How Food Ordering Apps Are Killing Restaurants

Grubhub DoorDash Credit: David Tonelson / Shutterstock
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Apps like Grubhub, Uber Eats, and DoorDash exploded in popularity while people were quarantining because of the coronavirus pandemic. These apps were heralded with saving the restaurant industry, which took a big hit when individual restaurants were forced to shut down for in-person dining. These saviors have unexpectedly turned into sinkholes for restaurant owners. It’s not a lack of customers that is killing them, restaurant owners claim. It’s the fees that will lead to their demise.

During the coronavirus pandemic, restaurants have a choice – they can close down entirely or offer takeout. The easiest way to provide a takeout is to partner with an existing service like Grubhub or DoorDash. These apps serve as the conduits between a restaurant and the customer, often providing delivery service for convenience. With restaurants offering takeout only because of the coronavirus pandemic, it seemed like a brilliant solution. That is until the fees starting piling up.

Fees Pileup Unexpectedly

Many restaurants didn’t anticipate the exorbitant fees that some of these food services are charging. Grubhub has taken more than 40 percent of the proceeds from each order placed through its service, reports the New York Times. These fees can be so high that businesses barely make enough to pay for the food for each order. One company that was breaking even during the pandemic had to shut down after joining Grubhub.

Complaints about the fees, both from restaurants and consumers, are widespread on social media. Restaurants also are concerned that they will be forced to accept a fee increase as there are few alternatives if they want to continue to provide take out dining.

Deceptive Practices Thwart Restaurants

It’s not just the fees that are the problem. Restauranteurs complained about deceptive practices, such as setting up websites without consent and with inaccurate descriptions. Freshcraft, a restaurant in Denver, is even suing Grubhub.

In its lawsuit, Freshcraft owner Erik Riggs claims Grubhub created a website without his consent. The food ordering service also filled the webpage with incorrect information. The Grubhub-generated site claimed the business was closed even though it was open and taking online orders.

“The fact that they misrepresented my brand in these times, and pushed Grubhub clients toward other restaurants — it’s deplorable,” said Freshcraft restaurant owner Erik Riggs.

The restaurant is not only suing Grubhub, but it also is seeking class-action status for its suit.

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