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Why Restaurants Hate GrubHub Seamless
I had heard grumblings about GrubHub Seamless (they merged in 2013) for many months, but not until a Tribeca restaurateur recently vented in detail did I realize that the company warrants a deeper look. It has made ordering delivery much easier for consumers, and restaurant owners acknowledge that business would be dramatically lower without it. But the cost is substantial, and restaurants—already feeling the pinch of high rent, increased wages, and so forth—no longer believe that the company is on their side. Indeed, with no formidable competitors, GrubHub Seamless isn’t afraid to flex the extraordinary power it has over restaurants that offer delivery.
“If I stop using them, tomorrow I close the door.”
That’s a quote from one of the 15 local restaurateurs who agreed to talk anonymously about their experiences with the company. Note: GrubHub Seamless also owns MenuPages, Allmenus, Restaurants on the Run, DiningIn, and Delivered Dish; and from here on out, for simplicity’s sake, I’ll refer to it as Seamless.
The commission system
Seamless takes a percentage, not a flat fee, of the total food and beverage amount, even though its involvement is the same whether an order is for $10 or $250. (In April of 2014, under pressure from the New York Attorney General, Seamless agreed to stop including gratuity and tax.) Restaurants can choose from four commission levels (12.5%, 15%, 17.5%, and 20%); the more a restaurant pays, the higher up it will appear in the search results. When you search for restaurants on Seamless, you may have noticed that, in the default view, the results appear to be random, but they’re actually arranged by who paid what. (And unlike with, say, Google search results, there’s no disclaimer.) You do have the option of sorting by other criteria—restaurant name, price, rating, distance, delivery estimate, or delivery minimum. Only the name and distance filters appear to be unaffected by the commission.
This explains why Seamless floods the results with so many restaurants, including ones farther away than your typical delivery zone. The more results there are, the harder it is for a restaurant to stand out—which makes restaurants likelier to pay more to increase their exposure. Is it cynical to think that this may also be why the company has been less then vigilant about cracking down on false listings?
“If you choose the lowest option of 12.5%, you are really relying on people who will already search for you, as you’ll be at the bottom of the list and you might not get any new customers.”
“We started with 15% but we were not found by our guests. They often asked why they couldn’t find us at all.”
But even a 20% commission doesn’t guarantee restaurants much of anything. To show up on the first few pages of search results, they have to pay much more. The percentage is determined by what competing restaurants will pay, and because the process is opaque, restaurants have no choice but to trust that Seamless is not manipulating the rates to its own advantage.
“Their sales rep makes it perfectly clear that you need to pay a minimum of 20% to exist, and the more you pay, the more you appear in the first pages. Even by paying over 30%, we’re only on the second or third page. So some restaurants pay even more than that! But we could feel the difference when we jumped from 15% to over 30%: We multiplied by 10 our orders from day 1. We don’t make money on Seamless, however. Thirty percent is our break-even point. But it’s helpful for marketing—maybe a customer will try us and then come back in person.”
“I don’t know why anyone would pay anything other than the minimum, because what’s the point of paying 17% to get on the seventh page of results?”
The commission structure particularly galls restaurants that do a lot of corporate business. In a brilliant move, Seamless effectively cornered the delivery market by offering corporate accounts that allow employees who work late to order through Seamless, but only after a certain hour and up to a certain dollar amount. The companies get billed directly and the employees don’t have to go to the trouble of getting reimbursed. And many companies now insist that their employees use Seamless for late-night meals.
“Before Seamless I had a thriving delivery business with Citigroup. But now the only way I can get that business is via Seamless—which takes 12% off my revenue.”
The fees
So if a restaurant is paying a commission of 20% or less, it’s solely using Seamless to facilitate the transaction; the marketing component is negligible to nil. And even though all Seamless is doing is taking the order and charging the credit card—something that might reasonably be covered in a 12.5%-20% commission—it tags on a credit-card “processing fee” of 3.05% plus 30¢ per order.
“Compare that to the 2.7% we pay credit-card companies on transactions at our restaurant. And because Seamless is huge, it gets an even better rate than that.”
“The 30¢ doesn’t sound like much, but 100 orders a night adds up to $30. That’s $210 per week—which is $10,290 per year—on top of the 3.05%.”
A best guess is that Seamless, with the purchasing power all large companies have, only pays credit-card companies around 2%. As for the 30¢ surcharge-on-a-surcharge, those nickels and dimes add up: Seamless “processes an average of nearly 242,000 daily orders,” according to its website; since those are nearly all credit-card orders, the 30¢ charge totals more than $70,000 per day.
There are two other fees worth noting. The first is a $1 “transaction fee” that a restaurant must agree to in order for Seamless to release its money more frequently than monthly. (The maximum is once per week.) Compare that to the 48 hours or so that restaurants have to wait to be paid for their own credit-card transactions. UPDATE: “Restaurants that are paid electronically are paid on a weekly basis, without the $1 fee you referenced,” says a GrubHub rep. “The $1 fee you mentioned is only applicable if restaurants want to be paid on a daily basis (which would be faster than the average 48 hours you mentioned, that restaurants have to wait to be paid for their own credit card transactions).”
“Even then, we are still financing Seamless for one full week.”
“You rely on cash flow when you own a restaurant, and if you don’t have it, you can’t exactly ask your vendors to wait.”
The second fee is a sort of finder’s fee. Every listing includes a phone number that is not the restaurant’s phone number, although if you call it, you will be forwarded to the restaurant. It’s a dedicated number that Seamless uses to track—and record—orders placed by phone, so it can charge restaurants what it judges an appropriate fee (even though the restaurant takes the order and runs the credit card itself). That is, if there even is an order.
“They charge us a minimum of $3 for any call under 30 seconds. If the call is longer, the fee can be up to $7. And at the end of the month, we have to go through all the calls, listen to them, and tell Seamless which calls did not result in orders. Then they’ll refund the fees for those calls. As a small restaurant owner, that is time I don’t have.”
UPDATE: “We charge the same marketing fee (the commission percentage you referenced) for phone orders as online orders,” says the GrubHub rep. “Our algorithm determines whether a call results in an order; the length of the call is one factor that goes into that determination. The review system is in place so that if our algorithm makes a mistake, we can rectify that with the restaurant.” Apparently, this vetting of the phone fees can only be done long after the call was made—so restaurants can’t hang up the phone and invalidate the fee just because someone wanted to ask if, say, there are peanuts in a certain dish.
All of this really starts to hurt
How much do restaurants pay Seamless over the course of a year?
“Roughly $110,000 per year [for two restaurants]. I know, it’s crazy.”
“Last year the total fee was over $110,000.”
“A monthly average of $15,000.”
Not all responses were that high, but even at half those amounts, you can see how it takes a toll. Especially since….
The technology stinks
Seamless and GrubHub were founded in 1999 and 2004, respectively, and yet they still haven’t found a way to integrate their current technology into restaurant point-of-sale systems—or even into a single tablet. (Then again, why would the company want to free up space for a competitor’s tablet?) Corporate orders are directed to what used to be the Seamless tablet and personal orders—which there are generally many more of—to the inferior GrubHub tablet. Restaurants have to monitor the tablets for orders, and then manually integrate them into their systems. Moreover, Seamless does not give restaurants the ability to change their own listings. Instead, they have to call or email if they want to add or remove an item, update prices, and so on.
In other words, Seamless has one job—to take the order and run the card. And as you’ll see below, it does a terrible job of it.
“They are responsible for changing menu items and prices, not us, and even then there is always a problem. It can take 10 minutes for a person to pick up the phone, and it takes many weeks for them to get it right.”
“The service department is non-responsive and when we change our menus sometimes it takes them a month to update them, resulting in guests ordering items that we no longer provide.”
“The system malfunctions on occasion so an order will not print. You get the call from the customer and you have no idea what the order is. Then you get a negative review which further impacts your business (in addition to having to offer a discount or complimentary item).”
“There have been multiple occasions when we have been listed as closed, or do not receive any orders even though we are open.”
“Since the merger, they seem pretty confused internally. Five times in the last month we have notified them that we were not offering delivery for a night—due to a private event or simply being closed—and they failed to close us on the system, so we got orders that we couldn’t fill. It causes chaos on already busy nights, lets down our customers, and makes us look bad.”
“I’ve had instances where Seamless has changed our prices to cheaper ones than on our menu, so we’re actually losing money.”
“Restaurants always take the blame.”
Restaurant owners report varying levels of success in getting Seamless to make up for its technical failures, whether it’s by contacting customers who were affected or covering the cost of the meal. Either way, the owners resent the extra effort necessary to goad a response out of the company.
“If they take such a high commission, they should take more responsibility when problems arise.”
How can you help?
Most restaurant owners would very much prefer it if you called in your order, not least of all because it saves them at least 15%. If you’d really rather order online, see if you can do it via the restaurant’s website; you’ll often receive a discount if you do (because even the extra 5% or 10% off is probably less painful than Seamless). And there are direct competitors to Seamless—such as Delivery.com, Eat24, Epicure—that take less of a cut, although they have less traction in the market.
Paying cash is always welcome, because it eliminates the credit-card fee. (Personally, I try to tip in cash. It stays under the table, and the credit-card companies don’t get 3%. This goes for dining at restaurants, too.)
“I understand that people order Seamless for the convenience of a push of a button, and they don’t want to wait on the phone while ordering. However, it would help tremendously if guests called the restaurant and ordered directly. It is painful to have to share 17.5% of your already nonexistent profit just to process your payment. For small businesses, this is a big deal.”
“I wish customers would realize that these websites are more for trying new things. They’re easy and convenient, but what starts as a ‘taste test’ turns into doing it because it’s easier. Our website actually offers a 10% discount and most restaurant websites keep your information secure so you can log in and order without having to put all of your information in again and again. At the end of the day, if Seamless is used by one person more than four times for the same restaurant, it just becomes a money-sucking leech.”
Seamless does allow restaurants to add a “delivery fee”; don’t be surprised if you see it pop up more often, in an effort to pass along some of the costs. Restaurants, for their part, might also want to consider incentivizing customers to call in orders by offering a discount and streamlining the process as much as possible.
The future
The food-delivery world is in a period of upheaval. Seamless is facing serious competition from the likes of Caviar, Uber, and Amazon; the latter two are said to be charging restaurants a 30% and 27.5% commission, respectively (and Uber customers will pay a $5 fee), but they’re removing a significant hassle for restaurants by handling the delivery.
And a number of companies—such as Maple, Munchery, and Savory—are offering delivery from commissary kitchens rather than restaurants. Seamless is already allowing “virtual restaurants” to be listed on the site. What’s more, it has invested in at least one, Green Summit. As CEO Matt Maloney said in Crain’s, “We absolutely want to continue supporting virtual restaurants through our ordering platform, by driving orders their way, and we would seriously consider any other opportunities to directly support virtual restaurants with this structure.” Remember, more restaurants in the listings means more restaurants willing to pay a higher percentage to appear near the top.
As a public company, GrubHub Seamless faces pressure to grow and squeeze out more revenue. And perhaps because its universe is changing so rapidly, it appears to be prioritizing short-term earnings growth, harming its relationships with restaurants in the process. All of us who have come to value the company over the years should hope that it will realize that restaurants are on the brink of revolt—and that it’s vulnerable to a savvy competitor who understands that. If the margin on delivery orders continues to shrink, restaurants will be tempted to ditch Seamless. They’ll have nothing left to lose.
UPDATE 4/6: A reader pointed out another aggressive scheme of GrubHub Seamless’s.
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68 Comments
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Great piece of journalism, Eric. FWIW, after a couple issues when ordering via Seamless, I’ve sworn off using them for quite a while now and order directly.
I agree. It only took one Seamless experience for me to stop using them. Now I always call the restaurant directly.
I prefer to order online but will only do it when it’s through the restaurant’s site, and I don’t know of any who still do that (Gigino is one example that had a very good online ordering system until they went Seamless).
They send me coupons for 10 off 15 first time orders….then I just make a million fake accounts and get a meal that was 16.50 for 10 less….LOL WIN!
After reading this article, I’m ashamed to admit that I love seamless. I had no idea they took such a big cut out of the restaurant. I always just assumed it was a more reasonable 5-10% or a flat rate.
Literally one of the funniest pieces of ostensible journalism I’ve seen in a while. Completely misses the fact that consumers use this platform to find food and order it easily, so its really crazy these restaurants have to cater to how their customers procure food? Also bizarre that the article takes the implicit perspective that its Seamless’ fault (or whoever the platform provider is) that there is competition amongst restaurants to be in front of those customers!
As a restaurant investor, have found that paying to boost presence on Grubhub is a great way to build up awareness and traffic (delivery and in-store).
Just like the phone book, no-one is forcing restaurants to be on Grubhub, eat24 or any of these other services.
You are obviously only a restaurant investor who cares about dollar signs and not someone who works with the system all day every day. You really have no idea what you are talking about. If you don’t use the system or care about individual customer satisfaction and only care about advertising and numbers than this article was not for you and you should probably not comment on something you know nothing about.
Go Work with Seamless/Grubhub at your restaurant 12 hours a day for a week and give them a call once or twice and then come back and make an intelligent comment.
You clearly do not “work” in a restaurant.
So if a restaurant doesn’t use seamless, it has to shut down. If it does use seamless, it get gouged. I wish the restauranteurs would make up their minds.
The primary way neighborhood people decide which place to order from is repeat business, which Seamless makes very easy. The way to get repeat business is with quality food and quality delivery service. If not, we look elsewhere.
Which of our neighborhood restaurants fit that bill for you? It would be interesting if the owner of one of those spoke to Erik.
I agree. I refuse to use GrubHub and Seemless and now I see that I am smart for doing so
Though we order from Seemless on occasion, I usually phone the order in or go in person for take out. I knew Seemless took a large bite from the restaurants, but had no idea it was this high. Going forward I will use seemless much less frequently. Thanks Erik for this outstanding article.
sigh… yet another example of rentiers building a parasitic business model on the backs of entrepreneurs. thanks to erik for the heads up
I hate Grubhub and Seamless, as someone who worked for restaurants for years, it is shameful how bad their customer service treats restaurants and customers. All those hidden fees really hurt restaurants. Personally, I prefer delivery.com, they offer a good delivery service and they charge less to the restaurants.
Not a fan of Seamless. But restaurants need to give an incentive to call directly or order online directly. If you give me 10% off my order for ordering directly, I would be happy to do it, but I haven’t really seen that. All businesses have to adapt and change. Its easy enough to do as they send out the orders and could easily slip a flyer in the bag and then let you know online that you can order with a discount.
“If the margin on delivery orders continues to shrink, restaurants will be tempted to ditch Seamless. They’ll have nothing left to lose.”
I am neither a user of Seamless nor a fan, however there is an element missing from the discussion of the economics here. Seamless orders can bring substantial additional business and new volume that helps to cover the fixed costs of rent and labor (if the kitchen and delivery staff are not running at full capacity.) These fixed costs are a large portion of a restaurant’s overall costs. Unlike food costs, these fixed costs are difficult to adjust and reduce in the short run. If each Seamless order remains sufficiently profitable to cover the food costs and some portion of the fixed costs, it is helpful to that restaurant.
This only works for restaurants if the Seamless orders bring incremental (new) business, without harming the existing business. As others have noted, to maintain overall profitability, restaurants need to motivate existing customers to order directly from them (whether by phone or through the restaurant’s website) as one element of the value of a loyal customer base.
You are a moron!!!! The revenue generated is only incremental. The restaurants are still making a lot of money! If they don’t want more orders than dont pay!!! No one is holding them hostage!! We are sending them incremental volume!!!! Without GH many of them would close!!
“We”?
Postmates is another alternative to Seamless that is becoming more popular among restaurant owners. Instead of the restaurant employing a delivery fleet and Seamless charging a percentage of the owner, the cost is borne by the customer and the delivery fleet is independent (like Uber).
Uber is new. So yeah the fees are okay now. But once/if they get traction they’ll be competitively priced like the big guys.
Postmates isn’t great. They deliver for restaurants they have no contract with (which isn’t a great experience for me or the restaurant). On of the side effects of that is your order has to be confirmed by a “postmate” (driver) before it actually gets placed. The first time I ever tried to use Postmates, I gave up after waiting six minutes for the order to go through (I got stuck at the “contacting postmates” spinner). Also, their website is pretty, but it’s pretty bad functionally.
GrubHub has its own delivery service too: https://www.google.com/search?q=grubhub+delivery+service&tbm=nws
The website is pretty difficult to navigate, but you can get delivery from some great places if you dig around. I haven’t had issues with it, but it is definitely more expensive. I know several restaurant owners who like it a lot.
I use Caviar for the occasional Blue Smoke. https://www.trycaviar.com/manhattan I wonder what their fee structure is like…
Caviar is by far the worst for both sides. They charge a 17% fee to the consumer. A 25% fee for the business.. Plus a ~$3-$8 delivery fee depending on distance..
Uber is a mess for both drivers and the riders if you look into it deeply. Postmate, Doordash,seamless/Grubhub and other companies alike are all nothing but disruption for the hard working restaurant owners. InstantOrdering.com provides similar services for restaurant owners while protecting brand loyalty. Customers can order with a few clicks and restaurants get their payment within 48hrs. The commission is only 5% regardless of monthly volume etc.
I don’t get the problem.., the restaurants have a choice. No one is forcing them to use the service. Plus,they only pay when an order is placed. So if seamless isn’t doing their job then the restaurant pays 0. Plus you’re not locked into the rates, you can adjust them to find something that fits your personal business needs.
I am surprised to see so many morons defending GrugHub. I guess that is why they are business. The comments have exhibited no awareness for spotting highway robbery created by monopolies.
I use Seamless, but I also try to call restaurants directly because I realize there is a large cost to them. Nationally the take rate for Seamless is around 14%. It might be higher in NYC where there is more competition for eyeballs, but that is fair. “Monopolies” don’t get created overnight or without some competition – unless we are talking about bond rating agencies, but I digress. Seamless and grubhub were challenged before by each other (before they merged) and by delivery.com. They will continue to get challenged by everything from the phone to caviar, munchery, blue apron, maple, uber, postmates and others. It’s a market. If their pricing (take rate) is too high there will be competition and the price will get competed down naturally. The reason people use it (other than corporate users who are forced) is because they provide a valuable service. It aggregates most of the available options and is much faster. I called dirty-bird this week to make an order because I couldn’t figure out how to set it for pick-up on my phone and they put me on hold and the transaction took 3-5 minutes to communicate. I would have rather done it on seamless.
Maybe we need the city to come in and provide a seamless like service for free. I’m sure they would do it efficiently. The government has a great track record with technology: http://www.theatlantic.com/technology/archive/2015/11/why-dont-we-know-where-all-the-trains-are/415152/
Local restaurant owner here.. I wonder what the appetite is for a coalition of local restaurant owners against Seamless. If every restaurant in the area agreed to participate in a No Seamless/Grubhub week, coupled with a joint marketing campaign to the community residents and businesses, what would happen? If we all agreed to not pay anything more than 14%, would we all appear on the first page for a given delivery radius? We’re getting played here, and it’s on all of our minds. Erik, fantastic article.
I like to order online because I feel better that my order has a paper trail that I can follow up on. And then re-order from at a later date. Instead of boycotting, I think a good campaign would be to have all the local restaurant businesses move over to a competitor who is charging a reasonable fee. Then Seamless will be left with only the hundreds of Chinese restaurants with their 2000 5 star ratings.
I like Seamless for the clarity. I probably wouldn’t be very likely to switch to direct phone ordering but I would absolutely use a different online method. I usually go to Seamless with a particular restaurant or cuisine in mind so the pagination is meaningless to me.
How large will the first page have to be to accommodate everyone?
This is simple economics
I find it fascinating that businesses pay so much extra to be placed at the top of the default sort on Seamless. Is that really worthwhile? The first thing I do when I use their app is to change the sort to ‘sort by restaurant name’. If I relied on the default sort, the app would be useless to me.
This was the worst article i have ever waisted my time reading – the author might want to proof read this article again and maybe have a few other people read it over before publishing it because ultimately the point the author is trying to make gets passed off and becomes irrelevant seeing that the entire article is about how American businesses operate – not just this one. There is no underlying cynical work being done to restaurants that we should be up in arms about – they know exactly what they are doing when they sign up to be apart of that company – no ones forcing them to be on the site. I recommend finding better topics with more legitimate, newsworthy material behind them before writing another pointless article and waisting readers time again. Thanks.
Taylor, you have every right to disagree with substance, of course. And one expects minor errors in texting as part of the speeded process. But if you nitpick, proofread your own work before complaining about someone else’s:
waist is where your torso bends; waste is the stuff you dump in the garbage and so has been used in such sayings as “wasting time”.
wait, seamless isn’t just like foodler? don’t they pick up the food from the restaurants and deliver for you? where I live, we have foodler and its the best. I have over 50,000 foodler points which tells you how much i order there.
seamless is great but i also use munchado.com for certain restaurants in nyc which aren’t on seamless. you can even earn $30 by using their referral offer: munchado.com/referral
I agree. Munch Ado is the best there is at the moment
Local restaurants are awesome, but regarding phone orders – one point not mentioned here is the quality of the people picking up the phone. There is one reasonably high quality restaurant on Greenwich Street whose order-taker literally cannot pronounce the items on the menu. Listening to this person sound out the names of pasta specials for the night would be high comedy if not for the fact that I actually want to understand what dish it is that I am ordering. To owners, hire the right staff for the job. Make it easy and convenient and friendly and I’ll happily call in orders. Maybe try a CRM that stores phone numbers, addresses, credit card info, past orders – maybe even a little loyalty program. Imagine if your order taker said, “Hello, Mr. so-and-so, thanks for calling again. Would you like the usual?” It’s a two-way street. If you want customers to value your business and not treat it as a transaction, pay it back!
I will totally admit that I prefer the ease, immediacy and clear communication of ordering via the web. However, I had no idea that Seamless was so aggressive or non-restaurant friendly.
I’ve seen some companies, like Dig Inn, switch over to offering online ordering through their own website and I tend to use these website portals if they are available.
I realize that this is an investment for a restaurant to set-up – but it would also give them greater control and synchronization with their other systems.
Thank you for this article. I’ve been told on many occasions from the delivery person that we can order from Odeon’s website for 10% off. We’ve never done it before because Seamless just seemed easier, but based on your article, we will start today (everywhere we order from). We should all support our favorite local restaurants – or see them disappear as so many good ones have lately.
We order from Odeon’s webside frequently and it works fine.
FYI – The Odeon uses ChowNow
“The Odeon
AMERICAN
‘Our favorite part of ChowNow is that it actually runs behind our own website, very efficiently, but our brand stays at the forefront.’
Roya Shanks, Floor Manager”
See video testimonial at: https://vimeo.com/101324962
“The Odeon restaurant testimonial presented by ChowNow. The Odeon explains how they increased sales and customer loyalty by using the ChowNow online ordering system”
OR
https://www.chownow.com/testimonials-reviews
i closed my restaurant 4 years ago and i STILL Get emails and calls from Grub Hub/Seamless with orders for food
occasionally ill get a call from seamless asking why i havent filled an order..
it’s comical. worse than yelp.
I recommend restaurant owners use a commission fee free system like ChowNow. I used to work for Two Boots pizza and they switched last year, but I’ve seen smaller restaurants that use them too. Whoever mentioned building a local restaurant coalition against seamless has a great idea – but your customers all want the convenience of ordering online. What about some sort of neighborhood website that features each restaurant and their own, direct ordering link and phone number, etc?
Great piece of writing. We finally get to hear what restaurants think about these gian marketplaces that are built to please consumers with little focus on the restaurant’s success. Reminds me of the daily deal sites.
We can only hope consumers start to realize how they are hurting their favorite local eateries by using these marketplace websites.
ChowNow has been working hard in NYC and other cities across the country to educate consumers about ordering direct from their favorite restaurants to help them keep their hard earned money and maintain a great relationship with their customers.
These restaurants need to work with restaurant minded partners like ChowNow to stand up against the big marketplaces. Hopefully they will phase out just like the daily deal sites did.
Thanks for the post!
CHownow will not be able to compete or offer the restaurants a solution to compete with seamless becuase it doesnt aggregrate all the restaurants in one place. Chownow can be for repeat customers, however getting new customers is what aggregation list is for. All restaurants in one place.
Again, I am no fan of Seamless, but they created a solution to solve a problem. They spend millions to develop a platform and millions to market it. They are a business that has found a niche in the food delivery space. This is similar to what google does with advertising. You practically can’t launch a business these days without buying ads on google. If they don’t provide consumers and businesses with value, they will go out of business.
Restaurants can chose not to use them if the costs become prohibitive. I don’t think people will abandon Seamless because their rates to restaurants are high. Restaurants can only rely on so much good will from customers, they will need to create better incentives for non Seamless orders.
Seamless barely makes a profit in spite of all the price gouging you describe. It costs a lot of money to run a business. And the writer doesn’t seem to have any morals of his own – tipping in cash so that it remains “under the table”
Unbelievable!
If after reading this article and understanding the economics, “Seamless barely makes a profit”, then all of us restauranteurs
are on the wrong end of the equation. Gimme a break! Cost overruns and high overhead is indeed the bane of the greedy e-commerce sector. I’m certain they’re not paying their algorithms a “living wage”.
Following up on the above post. Just for kicks, I called one of my favorite restaurants today to order. What a disaster. The order taker spoke little English. Did not understand my street name (Chambers) despite four attempts.
The crazy part – five minutes later, as I was about to give her my credit card number, she says “cash only”!!! Mind you, this business IS on Seamless. Incredulous, I had to ask, “should I just hang up and order on Seamless”? She asked the manager. Finally took my number. Got it wrong. I had to give the manager my credit card number directly. This was a 6 minute phone call (timed on the phone).
So let’s see, on my phone experience, to quote Erik T, “the technology stinks”.
Seamless sounds like the mob.
The standard rate for restaurant delivery services to deliver food is 30%. Most of this goes back into marketing the restaurants.
Thanks for the article. Interesting to learn how much restaurants pay to seamless (in some cases $100K per year). But what would be more helpful to know is how much incremental revenue that comes with?? i.e. at a 20% commission rate that tells me they are bagging an extra 500K in revenue from delivery orders?
That is a lot of volume that i don’t think can realistically be driven by just phone and or smaller competitors. Also would be good to know how much a resto would have to spend on marketing dollars just to get that increase in volume/revenue as a comparison.
In general agree that fees could be lower but i also don’t really see what the restos are complaining about as there is clearly value being delivered. What am i missing??
Ok, here’s some craziness I just found:
One of my favorite local restaurants is Yaar, which recently opened in Astoria. It’s rare that I order for delivery, and Seamless has always left a bad taste in my mouth, so I like to go to a restaurant’s website and see what they link to for ordering delivery.
I did a quick search for Yaar’s website. Google’s first result was http://www.yaarindianrestaurant.net The site didn’t look like a site, though. There was no real information, just menu items and a link to order online. Then I scrolled to the bottom of the main page and saw: “© 2015 GrubHub Holdings Inc.”
I went back to Google and found Yaar’s true website, http://www.yaarindianrestaurant.com – which linked to Eat24.
But seriously, how screwed up is it for Seamless to buy the .net version of Yaar’s website address and pretend that it’s Yaar’s official website? And then pay Google to be listed before Yaar’s actual website? They’re seriously tiptoeing the line between self-advertisement and fraud.
That’s insane! Has anyone seen this for another restaurant? (To be fair, it’s not clear that GrubHub paid Google for a higher search ranking; it’s likely just better SEO optimization.)
That is crazy! I checked whois.com and sure enough, GrubHub owns this domain. I feel a class action lawsuit coming at some point in the future. Despicable. http://www.whois.com/whois/yaarindianrestaurant.net
It’s possible that this is a service GrubHub offers to restaurants (it’ll set up a secondary website as long as orders to go it). I’ll contact Yaar and see what I can find out.
I like using Munchado.com, it’s like ordering locally from a food magazine.
I have a heavy takeout/delivery restaurant located in a heavy take-out/delivery area of Brooklyn for the past 5 years. Seamless really exploded about a year and a half after my business started.
I fought Seamless for a long time. I witnessed a complete change in the landscape of ordering. My business just shifted to Seamless and I saw it as a new and increasing expense, essentially like Seamless was stealing my customers. (not as incremental business I never had)
After a while I stopped fighting it and just accepted it. I always paid the lowest commission and still did a high volume of business. They’re a necessary evil but have a greedy business model. A fairer fee structure would be to charge a high % for new customers, say 50%, and then a low % for repeat customers, 5%. But they’re driven by the bottom line, so I get it.
Eventually you need to raise prices, put a delivery fee on, etc etc. They changed the game, so you either can survive with them or you can’t. But I will say one thing, it is next to impossible to get people to stop using Seamless and order through your site. I use Chownow and have offered discounts and no one cares. People want everything in one spot, and Seamless does that for ordering.
I have been trying to order directly since reading this piece and some restaurants make it very difficult. One saved its “no credit cards for deliveries” caveat until the check out page, another required registration via email and the link never showed up and yet another had an order minimum on their site that they don’t have on Seamless. Have some friends try out your website–the ordering process might not be as simple as you think.
That’s a good point. Chownow is a great option for adding online ordering to your website. I’ve tested them a number of times. Pretty much identical to Seamless; once you initially register (through facebook/google/regualr name and pw) then everything is much faster after that. But now you’re asking customers to go to individual sites for restaurants to order versus a one-stop platform like Seamless….hard to overcome that convenience.
@mike – What sort of marketing do you do to drive repeat business from those actually using ChowNow? Do you notice that they stay with you once they order direct or do you feel like they stray off and order next time from Grubhub or whoever is pushing a deal?
Thanks for this article. I have no idea why people are defending seamless as if you are totally bashing them. It’s obvious that you simply giving ‘the other side’ of the story.
My husband and I have just opened a business and have filled out a form to be contacted by seamless but have yet to be contacted a week later. I myself have used seamless and it’s many platforms as a consumer and have had both horrid and great experiences. While we wait to ask seamless questions directly, it was nice to read this piece of work so that we know exactly what to ask. We will ultimately weigh our options but it’s nice to know just how bad the cons are.
Erik, well-researched article. Lemme give you three reasons I use seamless:
1. Repeat orders. I can’t be bothered to talk on the phone when I can simply reorder on Seamless. It’s hard–I have an accent and, most likely, so does the guy at the other end.
2. Diet diary. Seamless, with the frequency at which I use it, has become a record of what I consume. “Sad, lonely life” you might say? Well, you all are welcome to join me ;)
3. Specialization. I believe in “value chain disintegration” to use a big phrase for the small person that I am. Restaurants cook and deliver, Seamless sources and brokers. This can only raise the quality bar (better food, anyone?) to the point where good restaurants can get out of the web of Seamless, commanding enough of a customer base that walks in or orders by phone or using other restaurant-friendly ways. Until then, they pay the devil its due.
Now, all of you, please spare me your harsh criticism and incisive analyses. I am just a tiny person enjoying July 4th at home and getting ready to order from Taco House (does the restaurant have a second name now? Is that even allowed?) on Seamless.
Adios amigos … Happy Fourth!
Pinky JJ
You should check out recoursenyc.com. I just spoke to the guy who created it. He launched Grubhub in NYC and la in 2008 and is now doing a seamless with 0% commission and no monthly fees. He seems on his game, but let’s see what he can do
Thanks for this article. I never realized Seamless was so predatory. I’ll call the restaurants henceforth. It doesn’t take any longer, anyway, given the number of times I’ve had problems with the Seamless site.
Hi, This is a nice article but it does miss out on the one very basic aspect of consumer thinking, cheap and ease. There are not many who talk about consumer responsibility today. I believe if you liked the restaurant it is your responsibility to share that with people. And most don’t realize that the consumer is the also one being harmed in the process. The only way for a restaurant to sustain is price increase and then the consumer suffers! If seamless is bad then groupon is a killer (well it actually killed a lot of restaurants!).
What do you think is the future of local economy?
Can someone tell me why people need to go to sites just to order food? If the restaurant has a website, what is so difficult about going to that restaurant’s website and calling in the order? If the restaurant has online ordering on its site, what is so difficult about going to the restaurant’s website and ordering online there?
Are you really saving any mouse clicks by going thru seamless and grub hub? Of course not.
Grub Hub and Seamless provide millennials with what they desire most – the ability to complete a task without having to talk to another human being. My Friday night Il Brigante order currently takes three clicks (“Past Orders –> Express reorder –> Confirm”)