George Constantinou runs four restaurants, including Bogota Latin Bistro in Park Slope, Brooklyn, which he opened with his husband Farid Ali Lancheros in 2005.
“That was our first baby,” Constantinou said.
And in 15 years of business, he said they’d never spent as much time thinking, talking or stressing about third-party delivery apps like Grubhub or Seamless as they have this past month.
“It wasn't a priority. Now it’s like top two, right behind when can we open up our dining rooms,” he said.
Constantinou shared access to his Grubhub Bogota Latin Bistro account with Gothamist/WNYC. On a $131 order for pick-up, for example, Grubhub took $20.20 for listing the restaurant on their site (what the company calls “marketing commissions”), $5.18 for processing fees, and $10 for a targeted promotion—leaving the restaurant with $95.62.
Constantinou said before March 17, when all the city’s restaurant’s had to close to dine in customers, giving up almost 30 percent of an order didn’t matter as much. Only about 7 percent of business was pick-up and deliveries. The place seats about 140 people, and Constantinou said they were making money packing customers in each weekend.
But now, aside from some catering sales, takeout is Bogota Latin Bistro’s main business, and Grubhub accounts for more than 80 percent of it. He said his other restaurants, Miti Miti and Medusa in Park Slope, are in the same boat.
Constantinou still has to pay his delivery workers, kitchen staff, sales taxes, rent, and all the restaurant’s other expenses. “These fees hurt,” he said.
George Constantinou and Farid Ali Lancheros, co-owners of Bogota Latin Bistro.
Grubhub spokesperson John Collins said restaurants choose how much to pay for marketing fees. A lower rate of 15 percent will get you less exposure than one around 22 percent. Restaurants pay an extra 10 percent if they want the company’s workers to offer delivery, but that saves businesses from hiring their own delivery staff.
“We only make money when [restaurants] do well. We want them to do well,” Collins said, adding that the company only makes money on sales generated through its sites.
But now that Constantinou and his managers spend more time poring through Grubhub invoices, they’ve caught a few unexpected charges.
Grubhub tacks on a fee any time a customer calls a restaurant using the number displayed on its sites. It’s a way to ensure they get a cut of any order generated through the company. But sometimes, customers call to check in on an order they’ve already placed through the app, like on an April 3rd call reviewed by Gothamist/WNYC, where a customer left a voicemail regarding an item missing from an order he’d just received. That 1:49 second call cost the restaurant an extra $8.46.
These types of charges aren’t new. Last year, a VICE investigation found Yelp was tricking customers into ordering through Grubhub-owned phone numbers listed on its site in order to charge a marketing fee. Grubhub ended up extending the period restaurants had to review and dispute phone orders from 60 to 120 days following pressure from New York lawmakers.
But the tedious task of listening to every call in order to flag bogus charges still falls on the restaurant, and Constantinou said it’s compounding the stress of simply trying to stay afloat.
“It's exhausting,” he said. “It’s like, you need a full-time third-party delivery tablet auditor on your staff.”
Collins, the Grubhub spokesperson, said the company explains how the phone call process works to owners when they sign the contract.
“And then we give them four months to review the orders and raise questions,” he wrote in an email. “But look, the system isn’t perfect. We are working to improve it but will absolutely work closely with any business that approaches us about an issue.”
Managers at Bogota Latin Bistro have also made a new habit of inspecting the refunds Grubhub issues on orders. This was after a customer sent them an email saying he’d been reimbursed for an order he’d received and enjoyed.
“I wanted to reach out to make sure you guys (and the delivery driver) got paid. Let me know best [sic] way to facilitate that,” the customer wrote.
In a three day period, Bogota Latin Bistro’s saff caught $1,176.32 worth of disputable refunds, according to emails between Constantinous and a Grubhub account manager. That money can go a long way during a shutdown, Constantinous said.
“In a normal restaurant world I’d say, ‘Forget you Grubhub, I’m done. I’m cancelling my contract,’” Constantinou said.
But it’s not a normal world. Businesses across the city are now depending on pick-up and delivery to make it through the shutdown. And Grubhub, which bought Seamless in 2013, controls about 62 percent of New York City’s market, according to data company Second Measure. The company expected to pull in around $360 million in revenue for the first quarter of 2020.
Andrew Rigie, president of the NYC Hospitality Alliance, said third-party delivery apps like UberEats and Doordash also charge steep fees, but Grubhub is ahead of the game in the city, having spent years positioning itself as a middleman between customers and businesses.
Even when a consumer places an order thinking they may be ordering directly from the restaurant, they're not. They're going through a Grubhub listing for the restaurant because it’s the first Google search result for many restaurants (Bogota Latin Bistro included), Rigie said.
“They own the customer data, they purchase Google AdWords, they purchase additional phone numbers and websites for restaurants to direct the traffic through their channels to ensure that they always get a piece of every single order,” Rigie said.
Restaurants can cancel their account with Grubhub at any time, but some owners say it's too risky in the current climate.
“The moment you decide not to be on their platform, the lights go out,” said Andrew Ding, who owns The Handpulled Noodle and The Expat in uptown Manhattan. He said Grubhub owns every customer phone number and email, so he feared not being able to reach customers to let them know they could order directly from his site if he dropped the account.
“Nothing that you’ve paid for in those fees for ‘marketing’, quote-unquote, are benefits that you get to keep,” he said.
Lisa Sorin, president of the Bronx Chamber of Commerce, said restaurants don’t have much of a choice right now but to stick with the apps during the pandemic.
“They’re using them because they’re almost, and I hate to put it in this way, almost being held hostage during this crisis,” she said.
The New York City Council has proposed a bill that would temporarily cap fees at 10 percent for all third party delivery apps. Seattle, San Francisco and D.C. have passed their own 15 percent caps on third-party food delivery services.
Grubhub and the other major delivery companies oppose the move, saying a cap would hurt restaurants and shift costs to customers.
Collins, the Grubhub spokesperson, said singling out delivery apps was unfair, especially when the city wasn’t offering restaurant owners a break on the taxes or rent.
“We’re not the federal government. We don’t have an unlimited pot of money,” he said. “There’s this misconception out there that we can give money out willy-nilly.”
Collins said Grubhub has indeed given restaurants help. The company offered to defer fees for two weeks at the start of the pandemic, and it rolled out “Supper for Support,” which lures customers by offering $10 off on every $30 order. Grubhub covers the discount for the first 25 orders—but after that, restaurants who stick with the promotion have to cover the $10 dollars while commission is charged on the total amount.
In a city council hearing on the legislation last week, one of the bill’s sponsors, Brooklyn councilmember Justin Brannan, pushed the companies to offer a fee cap on their own.
“Why should [restaurants] be forced to operate at a loss just so you don't have to operate at a loss?” he asked.
Grubhub spokesperson Amy Healy didn’t have a clear answer. “We don't believe in price fixing, councilmember,” Healy responded.
The bill will be voted on at the next full City Council meeting, which is slated for May 13.
