Ordering in a restaurant can be very expensive, but the same happens if we order by delivery to bring the food to us wherever we are. Different fees are charged to cover the company’s and Grubhub partner’s expenses.
Customers are dissatisfied that they pay more than the cost of their order. Many of them wonder about the reasons for the increase in the final price of the purchase.
Why does Grubhub charge extra on every order?
If you are wondering why Grubhub is so expensive, the answer lies in the additional taxes and fees to cover expenses the company charges. This amount varies depending on different factors that cause prices to increase considerably, which is the responsibility of both the company and the restaurants.
Delivery fees
Restaurants decide whether or not to use Grubhub’s application to make deliveries or to hire their delivery drivers, which is detrimental to the delivery company, as delivery rates are set entirely by the restaurant itself.
It implies a significant loss of revenue, so finding other ways to raise money is necessary, leaving aside some delivery fees.
Grubhub needs to prove it is a growing company
Each company has several investors to whom it must be accountable, so achieving a profit increase would stimulate the confidence of those who invested their money.
Just Eat Takeaway bought Grubhub for over $7 billion in 2020. These investors were betting on great growth for Grubhub, but they were not as successful as expected. That is why the delivery company needs to profit from wherever it can to recruit new investors and keep them involved.
Tipping losses
Grubhub’s delivery drivers get 100% of the tips that customers give them, representing a loss for the company, as this money does not add up to profit.
Taxes
The highest fees charged by Grubhub are those for federal and state taxes. Users are responsible for paying these fees, which increase frequently.
As an external factor, taxes made Grubhub so expensive in 2022, as the company does not control tax percentages; they will have to pay these taxes. However, what they do control is the direct income from users.
Paying third parties
By being affiliated with different companies for payment methods, such as Visa or Mastercard, an additional charge is collected from each order to cover the cost of third-party services. Of course, it is the users who must pay this extra fee.
Remote or luxury zone
Additional fees are charged depending on the location from which the company receives an order. The more luxurious and high social class areas will have to pay more for the processing, the quality of the products, and, of course, the delivery tips.
For example, the order’s final price will not be the same in a Hollywood residential neighborhood as in South Central.
Inflation
One of the factors that will always be present in any company (and in any area of life) is inflation. However, in the last two years, it has increased significantly due to the economic crisis caused by the pandemic. That made restaurants and Grubhub even more expensive; therefore, users are affected by higher pricing.
Penalties
Being a company that provides “freedom”, delivery drivers were (and still are) exposed to theft or accidents that could occur during their work. It was one of the reasons why Grubhub has had to pay compensation to comply with the law.
Also, several transactions and movements are contrary to the law, such as controlling the money earned by each delivery driver in a working day. What better way to cover these expenses than by charging users for cash that should come from the company’s wallet? Let’s see one example below.
Why did Grubhub become so expensive?
One of the main reasons why Grubhub increased its price is the additional fees charged according to the location to which they deliver the food and the money for the food products that make up each menu.
As mentioned above, Grubhub pays fees for the delivery service and delivery to the customer, which is about 70% of the final cost of each order. While Grubhub is expensive, its prices are on par with other home delivery services, such as Uber Eats, Seamless, or Doordash.
So, the company charges the restaurant and the user a percentage of the final amount of each order. That varies between $1 and $12. Still, it all depends on promotions, location, and the final cost of each delivery.
How much money does Grubhub charge restaurants?
The fees Grubhub receives from food venues are due to:
- Processing: Grubhub charges the company $0.30 (3.05%) for using the platform to ship orders to its users.
- Marketing: A 20% fee for each order.
- Shipping: This depends on the location, promotions, and the items the user orders. Generally, a 10% fee for each order.
References:
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Peterson, Melanie. “Is DoorDash Cheaper Than Grubhub in 2022? Which Is Better?” ConsumerGravity, 27 Oct. 2021, https://consumergravity.com/is-doordash-cheaper-than-grubhub/.
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Helling, Brett. “GrubHub Costs: A Waste of Money or Worth Every Penny?” Gig Worker, 27 Oct. 2021, https://gigworker.com/grubhub-costs/.
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“Why Is Grubhub so Expensive – Seekanswer.” Seekanswer – Seekanswer, 2 Aug. 2022, https://seekanswer.org/why-is-grubhub-so-expensive/.