The United States of Grubhub: No turning back for the restaurant industry
When I first moved to New York City in 1995, I was enchanted with urban delivery "culture". I could pick up the phone and order a pie (that's what New Yorkers call a pizza) or some Kung-Pao Chicken. The restaurants knew me by number and name when they answered, knew my favorites, and they'd throw in an extra soda because I tipped well.
They would also charge me exactly what they charged walk-ins. And they were quick - at my door in 20 minutes, sometimes shockingly less. I'd tip the delivery person with whatever cash I had left from my day in the city, put the game on, and all was good in the world.
These days, things are different. Now, I pop open the Grubhub app, tap the screen three times, and wait in silence. Forty minutes or more later, an overworked delivery person shows up, hands me my food, and is gone before I can thank them. No tip (that was already paid in the app), no hello, just a cold transaction.
At least the game is still on.
At first, I loved Grubhub. It was easy: I didn't have to talk to anyone on the phone, the app already had my payment information (no one carries cash anymore). I also enjoyed seeing new restaurants pop up on the app - it encouraged exploration.
And gone are the annoying menus slipped under the door, a ratty collection of them in a kitchen drawer. It's just all so clean and easy.
But it's changing the restaurant industry for better or for worse, and there's no turning back.
Grubhub is now just about everywhere, at least in populated areas. The map above shows Grubhub-enabled restaurants with a population density overlay (click here for a larger version).
And the interactive map below shows Grubhub-enabled restaurants, larger circles representing cities with more restaurants.
Grubhub wasn't the first company to attempt to move into the food delivery service. But it's become the most popular, mostly because of its ubiquity (see above) and its simple pricing model for customers. Instead of charging customers a delivery fee, it charges restaurants a percentage of the total bill. Restaurants have pushed back on this model, saying it eats into profits, some even citing it as a reason that they've had to close or change their business models.
Last spring, I spoke to chef and restaurant entrepreneur Eric Greenspan, owner of several LA chains that have opened and closed utilizing multiple business models.
“[Grubhub] takes 30 percent,” he said. He eventually gave in to delivery for his popular Greenspan’s Grilled cheese but instead decided to use Uber Eats. At least with the Uber Eats service, he said, costs were minimized and cash flow was maximized.
Uber Eats and upstart Slice are more transparent with their fee structures, the former charging customers a straight delivery fee and the latter disclosing exactly how much it costs restaurants compared to Grubhub. Meanwhile, Caviar is going after a more high-end market for those who say, "If you have to ask how much, you probably can't afford it."
Grubhub, meanwhile, has countered by allowing restaurants to charge a delivery fee in order to offset costs.
But none of this appears to be hurting GrubHub. In fact, things appear to be going quite well internally at Grubhub.
Employees appear to be happy, if Glassdoor ratings tell us anything (and they usually do).
Similarly, employee rankings of both their CEO and GrubHub's business outlook are increasingly positive.
And if anyone knows anything about how well things are going at a company, they would be its employees.