To stay relevant and reach a broader audience, many independent restaurateurs are jumping on the online ordering bandwagon. However, partnering with third-party sales processing and delivery companies, such as Grubhub, isn't a cut-and-dried decision. The best way to determine if an online ordering and delivery service is right for your restaurant is to understand how these types of deals are structured and how the actual ordering process works.
For the sake of simplicity, we will use Grubhub as the primary example. For years, the company was the leader in market share, and its revenue has risen each year since it went public in 2014. Thus far, Grubhub has purchased Seamless, Yelp's Eat24, Delivered Dish, Restaurants on the Run, LAbite, Dotmenu, AllMenus and Campusfood, among others.
Of course, there are other services that have grown significantly in popularity in recent years (especially during the pandemic), like DoorDash and Uber Eats, that you may want to consider using. That being said, if you are new to the restaurant delivery service game, Grubhub is a good place to start. Here's how the restaurant partnership program works.
What is Grubhub?
Grubhub is an online food delivery application that connects customers directly to restaurants. Customers can use Grubhub's app or website to place an order for takeout or delivery. Grubhub partners with over 300,000 restaurants in more than 4,000 cities in the United States to make food delivery easier for both the restaurant and the customer.
How does Grubhub work?
For consumers
Customers can access Grubhub through the company's website or mobile app. After logging in, they can look for a specific restaurant or a certain type of food, such as Mexican or barbecue. Once a customer has placed their order, they enter their preferred payment method to complete the sale. Customers have a variety of payment options, including credit cards, debit cards and PayPal.
After a customer pays for their order, they can see real-time updates in the app to know when their food will be ready and the time it will be delivered. They can track the delivery driver on the app and communicate with the driver directly in case anything comes up.
For restaurants
Once a customer completes their order, it is sent to the restaurant's dashboard. The restaurant's staff confirms their ability to complete the order and sends the customer an estimated time of arrival through the app. Then the restaurant starts to prep the order to be picked up by either the customer or the delivery courier.
The end-to-end process for a restaurant is essentially the same as having an in-person customer. The only extra step is to confirm the order through Grubhub's restaurant dashboard before beginning to cook it. Restaurants may decline an order if the food is unavailable or they are understaffed.
For delivery drivers
After the restaurant confirms the customer's order, the Grubhub app alerts the delivery driver closest to the restaurant. Once they accept the delivery, the driver should arrive at the restaurant as quickly as possible to pick up the food. As soon as the restaurant completes the order, the driver takes it to the customer. The driver can contact the customer directly in case of delays. The customer can give a tip that the driver collects once they finish the delivery.
Features of Grubhub for restaurants
Grubhub offers many benefits and features for restaurants through its dashboard. As the restaurant manager, you can calculate your sum total with the dashboard's point-of-sale (POS) solution to make accurate transactions. You can generate bills and invoices for online orders to make your restaurant's accounting process easy. The dashboard also lets you connect with drivers and customers to provide updates, instructions and customer support.
How Grubhub's restaurant partner program works
Commission rates and sponsored listings
While many online services claim that their restaurant partners increase sales by using their platforms, the major online restaurant delivery players tend to avoid the topic of commissions. Grubhub, for example, does not list commission rates or averages anywhere online.
To get an idea of how the commission structure works, I called Grubhub and asked about their restaurant partner options. I was told that a restaurant's location and how many other restaurants are in the area impact the rates. I explained that I was in New York City, in a neighborhood densely populated with restaurants, and the sales rep said the lowest commission for a sponsored listing would be 20%. When I pressed them for the least expensive option, Grubhub said that restaurants in the NYC area could receive a commission rate as low as 15%, but that's for a non-sponsored listing.
Here are the differences between a non-sponsored listing and a sponsored listing.
- Non-sponsored listing: For a 15% commission rate (again, this is in my area of New York City; inquire about your local rates), your restaurant will appear on Grubhub, and customers can place orders digitally. However, since the listing is non-sponsored, your restaurant will not be prioritized in searches and may not appear for several pages. This shouldn't be a problem if your restaurant is popular in your area and people know you're on Grubhub, but if your goal is to increase publicity by joining a food delivery service, it may be an issue. Non-sponsored listings may work better for businesses in rural areas or small towns, since fewer restaurants are listed and the reduced competition increases the chances your non-sponsored listing will be seen.
- Sponsored listing: For a commission rate of 20% or more, your restaurant will appear on Grubhub and be prioritized, which means it will show up higher in searches. However, where your restaurant appears on the page depends largely on the competition for listings in your area. For a more favorable position, many restaurants offer more than the 20% commission; if a lot of restaurants in your area do that, you may end up paying for a sponsored listing without getting the desired results. You're essentially bidding against other restaurateurs for a top spot, and according to the representative I spoke with, it's not uncommon for restaurants in densely populated areas to spend 30% or more for better spots on the page.
The best thing about the sponsorship program is how flexible it is. There are no long-term contracts, and restaurant partners can increase or decrease their sponsored listing rate at any time.
Delivery rates
It is possible to be listed on and process orders through an online ordering site without paying for delivery. Restaurants with their own delivery personnel, for instance, do not pay for delivery services, but those without them will be charged an additional fee for it.
Grubhub charges 10% per order for delivery services, which brings the total cost to a minimum of 25% on every purchase for restaurants that use Grubhub's ordering and delivery services in my area. Restaurants that opt for non-sponsored listings, in addition to delivery services, will end up paying a minimum of 30% commission on every purchase, at least where I live.
To get an accurate idea of what your costs will be, reach out to a Grubhub sales rep and ask what the commission rates are in your area. [Read related article: Hidden Costs of Restaurant Marketing]
Processing delivery orders
There are many order processing options for restaurants that sign up with Grubhub, and a POS system is not a requirement. Once an order is received and confirmed, it must be manually entered into your POS (if you have one) or otherwise copied into the format your restaurant uses for orders.
At no extra charge, you can add an Order button to your existing website, which automatically allows orders to be placed and processed online. This feature is invaluable for restaurants with a big following and a high-traffic website, because Order button sales are not charged commissions, just delivery fees (if applicable).
Editor's note: Looking for the right POS system for your restaurant? Fill out the below questionnaire to have our vendor partners contact you about your needs.
Processing and payment from Grubhub
The workflow for paying Grubhub commission and receiving payments through Grubhub is simple. At the end of each week, Grubhub participants receive a direct deposit in the amount of the total orders received, minus the cost of their listing (and delivery, if applicable). The representative I spoke to said that tips are clearly outlined for each transaction so that staff can be compensated properly. Restaurants that decide to work with Grubhub should consider how this remittance process may affect other business payments.
What to consider before choosing to partner with Grubhub
While there are many benefits to partnering with Grubhub, there are some drawbacks as well. Grubhub asks restaurants to pay a high price to be part of the service, which can impact their profit margins. While a non-sponsored listing may not cut into sales too much, it might make the service not worth it for customers.
Restaurants also worry that using Grubhub may cannibalize their own sales. While the service can bring in new customers, many will not be going to the brick-and-mortar locations in person. This can result in a loss of sales for items typically ordered onsite, such as drinks.
Bottom line on Grubhub for restaurants
Grubhub, and services like it, offers tremendous functionality to restaurants (including some light analytics), but since costs vary by location and sponsorship level, it's impossible to make a blanket recommendation.
As with any business service, the more hands-on you are as a business owner, the more you will get out of the product. If you join Grubhub at the lowest non-sponsored subscription level, add an Order button to your website, and then promote your online ordering capabilities to your legions of established eaters, you will probably make money using Grubhub.
If you think getting your restaurant on Grubhub will pull you out of a slump or replace other marketing and promotional avenues, you will likely be disappointed. The best course of action is to sign up at the lowest level of service, work independently to promote your business, and perform a cost-benefit analysis after a few months.
Sean Peek contributed to the writing and reporting in this article.