Should Your Restaurant Be on Grubhub?

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 order takeout or delivery. Grubhub partners with over 365,000 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?

Most users know how to order their favorite food through Grubhub, but may be less familiar with how the company partners with restaurants and drivers.

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 receive real-time updates notifying them when their food will be ready to pick up or 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 estimate on when their order will be completed and delivered through the app. Then, the restaurant preps 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 cooking it. Unlike serving an in-person customer, restaurants may decline orders if they are understaffed or the food is unavailable.

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. When 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 choose to tip the driver once their order is delivered.

Features of Grubhub for restaurants

Grubhub partners with many restaurants nationwide and provides various services and solutions to meet restaurateurs’ needs throughout their business lifecycle.

For restaurants with new Grubhub listings:

• Grubhub Marketplace curates restaurants based on customers’ searches. The Merchant Welcome Kit includes marketing materials, a tablet to start taking online orders and the opportunity to schedule a free photoshoot to promote your menu.
• Grubhub Delivery allows restaurants to enlist a licensed Grubhub driver to deliver online orders to customers.
• Grubhub Dashboard offers many benefits and features for restaurants. By integrating Grubhub’s point-of-sale (POS) service, restaurant managers can make accurate transactions and generate bills and invoices to simplify their restaurant’s accounting process. 

For restaurants looking to expand:

• Virtual Restaurants feature allows brick-and-mortar restaurants to create a delivery-only menu. The restaurant staff prepares the orders, and Grubhub’s drivers deliver.
• Loyalty and Promotion tools allow restaurants to attract their target customers and retain them with free marketing tools.

For restaurants looking to grow their digital presence:

• Grubhub Direct is a branded online ordering platform all eligible restaurants on Marketplace can integrate into their existing websites for no additional fee. The platform includes ordering and delivery capabilities and the ability to update the online menu automatically.

How Grubhub’s restaurant partner program works

Joining Grubhub’s Marketplace can help put your restaurant on the map, figuratively and literally, but there are costs associated with the service:

Commission rates and sponsored listings

Grubhub offers a variety of commission rate models to cater to your restaurant’s needs. To understand how the commission structure works, business.com contacted Grubhub and asked about their restaurant partner options. The sales representative stated a restaurant’s location and how many other restaurants are in the area impact the rates. For example, in New York City, in a neighborhood densely populated with restaurants, the lowest commission for a sponsored listing would be 20 percent. Grubhub also said restaurants in the NYC area could receive a commission rate as low as 15 percent for a nonsponsored listing.

Here are the differences between a nonsponsored listing and a sponsored listing.

• Nonsponsored listing: For a 15 percent commission rate (again, for 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 nonsponsored, 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. However,  if your goal is to increase awareness and patronage by joining a food delivery service, it may be an issue. Nonsponsored listings may work better for businesses in rural areas or small towns since fewer restaurants are listed. The reduced competition increases the chances of your nonsponsored listing being seen.
• Sponsored listing: For a commission rate of 20 percent or more, your restaurant will appear on Grubhub as a prioritized listing, which means it will appear 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 pay more than the 20 percent commission. If restaurants in your area do that, you may pay for a sponsored listing without getting the desired results. Much like optimizing your website for search engines, you’re essentially bidding against other restaurateurs for a top spot, and according to the representative, it’s not uncommon for restaurants in densely populated areas to spend 30 percent or more for a better listing.

The best thing about the sponsorship program is its flexibility. 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 delivery personnel, for instance, don’t need to pay for that service, and those without delivery drivers can opt into the service for an additional fee.

Grubhub charges 10 percent per order for delivery services, which brings the total cost to a minimum of 25 percent on every purchase for restaurants using Grubhub’s ordering and delivery services. In the New York City area, restaurants that opt for nonsponsored listings and delivery services will end up paying a minimum of 30 percent commission on every purchase.

To get an accurate idea of your costs, contact a Grubhub sales rep and inquire about the commission rates 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 required. Once an order is received and confirmed, it must be manually entered into your POS (if you have one) or 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).

Processing and payment from Grubhub

The process of receiving customer payments and submitting your commission percentage 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). Tips are clearly outlined for each transaction so that staff can be compensated properly. Restaurants that partner 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 also some drawbacks to consider.

The risks

Grubhub asks restaurants to pay a high price to be part of the service, which can impact their profit margins. While opting for a nonsponsored listing is more cost-effective, depending on your geographic location, it could render the service ineffective. Restaurants in densely populated urban locations may have to pay high commission rates to be discovered easily.

Restaurants also worry that using Grubhub may cannibalize their sales. While the service can bring in new customers, only some of those will visit the brick-and-mortar locations. And fewer in-person customers can result in a loss of sales for items typically ordered on location, such as drinks and other add-ons. Additionally, if diners have a poor experience through Grubhub, there’s little to no recourse you can take to rectify the situation.

The rewards

While there are potential risks to consider, partnering with Grubhub can have several benefits for your restaurant. Joining the service can expose it to a new demographic of diners, including tourists who might not have otherwise discovered your establishment and foodies looking to try someplace new. 

Grubhub can also positively impact your restaurant’s bottom line. Listing your restaurant can immediately increase the number of takeout orders you fulfill, adding to your revenue stream.

To help restaurants continually bring in new diners, Grubhub also offers customizable marketing opportunities and loyalty promotions that restaurants can implement to grow their online client base.

Should your restaurant be on Grubhub?

Grubhub and similar service providers can offer tremendous benefits for your restaurant (including some light analytics). Still, making a blanket recommendation is impossible since costs vary by location and sponsorship level.

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 nonsponsored level, add an Order button to your website and promote your online ordering, the service would probably benefit your restaurant.

If you think listing your restaurant on Grubhub will work miracles or replace other marketing avenues, you’ll likely be disappointed. You can always test the service, too. You can purchase the lowest level of Grubhub’s services and independently promote it. After a few months, perform a cost-benefit analysis to determine if the ROI is worth it to your business.

Mona Bushnell contributed to this article.