Washington Post: Restaurants are barely surviving. Delivery apps will kill them.

May 29, 2020 Op-ed

Giuseppe Badalamenti thought he knew everything about selling pizza. Then a client of his food truck turned consultancy, Chicago Pizza Boss, showed him her March invoice from Grubhub.

Customers had paid $1,042.63 for 46 pizzas; the delivery company, which is based in Chicago, had taken $666.09 in commissions and fees. That left the pizzeria with barely enough to pay for San Marzano tomatoes and cheese. “I’m sitting there fuming looking at this receipt,” says Badalamenti, who had never dealt with delivery apps while running his own pizza truck. “But it’s like an open secret. Owners have been suffering in silence, because they’re ashamed, and they think this is what you have to do because this is what everyone is doing.”

He posted an image of the invoice on Facebook, touching off a rebellion among disgruntled delivery service users and workers. A DoorDash driver posted a screen shot of the $4.75 fee the service had offered him to deliver an order 10 miles away. A pizzeria owner with his own fleet of delivery drivers posted a $41,230.47 invoice showing Grubhub taking a 27 percent cut — just for processing orders. And in the comments on another viral post about delivery apps, Collin Wallace, Grubhub’s former head of innovation, wrote that the platforms are “not actually in the business of delivery. They are in the business of finance. In many ways, they are like payday lenders for restaurants and drivers. They give you the sensation of cash-flow, but at the expense of your long term future and financial stability.”

Until recently, most restaurants didn’t think too hard about Grubhub and DoorDash. The math was never appetizing: Profit margins for full-service restaurants are typically around 3 to 5 percent, and delivery app fees tend to hover around 30 percent, so the commission charges clearly weighed against the services. Chefs thought selling a few delivery orders was like offering a pre-theater menu or selling $1 oysters after 10 p.m.: It brought incremental revenue that didn’t involve filling a seat at prime time.