What Restaurants Need to Know About Grubhub Partner Growth Tactics

Nov 7, 2019

Will Grubhub's partner growth strategy hurt restaurants?

The third-party restaurant delivery market has been changing rapidly, and certain providers are getting desperate to keep the sales coming in. There’s been a huge backlash among restaurateurs, consumers, and even governments against the fees that Grubhub and other third-party apps charge. Meanwhile, technology industry observers are questioning the benefits of the “growth at all costs” business model on which so many delivery apps depend. All of this is leading Grubhub to make changes to its partner growth strategy that could harm your restaurant. Here’s what you need to know.

Grubhub is now listing “non-partnered” restaurants.

“It’s a bad experience for diners, it’s a bad experience for drivers, it’s a bad experience for restaurants.” – Grubhub CEO Matt Maloney

During their most recent earnings call, Grubhub’s leadership acknowledged that increasing competition among third-party delivery marketplaces has been making business more difficult for them. One strategy they’re using to address this problem is to deliver meals from restaurants that don’t even work with them.

Rather than approaching your restaurant and asking to partner with you, this tactic involves Grubhub uploading your menu and information to their site. When a customer wants to place a Grubhub order from your restaurant, Grubhub will have a driver either call it in or place the order in person. The driver will pay you with a Grubhub-provided debit card, and then deliver the meal to the consumer.

Grubhub CEO Matt Maloney stated that the app has been testing this strategy for some time. He comments, “We’re scaling aggressively, we have tens of thousands of non-partnered restaurants already listed.”

With this model, rather than charging your restaurant steep commissions, Grubhub passes all the costs on to the customer. This financial arrangement might sound appealing at first, but it causes severe operational and branding headaches for restaurants that get caught in Grubhub’s web.

Grubhub’s partner growth strategy takes advantage of restaurants—whether or not they work with Grubhub—while creating additional hardships for consumers and drivers. Even Maloney admits, “It’s a bad experience for diners, it’s a bad experience for drivers, it’s a bad experience for restaurants.”

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How does this affect your restaurant?

If you’re not a Grubhub partner…

When it comes to the non-partner ordering and delivery experience, restaurants aren’t in direct communication with Grubhub or their customers. This makes the process ripe for misunderstanding and disappointment.

If your restaurant isn’t a Grubhub partner, you won’t have any dialog with them about how to build your online menu. You may serve certain items that simply don’t work for takeout, or others that typically come with a dozen modifiers—none of these concerns are taken into consideration. Changes to your menu likely won’t be reflected on Grubhub’s site, meaning that customers could find themselves ordering dishes you haven’t served in two years, or expecting to pay prices that you used to charge all the way back in 2001.

Drivers who now have the responsibility of ordering their customers’ food are taking on additional work for the same or similar pay. They operate as middlemen without your knowledge. If your restaurant has to 86 a dish, for example, it’s the driver who communicates that to the customer and attempts to manage their expectations—not you.

Diners then have to pay more for orders that take longer to arrive and are more likely to be inaccurate. It’s probable that they’ll direct their complaints to your restaurant, including your Yelp page and social media profiles. 

Throughout all of this, Grubhub gathers data about your customers while denying your restaurant any direct connection to them. You have no idea who they are or what they like, you can’t market to them effectively, and they become loyal to Grubhub instead of you.

Here's why you need a restaurant ordering app.

If you are a Grubhub partner…

If your restaurant is among the many that do knowingly partner with Grubhub, you’re also at a disadvantage in this arrangement. After all, you’re paying Grubhub for the same services that other restaurants are getting for free.

One Grubhub partner who was interviewed by the New York Post complained, “We are paying these commissions to Grubhub to be promoted on their platform, and yet they are posting menus of restaurants that are not paying them. I feel this could bury us because Grubhub is saying, ‘We’ll add any restaurant now.’”

So why is Grubhub pursuing something it knows will upset restaurants and degrade the customer experience? Part of the answer is simply that many other apps have done it, too.

See how one restaurateur saved over $100,000 and grew sales by 138% by switching from third-party marketplaces to ChowNow’s commission-free online ordering platform.

Read Case Study

Grubhub isn’t the first app to list non-partnered restaurants.

In the company’s October 2019 letter to investors, Grubhub notes that “listing restaurants on platforms without any partnership allowed other players to expand restaurant inventory rapidly.” It’s true that a select number of other third-party delivery apps, including Postmates and DoorDash’s restaurant marketplace, have been doing this for years.

You don’t have to look hard to find stories of restaurants frustrated by these practices. In-N-Out Burger filed a lawsuit against DoorDash’s restaurant marketplace for listing their locations and delivering their food without permission. One pizzeria in Reno, Nevada contacted Postmates 40 times, asking to be removed from their platform. In response to one Seattle restaurateur’s complaints, Postmates clarified, “We’re a pick-up service representing the customer; we’re not a delivery service representing the restaurant.”

Of course, Grubhub’s stated end goal isn’t to anger operators. In fact, the company is hopeful that restaurants will sign up as Grubhub partners after getting orders through this new method. In the words of one Grubhub rep, “We believe there’s a benefit to partnering with restaurants and we’re deploying a sales team to try to convert these restaurants to partners, because it’s a better experience for anyone involved…We think when we add restaurants they’ll see orders, and see the benefit of the Grubhub platform.”

What should your restaurant do?

Grubhub has stated that it will quickly remove any restaurant that contacts them and asks to be taken off their platform. Unfortunately, this places the burden on you to proactively monitor Grubhub’s listings and to keep an eye out in-store for Grubhub drivers.

It’s worthwhile to educate your customers about this issue and ask them to order directly from you, whether that’s via the phone or your branded, commission-free online ordering system.

Remember, your restaurant has a voice. After all, according to industry analysts, one of the key reasons why the delivery app market has become more challenging for giants like Grubhub and Uber is that “more restaurants are taking delivery back under their control.”

Want to take charge by getting a commission-free online ordering system that’s branded to your restaurant and gives you complete control over your customer data? Schedule a call with a ChowNow online ordering specialist today.

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