Seamless defers commission fees for restaurants. Critics say it’s not enough

The move comes in response to the growing spread of coronavirus

TRD NEW YORK /
Mar.March 15, 2020 08:44 PM

After the state called on restaurants to cut seating in half or shutter Friday, food delivery company Seamless has announced it will defer collecting commission fees from “impacted independent restaurants.”

“With dine-in down as much as 75 percent, local restaurants need our support more than ever,” wrote Matt Maloney, CEO of Seamless parent company, Grubhub in a statement emailed to account holders on Sunday.

In addition to deferring the collection of its fees, the food delivery company also said in the email that it would match internal promotion services that restaurants pay for to advertise their food to Seamless customers. It was unclear at what point Seamless would end its deferment of fees. The company did not not respond to a request for comment.

The move comes in response to the growing spread of coronavirus and days after Seamless’ parent company, Grubhub, announced it would waive up to $100 million in commission fees for independent restaurants. But it wasn’t clear if this would apply to all Grubhub brands, including Seamless.

Seamless was founded in New York in 1999 and merged with Grubhub in 2013. In the fourth quarter of 2019, Grubhub reported revenue of $341 million and reported its expected revenue for the first quarter of 2020 to be between $350 million to $370 million.

Third-party delivery services charge restaurants commission fees between 15 to 30 percent on deliveries — a steep levy for some restaurants that has led to calls for government regulation. For consumers, markups can range from 7 percent to 91 percent, a New York Times investigation found.

An independent restaurant that’s partnered with Grubhub — meaning the company provides the restaurant with lead generation — is charged between $6 to $8 on a $26.05 order, based on a set of unit economics Grubhub provided to investors in a February shareholder letter. That’s a fee of between 26 to nearly 31 percent.

Globally, retailers and restaurants are calling on landlords to reduce rents amid the coronavirus pandemic that’s eating into sales. On Sunday, The Real Deal reported that New York State suspended all eviction proceedings for residential and commercial tenants until further notice.

Locally, some New York City politicians and industry leaders aren’t impressed with Seamless’ announcement.

“Seamless should be doing more than ‘deferring commissions.’ Step up and help these small businesses. NYC will be working on a plan to aid our small businesses,” tweeted New York City Council Speaker Corey Johnson.

Many restaurants are beginning to expand their delivery options in New York City as the coronavirus pandemic mounts, Eater reported.

The NYC Hospitality Alliance, which represents restaurants and bars, criticized Grubhub’s Friday announcement that it would waive fees saying that the company didn’t clearly define which restaurants qualified as “independent.” The Alliance’s executive director Andrew Rigie was not available for comment Sunday, but he claimed on Twitter that Grubhub was “creating more confusion.”

“When restaurants contact their customer service they can’t give straight answers! This is no time for PR & politics,” Rigie tweeted.

New York lawmakers are in the midst of considering regulating third-party delivery companies.

Last fall, in a New York City Council hearing, restaurants accused Grubhub of systematically charging them for phone calls that never resulted in food orders and then requiring them to listen back through call records in order to recoup their costs. Meanwhile, closing restaurants are increasingly citing the cost of delivery fees as a factor for ending their business.

Legislation introduced last month in New York City proposed capping third-party delivery service commission fees at 10 percent; requiring corporate licenses; and full disclosure of the fees charged to restaurants.

Write to Erin Hudson at [email protected]herealdeal.com


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