New York vs. Grubhub


Seamless, the food delivery service started two decades ago in Midtown Manhattan, calls itself “the most New York app in New York.” In advertisements, the company cracks jokes about the L train and takes unsubtle jabs at New Jersey. “Eat Like a True New Yorker,” one subway ad declares.

But while the delivery giant Grubhub, which owns Seamless, seems to have plenty of affection for New York, that feeling may no longer be mutual.

In June, during a four-hour hearing of the New York City Council’s small-business committee, restaurant owners complained about the high commissions charged by Grubhub and other third-party delivery apps, which usually range from 15 to 30 percent. The service also faced criticism for its recently discontinued practice of creating web domains for the restaurants on its platform.

Senator Chuck Schumer of New York has called for a federal investigation into widespread complaints that Grubhub charges restaurants fees for phone calls that do not result in orders. Although most customers place delivery orders by tapping their smartphone screens, Grubhub allows users to make phone calls through the app, and Yelp listings often include a Grubhub phone number alongside a restaurant’s direct number.

In response, Grubhub has started a website to help restaurants reclaim their web domains and has promised to let owners listen to the recordings of some phone calls that generated disputed fees. On Tuesday afternoon, the company plans to hold the first in a series of “restaurant round tables” in New York to let business owners air their concerns.

Those steps have not mollified the company’s critics.

“I would love for Grubhub to do the right thing and do more,” said Mark Gjonaj, chairman of the Council’s small-business committee. “If they don’t, we’re going to be looking at serious legislation as we move forward that will make this a much more fair playing field.”

New York is one of Grubhub’s top-performing American markets and a crucial battleground in the escalating competition for dominance among the major food delivery apps. But the transformative impact of delivery apps is being felt far beyond the city. As third-party services — including DoorDash, Uber Eats and Postmates, as well as Grubhub and its Seamless brand — become faster and more convenient, they are growing increasingly popular across the world, fundamentally changing what it means to operate a restaurant.

And from San Francisco to Mumbai, the owners of small, independent restaurants complain that the per-order commissions the third-party services charge have cut into already-thin profit margins.

The major delivery companies have long argued that apps expose restaurants to new customers, allowing small businesses to tap into a network of tens of millions of online users and to benefit from the advertising muscle of multibillion-dollar companies. Katie Norris, a Grubhub spokeswoman, said the service drove “incremental sales” — bringing in customers who would otherwise stay home and cook.

“The incremental sales and traffic with higher average checks more than offset commission rates,” she said.

But that has not been the experience of Anil Bathwal, who runs the Kati Roll Company, a New York-based chain specializing in Indian street food.

Mr. Bathwal did not have a large-scale delivery operation when his chain signed up with Seamless, and he said the service had initially brought him new business. But over the years, third-party delivery has grown to account for as much as 30 percent of his sales, as existing customers — those who used to eat at the restaurant — have started using Seamless instead.

“As time goes by, more of my existing customers are being cannibalized,” said Mr. Bathwal, who estimates the delivery service has reduced his overall profits by 2 to 5 percent.

The third-party delivery apps vary in their approaches to calculating commissions. While Uber Eats levies a flat rate, Grubhub charges restaurants higher commissions in exchange for better visibility on the platform.

That system could change in New York. Mr. Gjonaj said the small-business committee was considering legislation to regulate commission rates. In August, the New York State Liquor Authority proposed a policy that could effectively put a cap on commissions charged to restaurants with liquor licenses.