Technology

Grubhub drops delivery fees for restaurants using direct-order tool

The end of the $1.99 charge is one of three updates to Grubhub Direct. The company hinted at more to come.
Grubhub bag on doorknob
Grubhub Direct allows restaurants to create their own online-ordering site. / Photo courtesy of Grubhub

Grubhub is waiving delivery fees for restaurants that use the company’s first-party ordering product, Direct.

Direct allows restaurants to create their own online ordering website, with delivery provided by Grubhub if they choose. It offers an alternative to Grubhub’s marketplace, which can help restaurants reach more customers in exchange for marketing and delivery fees.

Orders that come through Direct carry no marketing commission, but restaurants have to pay a flat $1.99 fee on orders delivered by Grubhub drivers. It is likely that many restaurants pass the fee to customers.

Grubhub said Thursday it is dropping that fee, making the service free for restaurants besides a 3% ordering processing fee. It’s one of a few changes the company is making to the direct-ordering product. 

“A robust digital footprint is key for merchants as they look to reach more diners across ordering channels,” said Kate Green, VP of restaurant services and innovation at Grubhub, in a statement. “We’re excited to strengthen our offerings for merchants and to serve as an even better, more valuable partner.”

Chicago-based Grubhub is also allowing restaurants to put their Direct website in their Google profile, so when people search for them, that’s the default ordering option. The company said restaurants that do this get nearly 20 times more orders than restaurants that don’t.

And it’s adding a guest checkout option to Direct, meaning customers will be able to order without creating a Grubhub account.

The company hinted that more updates to Direct are coming: “Today Direct is a branded website, but as we look to the future, we’re testing additional branded channels that will enable merchants to add more touchpoints with their diners,” it wrote on its website.

Restaurants’ use of Direct has grown over the past year. Grubhub said it added “thousands” of Direct sites in 2022 for a 3x year-over-year increase. 

The changes could help Grubhub compete with rivals DoorDash and Uber Eats, which each offer direct-ordering products of their own. DoorDash’s version, called Storefront, charges a credit-card processing fee of 2.9% plus 30 cents, but is otherwise free for restaurants. The price of Uber Eats Direct varies, according to the company’s website.

Grubhub has been losing share to those larger players over the past year, which has resulted in order and revenue declines. Owner Just Eat Takeaway, meanwhile, has been focused on improving profits. The company’s adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) improved to 150 million euros in the second half of last year from negative 134 million euros in the first half.

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