Services like Grubhub offer a significant amount of convenience. The tradeoff is that food delivery can often be more expensive than ordering food from a restaurant.
People might wonder why GrubHub is so expensive today! GrubHub seems to be over priced. This can be justified if you know how much they pay their delivery drivers, or if the delivery drivers are also charging you for their fuel.
Why Is Grubhub So Expensive In 2022?
Grubhub is expensive because it tries to make money from as many people as possible. This means that they need to make their food costs as small as possible. This puts them in the position of having to rely on a lot of people to order and pay. This means that they have to collect a lot of money from those people in order to be profitable.
To find out why Grubhub is so expensive, we’re going to take a look at the business of food delivery, because the problem lies in the business of delivery. We’re going to start by talking about how the business of food delivery works and how some of that affects the pricing for Grubhub. We’ll then show you how Grubhub has made all of its profits through its fees — and how much of that is made by you, the consumer.
1. Grubhub Has To Make Money Without Tips
All tip money is split by delivery driver and then split between the driver and the restaurant.
While Grubhub takes a cut from each order, that is not what it’s main goal is about (this is more of a side-effect). Instead, Grubhub is basically a delivery service. If your restaurant has good food and you have a lot of orders, you might not have to take as many orders per day as you otherwise would.
2. Grubhub Has To Show Its Investors Growth
Grubhub has a large number of owners and stakeholders that are invested in the company, and they want to see positive ROI (return on investment).
Most notably, Just Eat took over Grubhub for more than $7 billion, and it helped them reach profitability faster.
As a new method, it has been criticized for being too expensive.
The more customers Grubhub signs up, the more money it makes. So it can’t afford to let revenue drop, which is what happened in the second quarter.
3. Grubhub Has To Account For Third Parties
Grubhub also has a partnership with Square which handles payment options, however, as always, you can check out the fine print on their terms and conditions.
It’s also important to keep in mind that you will pay a lot more, for the same food, when you eat out.
4. Grubhub Can’t Rely On Delivery Fees
Most restaurants have their own delivery business and are not on Grubhub. They can pay Grubhub for delivery or charge delivery fees to customers.
So the company doesn’t really earn enough money from delivery fees. So since there’s limited income it has to raise prices elsewhere.
5. Grubhub Has To Account For Taxes
Food delivery apps have to pay state and federal taxes to maintain operations, and the cost of these regulations is baked into their fees.
One of the main reasons why the restaurant industry relies on Grubhub is because of the low cost to place and deliver orders.
6. Grubhub Charges You For The Convenience
GrubHub operates a business model that allows you to buy food and have it delivered by someone else without too much hassle on your part, and GrubHub charges a premium for this.
Although GrubHub charges you for the person’s time through tips, it is a platform that facilitates the whole thing, which carries a price tag of its own.
7. Grubhub Has To Account For Certain Laws
A couple of years ago, Congress passed a law to prevent the government from investigating companies like Uber and Airbnb, but it didn’t affect those businesses.
The company’s founders, who met in college, in 2001, started the service out of the living room of a house in Redwood City.
The company went public in 2012 and has since raised over $1 billion.
While this does indeed provide a short term solution to the problem, it can also be a long term problem – as this practice will only cause the prices to continue rising for people who are already struggling to pay their existing price.
In 2020, California voters passed Prop 22, which affected how drivers who work at Grubhub get paid.
This has been a contentious area in the United States where many startups fail, and the government has been trying to pass laws that help protect the consumer from food delivery apps.
8. Grubhub Allegedly Forced Restaurants To Make Food Expensive
The lawsuit filed against Grubhub is about restaurants and their inability to make food cheaper if customers order it on their mobile app.
Not only do they have to make everything very expensive, but they also charge a lot of money for customer support.
9. It’s Expensive To Operate In Your Area
Although it is expensive for users to order through Grubhub, it is a cost effective method for restaurants to advertise on the platform.
If you’re in a rural place then Grubhub charges the restaurants a rate that’s lower than the restaurants would charge you. If that’s not fair you can raise a complaint.
Grubhub is now at a high point in their business, and they need to keep the price high to remain profitable and keep the business up.
This means that restaurants will have to increase their prices to cover the added expense of paying for the groceries they receive off the platform.
The supply chain is also broken when it comes to the people who are on the receiving end.
If we have to charge all these fee every time we deliver food, it can be very expensive, and that’s why Grubhub is now charging more to deliver food.
I don’t see anything wrong with this. The fact that they have to charge more (even for delivery) is not a sign of greed. It is an understandable business decision. There is nothing wrong with this.
The Grubhub’s fee is fixed according to the current market price [in the US] at the time of the sale. (I asked an employee of Grubhub about this.) So, you need not worry about making a mistake in the calculation. However, for the convenience of customers, the Grubhub accepts online payments or cash payments [in US dollar].
Grubhub is expensive because it can’t control how much it charges restaurants to deliver food to their customers.
You may or may not have a higher cost of living in certain cities, but the inflation rate is high in many places, making food cost more expensive.
- How Does Grubhub Make Money? (all You Need To Know)
- Does Grubhub Markup Prices? (are The Menus More Expensive Than In-store)
- Does Grubhub Markup Prices? (Everything To Know!)
- How Far Does Grubhub Deliver? (What To Know!)
- How To Use Cash Value On Grubhub? (What To Know!)
- Is Grubhub Free? (all You Need To Know)
- What Is Grubhub Plus? (how It Works, Benefits + Other Faqs)
- Is Grubhub Profitable? (all You Need To Know)
- Grubhub Plus Benefits (Is It Worth It?!)
- Does Grubhub Work In Canada? (What To Know!)