Grubhub stock halted after report Uber is eyeing a takeover
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They have solid coverage in NYC, especially Manhattan.
Uber is also more likely to play psychological game with its drivers. It's been a while since I drove for these services, but I remember GrubHub being pretty straight forward with how much you are getting paid. I think Uber hid the tip amount until you picked up the food. I imagine their driver support would be abysmal.
All I know is that my $13 food choice costs me $22 when I go to check out, and I think twice about it, then check the promos, and then consider the price of just pickup, or order something else (lower price, or different restuarant with different delivery fees, or maybe add a $2 item to remove the $3 small order fee)
You price according to what the market can bear, as a participant of the market this has stretched the rationalization of what I am willing to bear, and if it isn't economically viable then maybe lay off 3,700 employees and buy the leaner competitor, crazy idea right
But either way, the economics are roughly the same: getting food made and delivered to your door is really really expensive. It just comes down to how that gets sliced between restaurant, consumer, and driver.
So bad things can be good, I guess...
Though on the other hand, I've been doing the old school call and pick it up myself method with local restaurants during quarantine, and not only are their prices usually lower, it does feel good to know that (besides card processing fees from Visa) all that money is going into their pockets. Maybe I should just take this opportunity to stop using food apps anyway.
As a customer I’ve never had a complaint about their service outside of the asinine decision to add tipping.
They don’t let you use their app without adding a credit card, even if you have more than sufficient credit with Uber to pay for a ride.
> How do you charge that person then?
They could require a credit with Uber sufficient to cover that charge if someone wants to take a nighttime Uber ride.
> Lot of companies also use credit cards to tie account to a person so they don't abuse the initial sign up bonuses.
Yeah, but still, companies tracking purchases via credit cards is definitely not "pro-consumer".
The economics of last mile delivery can not justify these valuations so if Uber thinks they can make it happen with driver downtime then grab the cash while you can.
https://www.bloomberg.com/opinion/articles/2019-05-07/lyft-s...
Information is public at this point, you might breach a contract if you've got equity but it's not jail time. Assuming recent regulatory actions, even if your actions were egregious, it's likely no jail time, just a large fine and disgorging profits made.
Disclaimer: Not a lawyer, not your lawyer.
You can (the chance is not 0), but the chances are very rare based on recent historical SEC enforcement actions. I'm not advocating for securities fraud, I'm expressing the observation of lax enforcement by the SEC.
https://www.sec.gov/files/enforcement-annual-report-2019.pdf
Uber has $9B cash on books in their latest 10-Q. I wonder if they'll burn some of that or will they issue new securities to finance this. It feels a little reckless to abandon half of your savings, especially as your cost of capital was just marked up and uncertain times are ahead.
Restaurant loses money on the percentage.
Driver loses money on the vehicle depreciation much of the time.
The delivery company loses money on the delivery.
I just don’t think a burger can be profitably delivered 15 minutes away for 1.99.
Delivery driver: Paid a portion by restaurant, paid a portion by tips
Telephone: $60 / month utility bill
----
Today:
Restaurant: Keeps 60-70% of order
Delivery driver: Paid a portion by Uber, paid a portion by tips
Uber: Paid 30% + delivery fees, service fees
See the problem?
Not so sure about pizza, but the tip issue probably comes into play there again. The customer covered the delivery cost and a 15% tip is more than most delivery fees in my area even on small orders.
But other than that, there is essentially no marginal cost to the delivery infrastructure, you pay part of the driver cost directly (via tip), they at most take a cut to go to drivers (minimum) wages, but that's a fixed cost not % of checks.
Thing is when I did we kind of optimized for the trip costs / payout. Deliveries only happened (for free) for orders over a certain value. During peak times (around dinner) we’d also batch orders. I’d often go out with 3 or 4 deliveries at a time and come back in about an hour with $30 or so just in tips. The 3 hours or so of dinner rush basically paid for the rest of the day.
1. From what I understand restaurants doing delivery largely were breaking even on it considering the costs - there was no third party looking to take 20-30% of the gross.
2. Again anecdotally, I suspect the old school pizza/chinese delivery places are more efficient in terms of deliveries per driver per hour. What I see with a lot of UberEats/Grubhub etc is drivers waiting a lot at restaurants, bouncing around a bunch to pick up one or 2 orders each. Vs the old-school pizza model of a driver being able to pick up a bunch of orders at once.
Precisely this! It's amazingly inefficient to dedicate an entire person (and their 1000kg car) for the delivery of a single 2kg takeaway meal.
Uber tries to "solve" the problem by giving drivers two orders at the same time, but their implementation is terrible:
1. Sometimes the restaurant doesn't have both orders ready at the same time, so one of the orders is growing cold and soggy.
2. Uber's dispatch system has such a strong preference for batching deliveries together that a driver will often get assigned two orders that are going in opposite directions from the restaurant!
3. The high-volume restaurants (like McDonald's) have managed to exempt themselves from the double-delivery system [for the obvious reason that customers hate getting cold food!].
I think the old world was restaurants squeezing delivery drivers. Now it's the app squeezing both the restaurant and the delivery driver.
This shouldn’t be as much of an issue, compared to the ride share market, as you can make deliveries in a $2k junker for years before it gives out.
Old cars are definitely cheaper to run (net) than new ones, but they aren't free.
Do they? For delivery, FOH is out of the equation, so there is a very big cost of running a restaurant that is not impacted.
"The delivery company loses money on the delivery."
They're a software/customer support service. At scale there has to be an inflection point.
"I just don’t think a burger can be profitably delivered 15 minutes away for 1.99."
It's way more than that... 1) the upfront cost the person pays (these services are sneaky about how this is calculated, often times the menu prices are adjusted for delivery + the hard fee) 2) the amount the restaurant pays 3) tip for the driver. The end user will end up paying $5 for say a $10 meal, and the restaurant might pay $2.
I guess the question is - does a person want to spend 30 minutes driving + gas vs. pay $5 for the convenience of delivery for a $10 meal? I think quite a few people will pick the latter.
The only question is if delivery services can find scale and a price point where they're profitable.
Ghost restaurants, which are restaurants run out of commercial kitchens away from downtown areas, and with no physical presence to speak of, using the Internet to drive orders, are trying out running FOH-less operations, but for an existing restaurant that's a bit more difficult a move to make. (Since a restaurant with ~no FOH staff has no human servers/waiters, maybe we could call that model serverless.)
How would it work in the US? Would it work if the app did not take a cut at all? Is there just little demand for delivery in the US?
https://patch.com/virginia/fairfaxcity/robots-make-food-deli...
30% of the bill seems to basically be what it costs to move most orders to their destinations.
It's also pretty clear that delivery as a function doesn't scale linearly with check value...
We're not "an eatery discovery app" as our app is generally used by a single end user with a single brand (a sort of pseudo white-label) but we do service a similar market and are low priced relative to GrubHub. We don't do delivery but we do click&collect, online ordering solutions, cashless transactions for gift and loyalty, branded PWAs, Clover&Poynt integrations. Employee owned.
https://www.gloriafood.com/pricing
"We understand that your restaurant's profit margin is already low and we don't want to reduce it even further with fees or commissions. That's why we offer this simplified, do-it-yourself ordering platform for free.
However, we do have (and continue to add to the platform) premium features that are more complex, that you can choose to pay for (if they bring extra value for your business). For example: online payments, promotions, sales optimized website, branded mobile apps."
Small business pizza focused app, and takes much less than the 30% the other apps take to help these businesses succeed
If you live in NYC, this nonprofit helps you find restaurants still open and order directly. Restaurants keep 100% of commission. I use it to order food every weekend. Local restaurants seem to really appreciate it.
A few stores locally have "we deliver" type messaging, but it's really just grubhub :(
You'll also synchronously resolve any issues, like if they're out of a certain item.
Most every place seems to have optimized for internet orders, not phone.
Plus a lot of places are a little cheaper if you call.
Transaction fees aren't new, and merchants typically bake that into the cost of doing business. Ostensibly, the end user would have to pay more for the convenience of someone else using their labor to deliver them food.
For example, from Uber's terms for UberEats restaurants[1]:
"Notwithstanding anything to the contrary in this Section 5, Merchant may not make any Item available to Customers through the Eats App at a price that is higher than the price that Merchant charges in-store for similar Items. Merchant agrees that you will not make an Item available under this Agreement at a price higher than the amount Merchant is charging for similar Items through any comparable platform for food delivery services."
[1] https://www.uber.com/legal/en/document/?country=united-state...
Edit: Even more interestingly, I rarely see this behavior on GrubHub. Maybe they have a history of enforcing it? Or are just more explicit about the rule? Or just coincidence? I'm not sure.
Isn't that why discount for cash exists at gas stations etc? To get around these sorts of policies from the credit card companies.
However, they don't charge more on UE than they do on competing delivery apps.
Also, the attorneys general of CA and NY have begun investigating these app pricing policies, so it's very likely they'll be deemed illegal by the end of the year.
The sales funnel is pretty valuable, and they’ll cut you off/derank you if you undercut.
There is also a contract but I don’t think that’s the main motivator.
Restaurants are banned by these services from charging more. So they end up eating the 30% delivery fee.
My accounting is here (I mainly focused on the fee structure but the base food cost is there too)
If we really want to support local restaurants (and give them better chances of post-COVID survival), we should do exactly as stated above: call in to order directly.
Do not give GrubHub, Uber Eats, and similar services a large portion of your order total just for being an easy-to-use middleman. The vast majority of restaurants around today are capable of processing payments and handling pickup/delivery themselves.
While these restaurants fight to stay alive in unprecedented times, the least we can do is put in a bit more effort for an order of food we would have placed and paid for anyway.
Thank for the advice, but I highly value an easy-to-use middleman. How many orders would these restaurants miss out on if they didn't offer the easier option? And it's not just the ease of use (viewing the menu, adding comments, seeing real-time delivery status) but it's that fact that these services offer a centralized way to find restaurants to order from in the first place. I'm not saying I love the current balance of power, but much like with old-style taxi services, the new way is an undeniably better experience for the end user. People will never abandon the easier way, and much like with more traditional boycotts, relying on consumer action is a losing strategy for enacting change.
At the end of the day, would I rather give 30% away to Uber, or would I rather pay directly the restaurant. I prefer encouraging small business, especially RIGHT NOW!
Personally I use postmates, and with all the fees they stick on it, I’ve assumed it didn’t cost the restaurant anything. Does anyone know if this is true?
It's entirely plausible that for many restaurants running an online ordering system/delivery network costs them 20-30% of the order price regardless.
They don't provide a 20% discount from the prices on their own websites/flyers because those are the normal prices.
Then I would be 95% sure to get at least two things in my order wrong, rather than just 50% sure to get one wrong.
(There are several reasons I don't order out, and that's a biggie.)
The margins on restaurants are already very small.
Instead (at least in my experience) charge more for items purchased via DoorDash/Uber Eats.
In effect you get a discount for ordering and picking up.
Say I pay ~$20 dollars total for a delivery including tip. My usual Indian takeout order. A real human spends 30 minutes picking up and delivering my order and makes ~$7 (or a little less than $15/hr but not really since they're not getting a steady stream of deliveries). $4 of that order was my tip for the driver so the delivery service and the restaurant now have to divide up the remaining $9 which is already less than 70% of the menu price of what I ordered.
Unless people start getting okay with paying way more for delivery it's gonna continue being a "squeezing water from a stone" situation.
You can argue that is a free market and restaurants are free to not participate if the cost is too high. Some do, at least some of the popular local spots around me are NOT on any delivery app. But most restaurants also can’t afford to not have this sales channel, especially during COVID. So now they are left in the shitty position of choosing between losing a lot of their orders and losing money on a lot of orders and hope dine in comes back soon.
https://www.theverge.com/2020/1/29/21113876/grubhub-seamless...
That said, I completely agree with the rest of your comment. We just don't want to pay what things are worth.
[0] https://www.eater.com/2020/5/1/21243966/giuseppe-badalamenti...
Anyone claiming that GrubHub is only taking a 30% delivery fee and ignoring all of the other charges they tack on to reduce restaurants' income is simply lying.
edit: reading further, grubhub auto-opts in the restaurants into this promotion. That's scummy, but also exists due to US auto opt-in. I believe in Europe, this wouldnt fly as they need you to explicitly opt-in, not explicitly opt-out after they implicitly opt-in. Scummy, but the american way
edit2: i think the verge, incorrectly reported in late march that restaurants "must" opt-in. from the perks program T+C. "Your participation in the Perks10 Program (the “Program” formerly known as “Supper for Support”) is optional. By electing to opt in each restaurant location identified to the Program, "
so 42% for both "advertising/marketing" (grubhub is providing the order to the restaurant). and delivery. If you link to grubhub from your restaurant's website. The advertising/marketing fee is waived
None of the apps require businesses to offer items at the same price, and if they were to try an do so most restaurants would simply leave that app for one of their many competitors.
Ordering on the phone is very easy. I don't need to make an account, don't need to get out my credit card, don't need to fill out my name, email address, etc. All the restaurants I order from seem to have systems that remember the address associated with incoming phone numbers, so after the first call I don't even need to tell them my address. If I order from a restaurant frequently enough, I often don't even need to tell them what I want, because they remember that too. It frequently goes "Hey, Big Joe's Pies, same as usual?" Yep. "Paying cash?" Yep. "Okay it'll be about 20 minutes." How can fidgeting around with an app compete with that?
I think the only reason this model works is because people don’t actually know what is happening. I think if people knew GrubHub was running restaurants out of business they would consider alternative options.
Given the higher volume provided by Grubhub, I assume using Grubhub is a net positive, isn’t it?
I'm already in the middle of it every time I eat out- having to add an arbitrary tip to the end of the my bill and always get surprised because I'm supposed to sit there and increase everything 10-20% of the menu prices.
Then I order groceries from walmart online and they try to bug me to add a $10-20 tip for every order that arrives.
Screw all of that. If the restaurants are paying too much, then they can figure it out. It's not my problem.. I'm done with it. Just show me what it costs.. telling me to go to the restaurant instead of using a service is ludicrous and pretty much defeats the purpose of delivery.
When I ordered from Costco last week, you know what they did? Increased all their prices so it included all the extra work. That way every item I ordered I could see exactly what I was paying- I didn't have a choice, which is great. I don't want the choice.
Edit: not employee
Some places, like bakeries and ice cream store can let people pick up orders, but food trucks for example can't, they must operate with doors (and windows in case of food trucks) closed and only send orders with delivery services of some kind.
And yes, delivery companies are expensive, a food truck owner I often chat with about business told me iFood charges them 30% of the total value, some restaurants then opt to have high food price, others just charge a lot for the delivery service, even then they might lose money (for example of they charge 5, but you buy only low margin dishes that cost 100, they lose money)
I thought it was the owner not wanting them to take the rip but sure enough there was no sign of GrubHub going there. Calling them resulted in being connected to an offshore call center that said that we shouldn't cancel it is "in progress" but the projection was still over an hour later after we had been waiting 45 minutes. We finally cancelled and went there and got it ourselves. The restaurants I frequent often and know the owners I just call them or use their chow-now powered site. It is much more fair that way. Also saves the unpredictability of the whim of gig workers.
It charges an additional 15%+ for the marketing component (to get your restaurant listed and to appear higher up in search rankings).
In other words, if a restaurant sources their own customer and only uses Grubhub for delivery, they only pay 10%. This charge seems reasonable when compared to what it costs to have an inhouse courier.
Advocating for cutting out the ordering/delivery company and delivery person is akin to cutting out the waitstaff since those are the ones taking your order and bringing it to you.
They seem to have solid coverage in Manhattan.
I think it's pretty absurd that Grubhub and Uber take such a large commission for what amounts to pretty basic software.
But, I bet this site isn't getting much traction because it has no marketing budget (because it makes no profit).
Sure. Why don't you make a competitor then? Get yourself bought for $$$.
My guess is you'll discover it's far more difficult to onboard customers (restaurants are the customers) and consumers than you seem to think. Further, once it's mildly successful, it turns out maintenance is tough.
Edit: Looks like the "in a weekend" assertion was retracted.
I mean... and also an entire international coordinated delivery network, apps that work on all devices, background checks, vehicle registration and checking sites, marketing, huge expensive legal departments, etc. The original algorithm behind Google search was also "pretty basic software" but there's a lot more that goes into building a successful product than writing some code.
So Uber does this but grub hub/seamless does not? The delivery folks who work for the restaurant do the deliveries for seamless and grub hub orders, at least in the NYC area.
Edit: I see now that grub hub has gotten into the business of managing the delivery as well, at least in some cases.
There is no money to be had in actually being on the hook for having the assets to do the work. It's way easier to pawn off the depreciation to the naive sub-contractor, and pocket the middle-man's cut.
This is the key behind almost every commercial "tech" innovation. Exploit economies of scale by positioning yourself to extract fees from transactions that were not previously subject to having fees extracted. If that means facilitating more transactions than otherwise would have before so be it.
Stopping right there is enough seemingly for many business minded folks in the sense that new transactions = good; but I'm starting to realize there is definitely such a thing as toxic transactions, and it seems way more difficult for some reason to get this across to folks.
Then again, I'm getting older,and the rest of the world is becoming by and largeyounger than me. So that perspective may have more to do with me being a poor communicator than anything else.
Why does a local restaurant care about an international delivery network?
apps that work on all devices
If by all devices, you mean iPhone and Android. Some services like Uber Eats are either not available in a browser or offer reduced functionality in the online version of their service.
background checks, vehicle registration and checking sites
It has been demonstrated many times that this is not true.
marketing
Marketing of a third party service, yes. Marketing of restaurants, no. Thus, this point is useless and arguably even detrimental to the restaurant.
huge expensive legal departments
Which does not provide support to the restaurant and thus is useless to the restaurant.
In fact, all these apps offer restaurants are vastly increased costs for minimal if any benefit.
At least for restaurants which don't offer delivery themselves (which is the vast majority), the delivery service may be creating more than 30% of the value of the final product. "A meal delivered to me from any restaurant within about 3 miles" is often a different product than "A meal that I need to spend 20-50 minutes going to and coming back from." Although they're similar, they aren't always substitutes for one another.
Obviously the adoption of delivery speaks for itself, but beyond that, I think if one just asked buyers how much of the value is provided by the delivery company, many or most would say over 30%. The target market does not consider it "just delivery."
- in 2019 Uber threw itself into bike share after cities had success with it.
- Uber scooters followed immediately after Bird scooters
- Uber self driving showed up almost instantly after Waymo.
- Uber eats showed up almost immediately after GrubHub.
Is there anything meaningfully unique this company does anymore?? I mean the self driving truck company they bought basically imploded. its got 22 individual criticisms on Wikipedia everything from murder and sexual assault to tax dodging.
As someone from the UK I've never heard of them (Deliveroo is everywhere here along with Uber Eats).
Healthy companies do not have a large restructuring and then try to burn capital on an acquisition for revenue. Restructuring to be acquired is a different story.
The only answer is that Uber is attempting to monopolize the food delivery market.
Did I get tricked into a Paywall Ad?
I have been debating for a long time of creating a Hacker News feed that filters out specific domains. Bloomberg is on that list without a doubt.
Buy GrubHub, merge it with UberEats, and then layoff all the redundant roles? Without just looking like a sinking ship?
they shouldn't have been trying to inefficiently create uber eats so quickly. so cut out that nonsense, and buy the established player that has probably negotiated better pricing. Uber probably outbid them in a lot of restaurants to get into those restaurants quickly.
There is no dick move here. The only reason you call it that is because we have a society (America) built to give almost no support system to workers if they lose their jobs. The company isn't in the wrong for failing to pay users. Our societal structure is. Our lack of social safety nets, and communally focused behavior is.
We set up a system prone to Americans getting screwed, and then are annoyed when companies screw them? This is our mess. We need to fix it, and not try to pretend companies should be moral. Doing so will only allow them to be immoral and hurt workers.
https://www.kqed.org/news/11812496/uber-and-lyft-arent-payin...
The idea that large companies "just exist" in this system and abide by its rules strikes me as naive. In many cases, companies are making the policies themselves through lobbying efforts. They also influence governing agencies that are supposed to police them. It's called regulatory capture and it's a well established phenomenon.
https://en.wikipedia.org/wiki/Regulatory_capture
So back to this:
> We set up a system prone to Americans getting screwed, and then are annoyed when companies screw them
When the companies are the ones advocating for policies that screw workers and stop lawmakers from creating proper protections, yes, annoyance is a mild way of putting it.
Nope. Lobbying is simply petitioning the government to do things. It can be used for good or evil. All that privacy legislation people like is a result of lobbying by pro-privacy organizations, for example.
Like I mean, come on: https://www.opensecrets.org/federal-lobbying/top-recipients
> Large companies have outsized impact on influence public policy, using bribery aka lobbying. Collectively, billions are spent yearly to influence lawmakers.
Agreed entirely. But the objection wasn't about the root cause for the society system we have. My complaint was about using a moral argument as to why a company should spend their money to provide a social safety net for its workers.
Trusting companies to do the right thing is, at the root, why we are where we are. Companies lobbied for freedoms and the public agreed with it, in the sense that we largely ignored it. We can't be angry at companies for not acting moral. They're working within the freedoms that we allowed them.
But again, I'm not arguing the root cause or anything. Just merely saying that if our only tool in this "fight" is a moral finger wagging, oh boy oh boy will we be in for a quick loss.
This is the part of the argument I'm contesting. I'm not convinced that the public went along with it because companies put forth a well reasoned argument. It's not that we agreed to it, more so that they rigged the system in their favor, despite the opinions of the people.
I think if you poll most Americans, they wouldn't agree that Wal Mart can pay minimum wage and also have employees on food stamps. Or that CEOs should get paid x50 the average worker salary. Or that Amazon should be able to fire employees for trying to unionize. Or that coal mines can dump toxic waste in rivers.
There's actually a huge list of things companies do that are against what many Americans believe, and yet they still get their way. That's my point. The power balance is truly in the favor of the corporate elite. I'm really not sure how much we're letting them do anything, and how much they're just rigging the system the way they want it.
Well that's my contention, that the opinion of Americans only matters as far as they're willing to act.
Americans are pushovers, and if they're not willing to do anything other than share their opinions, what good are their opinions?
It would be like if a Union refused to strike, how much "power" would they actually have? The power of a Union is in the coordinated action of the people, not of the coordinated opinion. Likewise, if Americans refuse to act on this, why would they be listened to?
What's the alternative action for them to take?
The layoffs were in customer support, who - if you think about it - were largely twiddling thumbs due to the large loss of ridership (and therefore, of customer support demand).
It's not like Uber could just magically take CSRs and somehow turn them overnight into roles that were strategically meaningful for food delivery competitiveness.
I can't really fault a company in these circumstances for pivoting toward a model that will enable it to survive the downturn.
And I thought "Sign up for blah news Premium(tm) for 9.99/day or whatever to access the rest of this article" was bad. At least those subscriptions aren't 20k/person/year licenses for financial services/trading software ...
On the cost, one person I know who uses them commented that on any given year they wouldn't have much trouble picking one day where it paid for itself (i.e. that day made the whole year subscription worthwhile).
google, facebook and amazon have clearly died from their acquisitions as well.