Grubhub’s $10 off promo forces restaurants to front the discount costs while being charged full commission

Technology

Grubhub announced last week that, between the hours of 5 to 9 PM, customers could order takeout or delivery through its platform and receive $10 off orders of $30 or more. It sounds like a good deal, until you realize that while Grubhub is promoting the offer on behalf on restaurants, it’s also contractually forcing those business owners to eat the cost of that discount for every eligible order. (Disclosure: my parents are restaurant owners that list their business on Grubhub / Seamless.)

Under Grubhub’s Supper for Support program terms and conditions, the fine print says that while restaurants must opt into the program, they also have to agree to fund the $10 discounts — or roughly 30 percent off the cost of one order if the customer just meets the $30 minimum. On top of that, they must allow Grubhub to charge them commission for the total cost of the order before the discount. The full agreement is here, but the key passage reads:

I also understand and agree that (a) Restaurant will fund the full cost of redeemed Promotions, and (b) Grubhub commissions may be charged on the non-discounted product total rather than the amount paid by the customer.

If the business owners want to opt out, they have to send in a form for every location if the restaurant has multiple locations, and wait two days for processing.

Though Grubhub is upfront with businesses about the terms, the move is being criticized as an attempt to profiteer from business partners that are struggling under the nationwide measures to limit the spread of the novel coronavirus. Restaurants have been forced by these measures to indefinitely close or to reduce their service to takeout and delivery only. To continue operating, businesses have had to rely on online services like Grubhub, Doordash, Caviar, Postmates, and UberEats to assist with orders and deliveries, although many restaurants are urging customers to help them avoid fees by ordering direct. (Grubhub says it will postpone charging commission fees to independent restaurants in select cities, but will eventually still collect them at an undisclosed time.)

When reached for comment, Grubhub told The Verge the promotion is helping boost sales for restaurants. “Grubhub is always looking for ways to increase sales for its independent restaurant partners, especially during these critical and challenging times. The optional Supper and Support effort does exactly that. In fact, local restaurants that chose to participate in the optional initiative have, on average, seen a more than 20 percent increase in the number of orders they have received as well as overall sales,” a spokesperson said. The company did not elaborate on why it has chosen to pass on the discount costs to restaurants while also billing commission fees on the non-discounted total.

The coronavirus pandemic has devastated the restaurant industry with no end in sight, leaving restaurants with few options. Though the US has passed a federal loan program to help keep small businesses afloat, loanees are still expected to pay the money back with interest. Provisions for loan forgiveness include rehiring full-time employees by June — a seemingly difficult task in states hardest hit by the pandemic like New York, New Jersey, California, and Washington.

Grubhub’s Supper for Support promo comes days after Yelp was also criticized by restaurant owners for using the crisis as a PR move. The online reviews site last week began setting up GoFundMe campaigns for small businesses, but failed to inform or receive consent from those businesses. Both Grubhub and Yelp have been in hot waters over the past year after employing various tactics to upcharge businesses commission, from creating fake domains that resemble real restaurants, listing restaurants that haven’t yet agree to partner, and swapping out phone numbers for Grubhub-affiliated ones to bill higher commissions.