In Australia there’s an online ordering platform called MenuLog who also charge a commission. I’m not sure if Grubhub or Seamless do this, but MenuLog will also purchase a domain and set up a cookie cutter site for all restaurants that sign up. They will also push this site high up in Google search results with SEO, which sounds great, but all loyal customers who are searching for the restaurant end up on this site, which links to their online ordering platform. So restaurants end up paying a commission for orders from loyal customers who would have gone straight to the restaurant. We’ve also seen phone numbers purposely omitted in these cookie cutter sites as they can’t earn a commission from phone orders.
GrubHub/Seamless also does this. Additionally they DO charge a commission for phone orders via a system that charges restaurants on a per-call basis. You see it frequently in tiny Manhattan restaurants where the website the owner set up couldn’t possibly have worse on-page SEO (the menu is an image or a PDF link, not responsive, etc) and the GrubHub site is a heavily optimized lead gen funnel.
I read a great book a while ago called "The Middleman Economy" which talks about all the ways that middlemen provide value. Sounds like Seamless isn't providing much value (at least at the time of writing), and those take rates are pretty high for repeat orders.
At the same time, as a restaurant, why wouldn't you pay 20% if you were going to be out of business if you didn't (as one of the quotes in the article mentioned).
After factoring in industry wide targets of 25% direct food costs, 25-35% staff costs, and 25% overhead - why give the whole profit margin to Seamless?
As an owner of a restaurant and beer garden - experiencing first hand their unreliable technology, driver dispatch, and support staff - I dropped them after a few months.
We also added notes in all our deliveries as a disclaimer that we did not hire the drivers - and that customers could call us directly for future orders - bypassing Seamless - to help support their beloved local business.
I absolutely agree that restaurants shouldn't give the whole profit margin to Seamless and that they should, as you did, pursue alternate marketing tactics that use Seamless as an entry point, but hold on to the customer and build a direct relationship.
Are you allowed to have higher prices on Seamless? That would seem to be a pretty straight forward method of not killing your margin.
I wonder if a restaurant association could take on the cost of building a competitor that could compete with Seamless; Especially if restaurants manage to convince the public that Seamless is as toxic as Uber, a solution to absolve people's guilt that is just one click away might be successful.
I say this because I hate having to get on the phone.
I don’t know why you wouldn’t be allowed, other than Seamless may have a rule against it since it’s probably a better customer experience to see accurate prices. The margin problem can be handled with delivery charges or delivery minimums.
I use Foodler, which was recently acquired by GrubHub. Several restaurants near me charge a bit more on foodler than they normally do. I'm cool with that as I'd rather order from one of these services
The whole restaurant marketing/value-added service industry is terrible, sometimes feeling even a bit sleazy. Of course its known that a restaurant's yelp rating is dependent on how much they pay, but all the way down the food chain to the local startup restaurant-services, they seem equally sketchy. Every 3-6 months I see the stickers for some new delivery service, discount club, or rewards program start to show up on the doors of almost every restaurant in town. And then like clockwork within 6 months they are gone because the service either went bust or was dropped by every restaurant (and then went bust) because the restaurant owners finally did the math and saw how much money it was bleeding.
While none of them exist in my neck of the woods, it seems that all the "successful" 3rd party food delivery companies are only successful because they're running on VC cash, exploiting contracted delivery personnel, and/or making the restaurant give them a big enough discount such that they only break even.
The corporate accounts thing is actually pretty interesting - a cost that was previously absorbed by large companies (doing the accounting for expensed food orders) is shifted to the restaurants by a third-party entrant in the space (Seamless) which captures a profit in the process.
Of course this is money that the large companies could have been extracting in the first place, but they didn't bother because it's not worth it for them on an individual basis - they don't care about the money, they are giving their business to Seamless just for the convenience. I wonder what other similar opportunities might exist?
I see an opportunity for a "Shopify for restaurants". Essentially an end to end SaaS solution that let's you do your own order management and lead-gen (and plugs into your own POS). though that latter part (lead gen) would still be a huge challenge for restaurants. Seamless charges those fees because they have the audience and can.
The other day, I was at a restaurant that uses EatStreet (a smaller competitor) but no other similar services. (I was waiting for an order I placed in person.)
A GrubHub driver came in and asked whether the GrubHub order had gone through yet; it seemed like he had been waiting. The person at the counter, confused, said that the establishment didn't work with GrubHub and never had. The employee repeated that he had an order, and tried to confirm the details of the order - but there was no such order. Apparently GrubHub had called the restaurant, and when someone at the restaurant tried to explain that it didn't work with GrubHub, the system had ignored them, and placed the order anyway.
Now somewhere there is a customer presumably mad at the restaurant for losing their order, while GrubHub will, for all I know, continue to do this to said restaurant forever. What's an owner supposed to do?
I was at a local bar who has instructed their staff to not pickup when GrubHub calls since they place orders off an obsolete menu and refuse to fix it leaving the bar & end customer pissed off.
A super innovative, restaurant-centric startup in this space: https://www.tocktix.com. Tock turns around the weird power imbalance by booking tables as tickets like you might in a theater. Instantly the no-show problem vanishes, and the customers you get are the kinds of customers you want. Clever.
Most restaurant owners would very much prefer it if you called in your order. If you’d really rather order online, see if you can do it via the restaurant’s website.
This kind of explains everything. As bad as Seamless might be, it's a far better experience for the customer than using the average restaurant website.
But the irony is that just calling the restaurant is a better experience than any app has been able to deliver. One wonders why restaurants even bother with online ordering.
No way. The number of screwed up orders I had went down massively when I started ordering online. No longer do I have a pained conversations where we're both facing a language barrier. No wonder do I have to wonder "did they actually get that right?"
So I can talk to a human, who may have trouble understanding my accent, and slowly read out an order, then have it read back, correct it, then pay by reading out all the numbers on my credit card over the phone? And this is somehow better than using an app, where I just click what I want and hit go?
Which restaurant do you call? Do you find it on Yelp/Some other review website? Are those reviews of the dine in experience or the dine out experience? Will the person I speak to get my order correct?
I dunno. I'm put off by the "% revenue buys place in the list" model, but I have a hard time saying that the online order aspect doesn't add some value.
> This kind of explains everything. As bad as Seamless might be, it's a far better experience for the customer than using the average restaurant website.
There are network effects. Even if some new competitor comes up with a far superior experience for restaurant websites (some kind of Shopify thing) the customers might all be looking on Seamless.
Yup. Similarly, I often find myself looking for dinner options on OpenTable, ignoring restaurants that don't take reservations that way, because the friction is so much lower. I know that OpenTable isn't great for a variety of reasons, and I also know that I'm missing out on a handful of places that don't accept reservations that way. But it beats the awful experience of calling around to restaurants, hoping they answer, going back and forth on available times (maybe trying a few places until you find one that's available), and then hoping that the person you spoke with wrote it down right....
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[ 5.9 ms ] story [ 68.2 ms ] threadI read a great book a while ago called "The Middleman Economy" which talks about all the ways that middlemen provide value. Sounds like Seamless isn't providing much value (at least at the time of writing), and those take rates are pretty high for repeat orders.
At the same time, as a restaurant, why wouldn't you pay 20% if you were going to be out of business if you didn't (as one of the quotes in the article mentioned).
As an owner of a restaurant and beer garden - experiencing first hand their unreliable technology, driver dispatch, and support staff - I dropped them after a few months.
We also added notes in all our deliveries as a disclaimer that we did not hire the drivers - and that customers could call us directly for future orders - bypassing Seamless - to help support their beloved local business.
I wonder if a restaurant association could take on the cost of building a competitor that could compete with Seamless; Especially if restaurants manage to convince the public that Seamless is as toxic as Uber, a solution to absolve people's guilt that is just one click away might be successful.
I say this because I hate having to get on the phone.
While none of them exist in my neck of the woods, it seems that all the "successful" 3rd party food delivery companies are only successful because they're running on VC cash, exploiting contracted delivery personnel, and/or making the restaurant give them a big enough discount such that they only break even.
Of course this is money that the large companies could have been extracting in the first place, but they didn't bother because it's not worth it for them on an individual basis - they don't care about the money, they are giving their business to Seamless just for the convenience. I wonder what other similar opportunities might exist?
A GrubHub driver came in and asked whether the GrubHub order had gone through yet; it seemed like he had been waiting. The person at the counter, confused, said that the establishment didn't work with GrubHub and never had. The employee repeated that he had an order, and tried to confirm the details of the order - but there was no such order. Apparently GrubHub had called the restaurant, and when someone at the restaurant tried to explain that it didn't work with GrubHub, the system had ignored them, and placed the order anyway.
Now somewhere there is a customer presumably mad at the restaurant for losing their order, while GrubHub will, for all I know, continue to do this to said restaurant forever. What's an owner supposed to do?
sue?
Most restaurant owners would very much prefer it if you called in your order. If you’d really rather order online, see if you can do it via the restaurant’s website.
This kind of explains everything. As bad as Seamless might be, it's a far better experience for the customer than using the average restaurant website.
Explains to me why GrubHub and the like have been able to turn revenue in this space.
Also I hate talking on the phone.
I dunno. I'm put off by the "% revenue buys place in the list" model, but I have a hard time saying that the online order aspect doesn't add some value.
There are network effects. Even if some new competitor comes up with a far superior experience for restaurant websites (some kind of Shopify thing) the customers might all be looking on Seamless.