How some third-party delivery services are hindering the restaurant business

Delivery isn't a bad thing to offer, but for restaurants, some delivery services can mean bad business for them

MADISON, Wis. — We all enjoy the convenience of getting food delivered to our homes. But, the easy meals for us come at a cost to restaurants, depending on which delivery services you’re using.

Patrick Riha owns Beef Butter BBQ in Madison. He said he has been using third-party delivery services to help his business stay afloat during these difficult times.

“We prefer to see our customers,” Riha said. “We do have a drive-up service that we prefer them to use, but if they need delivery, Eat Street and other companies do provide a valuable service.”

Many restaurants like Riha’s that don’t offer their own delivery service rely on third-party businesses. While it helps restaurant owners manage their workload better, it can be seen as a double-edged sword for others.

“It’s seen as a bit of a necessary evil for restaurants,” said Kristine Hillmer, CEO of the Wisconsin Restaurant Association.

Hillmer said some third-party delivery services are listing restaurant menus on their site as an option for customers without the restaurant agreeing to a partnership.

“Some of these third part deliveries will grab old menus, they will put it on their website and say we deliver for these restaurants and there’s no relationship with the restaurant,” Hillmer said.

Restaurants end up getting the short end of the stick when inaccurate menus, inaccurate prices and a service charge for the delivery service are dumped on them at the time the order is placed.

“You might think that you’re supporting your local restaurant,” Hillmer said. “It’s not necessarily supporting them because sometimes the dollars that the restaurant is given doesn’t even cover their expenses.”

Although some delivery services participate in these business practices, CEO and co-founder of Eat Street, Matt Howard, said his Madison-based service always gets permission from restaurants to establish a partnership where both sides reap the benefits.

“There are companies in our industry that will list restaurants menus without prior permission. That is not something we do at Eat Street,” Howard said. “We want to make sure we work with each individual restaurant to make sure they are successful and they want to be part of the platform.”

Riha said Eat Street even gave him the option to maximize the revenue from delivery orders.

“We up the menu prices about $2 per meal for the outside delivery companies to help cover the 30% charge that the delivery companies charge the restaurants,” Riha said.

“That’s a very good thing because the restaurant is controlling who is delivering their food and the mechanisms and there’s a relationship there,” Hillmer said.

News 3 Now reached out to several other third-party delivery services to ask about their business practices of taking menus from restaurants that did not agree to partner with them. Grubhub responded with this statement:

“We have a dedicated sales team that identifies restaurants to add to our marketplace, but restaurants are able to reach out to us as well if they want to be added via our self sign up process. Starting in late 2019 in select cities across the country, we’ll add restaurants to our marketplace when we see local diner demand for delivery so the restaurant can receive more orders and revenue from deliveries completed by our drivers. This is a model that other food delivery companies have been doing for years as a way to widen their restaurant supply, and we’re trying it as well to create a level playing field. We believe partnering with restaurants is the only way to drive long-term value in this business – and have only added non-partnered restaurants to close the restaurant supply gap created by our competitors. 

If a restaurant prefers not to be on our marketplace or needs to change any information like menu items or hours, they should reach out to us at restaurants@grubhub.com, and we’ll work as quickly as possible to make necessary updates or remove them.”

Hillmer said the best thing a customer can do if they want to support their favorite local restaurants is to call the restaurant directly and ask which service or method of delivery will support them the most financially.