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Grubhub Catches Heat From Restaurants Over $10 Customer Discount

By Rhian Hunt – Apr 1, 2020 at 1:55PM

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The delivery service defends its program as beneficial to restaurants.

Many restaurants are mad about Grubhub Inc.'s (GRUB) latest promotion, a $10 discount offered on all takeout or delivery orders totaling $30 or more placed between 5 p.m. and 9 p.m. After opting in to the promotion, restaurants must absorb the cost of this sizable discount, while still paying normal commissions to Grubhub on the orders.

Grubhub launched the promotion, called Supper for Support, on March 27 to help diners save while using its delivery services during the COVID-19 coronavirus pandemic. As part of the program's description, the delivery company says that the restaurants are "family" and remarks that the discount gives customers the opportunity of "supporting the restaurants you love."

A countertop tablet in a restaurant displaying Grubhub delivery information.

Image source: Grubhub.

The fine print of the Supper for Support agreement specifies that the restaurants have to pay Grubhub its full commission on each order, ranging from 15% to 30%, based on the purchase total before the $10 discount is applied, rather than after. While restaurants can opt out of Supper for Support, a separate request must be sent for each location, with removal taking 48 hours.

Grubhub offers deferral of its commissions to independent restaurants that request it, though the time during which payment is deferred is determined solely by Grubhub itself. Opting into the program in the first place contractually requires restaurants to continue using Grubhub as a delivery service for 12 months after the date of requesting commission deferral.

Though joining Supper for Support is voluntary, restaurants are complaining that Grubhub is "profiteering" from dine-in facility closures. As a counterpoint, Grubhub spokesman John Collins stated participating businesses "have, on average, seen a more than 20 percent increase in the number of orders they have received as well as overall sales." 

Rhian Hunt has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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