Online Food Delivery: Who's Picking Up the Tab?

By Kelly Dobkin  |  August 15, 2013
Credit: Seamless

Last week, the merger between online food delivery giants GrubHub and Seamless was completed, in effect creating a new super network of restaurant delivery options to customers around the U.S. In many cities, online food delivery sites have now replaced the drawerful of paper menus, shouting into the phone (and inevitably being misunderstood) and effectively eliminating the need to leave your apartment ever again. But aside from increasing convenience (and enabling laziness), these sites have also increased ordering efficiency and drummed up business for thousands of struggling restaurants. So is online food delivery already the new standard? While in bigger cities it seems much more dominant, in 2011, out of $69 billion in take-out sales in America, only 5% came from sites like Seamless and GrubHub, according to a spokesperson for the combined company, Abby Hunt.

“There’s a lot of opportunity for growth in there,” Hunt told us. Currently, the combined network for GrubHub and Seamless spans over 500 U.S. markets (and one in London). While the companies will continue to operate independently (at least for now), it’s unclear at this juncture whether one day the two sites eventually will be combined. “We’re just now beginning to work together,” says Hunt. “Before we will make any possible changes, we’re going to take the time necessary to find out what exactly our restaurants, our diners and our corporate diners want.”

Turns out, pleasing business owners may prove a lot more difficult than pleasing customers.

While there’s no doubt that adding your restaurant to an online delivery site will most likely increase sales, not all restaurant owners are thrilled with some sites' commission-based system. “I hate Seamless. They’re pigs,” NYC restaurateur David Feldman (Mumbles, Benjamin, East of Eighth) tells us. “Most online ordering companies take a percentage off the net plus the tax plus the tip and what they take is 15% and most places take 10% on the whole gross check." But for Feldman, it's more helpful to put his restaurants on Seamless than not, due to its popularity. "A lot of people use it. So I’d rather have the little bit I get out of it than nothing at all. “ While GrubHub doesn’t work quite the same way, restaurants pay for promotion on the site, and can opt to pay to bump themselves up on the list of eateries. Hunt tells us, “There are differences in terms of the fee structure between both companies and the good thing with this merger is that it’s affording us the opportunity to review the fee process.”

On the customer side, while most people we spoke to seem more than pleased with the speed and efficiency of online ordering, it can easily become addictive. And some might argue that it’s taking human interaction out of the dining experience. Jeff Saloman, General Manager of NYC’s AG Kitchen, tells us about one frequent online customer: "Several months ago we got a new Delivery.com customer. Apparently she really loved AG Kitchen, as she began ordering the same items (Manhattan Latin Burger, a shake, side of sangria-braised string beans), several times a week. We call her by the nickname Ms. MLB (Manhattan Latin & Beans).”

While this may seem embarrassing for the customer, online ordering has ultimately increased the level of intimacy between the kitchen and the diner, for better or worse. “One week she ordered the same meal four times (Monday through Thursday),” Saloman told us, “So I wrote her a handwritten note on Friday that our delivery staff brought to her doorman: I invited her to dinner on me, to thank her for ordering so often. That Saturday night she walked up and introduced herself to me at the host stand.” This interaction effectively led to the customer trying different menu items, ultimately leading to more sales for AG Kitchen.

Whether or not the merging of the two companies will increase restaurant owner satisfaction remains to be seen, but Hunt tells us, “We’re reviewing all of our processes right now. We want to make sure that whatever we’re doing is in the best interest to the restaurant. Because we work with a two-sided model, we know that driving incremental revenue to the restaurant is of the utmost importance.”