Introduction: What is Grubhub?
Grubhub is a company that deals with online food delivery services. It operates in about 1,600 cities across the United States and the United Kingdom. They have over 14 million users and work with about 80,000 restaurants. In this article will see, Why is Grubhub so expensive?
The Grubhub pattern of business is to serve both Customers and Restaurants. And this pattern of business has been successful for quite a long time.
How Does Grubhub Make Money?
•Delivery fee:
What is Grubhub’s delivery fee? 20-40%. Customers are happy to pay this percentage in exchange for Grubhub’s high-quality service.
Furthermore, users don’t mind paying this amount of money to acquire food as long as Grubhub delivers the food in the comfort of their homes. Grubhub takes a little percentage of the delivery fee and pays it to the delivery guys.
•Commission fee:
Grubhub charges a 12.5 percent basic commission on all orders. Grubhub’s income comes primarily from this percentage. Although commission fees might range from 5% to 15%, the standard rate is 12.5%. This money is split between Grubhub and the restaurants for both to gain.
•Excess commission:
This additional fee is applied to restaurants in the same category. The order of ranking will determine the commission to be paid; it could be from 2.5%, 7.5% to 17%. The additional commission is only taken when restaurants are featured on-demand, and customers have no input.
The Working of the Grubhub App
Some processes are carried out by Grubhub in the smooth running of their businesses. To begin with, Grubhub created an app that will connect the restaurants, the customers, and the delivery guys. The moment an order is placed, packaged, and ready for delivery, a notification will be sent to the respective individuals.
These are the processes involved;
: Search for items;
Customers can choose from a variety of restaurants for their next meal. They’ll order food using the Grubhub app, which has options like ‘nearby’ and search.’ The software also allows users to order from a specific location by manually selecting it.
: Make a purchase;
Users can specify multiple settings and preferences for delivery and payment options while placing an order.
: Prepare and packed;
The restaurants selected by the users receive the order and make the meal. They notify the delivery guys to pick it up after carefully packing it.
: Done;
Grubhub’s delivery team will deliver the package once it is ready.
Why is Grubhub so expensive;
Grubhub is expensive for many reasons that have to do with the need for profitability as of 2022. What you pay on Grubhub at the end of your order includes several fees that are affected by several other factors. Grubhub prices go up depending on internal targets and in response to external influences the company can’t control.
1. Charges from Third Parties;
Grubhub’s payment option is usually from third parties like MasterCard and Visa.
This payment option tends to charge Grubhub for using their platform as a means of payment. So in return, Grubhub will add a certain percentage of these charges to the customers. And this makes them expensive.
2. Delivery Fees Ain’t Enough;
For Grubhub to help prevent the effect of fees set up by most restaurants for every delivery, they have to seek ways of raising prices. Restaurants will choose whether or not to use the Grubhub delivery service. Of course, Grubhub won’t decide how much restaurants will have to pay for delivery from other networks. That is why Grubhub increases the price of its supplies because it can’t rely on the revenue generated from delivery.
3. Investors at Grubhub need to be impressed;
Just Eat Takeaway, to begin with, purchased Grubhub for over $7 billion in June 2020, with the expectation of getting a return on investment. However, because things aren’t going as planned, the corporation is considering selling it.
Grubhub has several investors and stakeholders whose money helped the firm get to where it is now, and they want a great return.
Investors are more likely to withdraw if Grubhub’s earnings start to fall steadily, affecting the company’s operations, so it must find ways to maintain sales growth. To stop the company from folding up, Grubhub had to increase its prices.
4. Grubhub takes advantage of your convenience;
Grubhub implemented a business concept that allows them to buy people’s time with little or no effort on their part in exchange for a certain amount of money.
Although Grubhub charges for the person’s time in the form of tips, it also streamlines the process, which has its own cost.
5. Location makes Grubhub expensive;
As a matter of location, Grubhub is expensive where the cost of living is already high, so to cover the actual cost of food, operations, driver paycheck, and other miscellaneous expenses they have to increase the price of their supplies.
If you live in New York, Los Angeles, or Chicago for example, you will pay more for Grubhub than if you live in Arkansas, South Dakota, or Kentucky. Grubhub will capitalize on the high cost of living to skyrocket the price of its food delivery.
6. Incessant Inflation;
The price of goods has continued to increase while the value money kept on depreciating in recent times. Of course, it’s obvious that inflation is inevitable, but it has accelerated in recent years, and that is one of the main reasons Grubhub is so expensive.
To begin with, restaurants must spend more on food supplies, which raises the price of the food they sell on the platform.
In addition, Grubhub must add additional fees to maintain its capacity to function, despite the increasing cost of living across the country.
Conclusion;
Food delivery services like Grubhub offer a significant amount of convenience; however it’s often more expensive than ordering from a restaurant directly.
Loyal customers at Grubhub have observed that the prices of food items have been on a steady increase for the past couple of months. The reasons why Grubhub is so expensive have been discussed in this article.
