Chicago is among cities where Grubhub has pledged, starting on Saturday, to delay the collection of certain fees it charges to “independent” restaurants. The move is poised to improve cash flow for restaurants losing customers as people stay at home due to concerns about the novel coronavirus.
Grubhub CEO Matt Maloney, at a news conference at Chicago City Hall, said the company is prepared to delay collection of $100 million in fees. The fees would affect restaurants across the country, not just certain cities. Maloney said Grubhub was looped in on Thursday after officials from cities like Chicago, New York, Atlanta, San Francisco, and Atlanta discussed how they could help restaurants during the pandemic and reached out to the company. It’s unclear how long with Grubhub will wait until it collects fees from restaurants. One restaurant owner, who didn’t want to be named, said his Grubhub rep described it as a no-interest loan.
Maloney was joined at Friday’s press conference by industry vets including Lettuce Entertain You Enterprises president R.J. Melman. Melman’s company is the largest hospitality group in Chicago, and he estimated that business has fallen by 70 percent since the outbreak. Chicago mayor Lori Lightfoot estimated dine-in traffic would fall by 75 percent in the coming days in her city.
“Online food delivery will only go up as people choose to stay at home and follow the guidance of social distancing, and we want Chicagoans to continue supporting their local businesses in every way that they’re available,” Lightfoot said on Friday morning.
As the owner of about 120 restaurants, Lettuce is not traditionally defined as an independent, but under Grubhub’s plans it likely would qualify for relief, given it’s not a global chain like McDonald’s.
Grubhub is delaying costs associated with “marketing fees,” as Maloney described them: “We still need to pay our delivery people.” Normally, Grubhub can charge restaurants between 15 and 30 percent for its delivery services. Payment structures differ depending on the restaurant and city; but Melman estimated the marketing fees at about 15 percent, or saving $15 on a $100 meal. Maloney estimated that waiver would save restaurants “thousands of dollars.”
Lightfoot encouraged restaurants to sign up for Grubhub, which would bolster the site’s client base. That’s a difficult decision for many restaurants to make, as many owners, like those who run traditional Neapolitan pizzerias, are anti-delivery, saying it affects the quality of their food. But with cashflow becoming a problem, some owners will have to consider make changes. Pursuing delivery is something that Chicago chef Phillip Foss suggested to stubborn owners in a Thursday column for the Takeout. Foss runs Michelin-starred El Ideas. Illinois Restaurant Association President and CEO Sam Toia estimated more than 60 percent of Chicago’s 7,200 restaurants offer delivery services.
On Thursday, the James Beard Foundation announced it would postpone its awards gala that takes place in Chicago annually. But overall, COVID-19 hasn’t yet affected Chicago as in other cities. In LA, health department officials are suggesting that at-risk residents, including those pregnant, avoid public places — which would include restaurants. And in New York, all restaurants seating 500 people or less are being mandated to reduce capacity by 50 percent. Cook County public health department commissioner Allison Arwady advises caution, but also pointed out that Chicago hasn’t reached the stages other coastal cities have. She’s not advising Chicagoans to avoid restaurants: “You have not heard me say that yet,” Arwady said.
Meanwhile, Maloney said he’s not sure how long restaurants will burn through the $100 million he mentioned. The company is also setting up a fund for delivery drivers affected by the virus, using money from Grubhub's Donate the Change program.
Grubhub is a Chicago-based company that was founded in 2004. It’s become the industry leader in third-party delivery services, competing with companies including DoorDash and Caviar.
Correction: This story has been updated to reflect Grubhub is not waiving fees, but is delaying collection.