Restaurants rebel against delivery apps as cities crack down on fees

One restaurateur gives each bag a personal touch, printing out a small note with a simple message: Grubhub orders are killing his business.

A Grubhub delivery person checks his phone in New York on May 3, 2020.Cindy Ord / Getty Images file

When Pitas and Sticks, a Greek restaurant in Brooklyn, New York, gets an order from Grubhub, owner John Stamos gives each bag a personal touch, printing out a small note with a simple message: Grubhub orders are killing his business.

"Small businesses like us need your support in this time of crisis," Stamos writes in each note. "Online apps such as GRUBHUB ARE CHARGING US 30% of each order and $9 or more on orders made using phone numbers on their app or website … please help save the restaurant industry by ordering directly with us."

Restaurateurs like Stamos are mounting guerrilla campaigns to persuade customers to skip the delivery platforms they say are squeezing their businesses at a particularly difficult time. Some are looking to use social media to get the word out or coming up with special offers. Others are ditching the apps altogether.

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Outside a Bareburger restaurant in Brooklyn, a new sign appeals to passersby: "Support your local restaurants & order directly with them."

A sign on a Bareburger restaurant in Brooklyn asks people to skip delivery platforms.Jason Abbruzzese / NBC News

Restaurant owners are trying to figure out ways to stay in business during the coronavirus pandemic, which has hammered their industry. Many restaurants have had to close their doors to customers, while others have turned to food delivery apps such as Uber Eats and Grubhub to fill the void.

That's meant a sudden focus on delivery companies and the broader food delivery economy, which has faced its own difficulties. Grubhub, which also owns Seamless, and DoorDash are the biggest services, with Uber Eats and small competitors like Caviar also in the mix. But few of them have figured out how to make much money. Amazon, a company that many would consider an expert in e-commerce and logistics, tested the market and left about a year ago.

Stamos said that 90 percent of his online orders come from Grubhub and that the company has been forcing him to pay "extraordinary commissions." He said that he's been trying to get off the delivery apps since he started his restaurant five years ago but that the pandemic has dramatically tightened the squeeze.

Other restaurateurs have also complained — and attracted the attention of city politicians.

After a photo of a Chicago restaurant's Grubhub statement showed a dramatic cut taken by the delivery company, the city mandated that third-party apps must be more transparent about their fee structures in receipts to customers. Washington, D.C., San Francisco and Seattle recently capped fees from delivery companies at 15 percent. New York City capped delivery commissions at 20 percent.

Spokespeople for Grubhub and Uber Eats said their companies are against caps. Neither company responded to questions about restaurants' concerns.

Restaurants use apps like Grubhub, DoorDash and Uber Eats to streamline payment processing, customer support and various marketing services. The delivery companies also have their own fleets of insured drivers and deliverers, eliminating the need for restaurants to hire their own couriers.

For users, the apps offer a convenient way to find, order and pay for delivery food that might not otherwise be available.

That worked for many restaurants when it was a small part of their businesses. Now, it's a problem, leaving restaurants to try to persuade their customers to cut out the app-based convenience.

And that might be possible. Stamos estimated that he's printed over a thousand notes since the pandemic closed his dine-in options. He said many customers have said they were unaware of how much delivery apps were hurting his business until he added his note.

"People are like, 'OK, hey, I didn't know that,'" Stamos said. "They are willing to switch."

David Singh, owner of Mesa Pizza Company in Santa Barbara, California, said that after the pandemic hit, working with Grubhub quickly became untenable because of the various commissions and fees. He and his son updated the front page of their website decrying Grubhub and took out sponsored posts on Instagram slamming delivery apps, listing the fees and charges that inflated the cost of the food.

Singh took similar action on his own Yelp page, writing "HELP US survive by CALLING in your order for PICK UP."

Shortly after he put the message on the internet, Singh ended his contract with Grubhub. Despite his having cut the cord on apps, Singh said, business improved and customers reacted positively.

"Those that got educated have come and told us: 'Thank you so much. We always wondered why these cost us so much,'" Singh said.

Food delivery isn't a much better business for the companies. Grubhub, which is based in Chicago, has tried to balance increasing its support for restaurants while managing its own balance sheet. In early May, the company released results from the first three months of 2020, which showed an increase in customer orders but a decline in profit.

Uber Eats hasn't fared much better despite considerable growth. Uber is also reported to be in talks to buy Grubhub, a combination that would give the united company as much as 48 percent of the delivery market, according to analysis from the data analytics company Second Measure.

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Some restaurant owners say that despite the fees, the apps provide a service they can't replicate on their own. Nora Sarkissian, co-owner of Aslan Catering in Los Angeles, said that she's thought about quitting the delivery apps numerous times but that the range and delivery workers are hard to pass up.

Sarkissian said she has come to begrudgingly accept the app business model, describing her feeling as "people want to go this route."

"During the pandemic, most people order online," Sarkissian said. "It's more accessible for them to just click on Uber and order from them, because they don't have to go through the hassle of doing anything else."

However, to get repeat customers off the apps, she and her family have begun placing postcards in orders encouraging customers to order directly. The Sarkissian family shared their March Uber Eats statements with NBC News, which showed that the app accounted for roughly a third of all the restaurant's revenue.

"At this point, I think we're just trying to stay above water, just trying to make it work," said Sarkissian, her voice cracking. "It's very hard as a restaurant owner to walk away with all the hard work you put in. It's very hard."