of sales, many have signed on to the third-party services because so many people order that way. That’s the case for Napoli, for instance, said Carroll.

Restaurant complaints about the services have gone viral, sparked in part by one Chicago restaurateur’s posting of a statement showing that out of a series of orders in March totaling more than $1,000, he had pocketed just $376.54. (The deductions included about $360 in promotions and refunds for restaurant error.)

"These companies should not benefit on the backs of businesses that are struggling to survive"

Third-party delivery services counter that they bring in business. “Restaurant owners select the services they want and only pay us when we help generate sales,” said a Grubhub spokesperson in an emailed response to questions. Harry Hartfield, a spokesperson for Uber Eats, said the fees are necessary to cover overhead, in particular fees for drivers. “Uber Eats does not turn a profit. It loses money currently,” he said.

Hartfield added that Uber Eats had waived delivery fees during the pandemic for customers of independently owned restaurants, to incentivize orders.

Still, the outcry has been such that cities including San Francisco, Seattle, and Washington, D.C., have sought to protect restaurants during the pandemic by capping delivery fees at 15 percent. Cities including New York and Los Angeles are considering following suit.

“Some third-party delivery app players have aggressive fees and commission structures, which is detrimental to the restaurant industry,” said the Pennsylvania Restaurant & Lodging Association, a trade group, in a statement.

The group said it “has heard from restaurant operators prior to and throughout the pandemic about delivery app fees and structure” and that it “supports short-term fixes that reduce the fees being assessed during the State of Emergency. Restaurants have been forced into a situation not of their doing and these companies should not benefit on the backs of those businesses that are struggling to survive.”

Delivery services oppose such moves.

“Commission caps make it much more difficult to pay delivery people,” said Uber Eat’s Hartfield. “We obviously need to make sure we’re balancing the needs of our restaurants but also the needs of the delivery people on our app.”

Hartfield added that when app delivery fees that are too low, it could cause restaurants that have in-house delivery staff to lay them off.