Daredevil Startups Are Finally Exposed for What They Are
Why the flimsy business models of Uber, Airbnb, and ClassPass are starting to crack under pressure.
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Giuseppe Badalamenti, a pizzeria consultant outside Chicago, was flipping through the invoices of a particularly troubled client when a March statement from Grubhub, the food order-and-delivery app, made him stop cold. From 46 orders billed at $1,042.63, Grubhub had paid the pizzeria just $376.54 — a 64% cut going to the app. Among the deductions were charges for two types of commission along with fees for processing, promotions, and adjustments.
There has long been grumbling in Chicago pizza circles about the excessive fees charged by Uber Eats, Grubhub, DoorDash, and Postmates, but this was by far the largest Badalamenti had ever seen. On April 29, he posted the invoice on his Facebook page. “Stop believing you are supporting your community by ordering from a 3rd party delivery company,” he wrote.
The post has since been shared about 5,300 times and has more than 1,200 comments. Not everyone sympathized with Badalamenti’s client — among those defending Grubhub, one restaurateur posted his own April statement, which he noted showed the app claiming only 28% of his revenue. (He hadn’t run any special get-$5-off promotions nor did he have as many pizza orders returned, he explained).
Yet the app charges still resembled those of a ticket scalper to a rock concert. A growing number of cities are now cracking down, especially amid the Covid-19 lockdown, when restaurants are relying entirely on takeout and delivery. Last month, San Francisco and Seattle capped app fees at 15%; New York is discussing a 10% cap, and Chicago a 5% one. Some of the apps have initiated various fee discounts and temporary waivers to restaurateurs.
A stark tension has resulted: Restaurants say they can’t survive at the rates the apps charge. But Grubhub, the only profitable major delivery app, suggests its very survival is dependent on those high fees. In a statement, Grubhub spokesman John Collins said the caps imposed by the cities “threaten the sustainability of our business.”
Silicon Valley and Wall Street seemed to value them at such…
