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Comment by bhupy | Hacker News Reader

Honest question: what's stopping restaurants from charging 30% extra for items on GrubHub?

Transaction fees aren't new, and merchants typically bake that into the cost of doing business. Ostensibly, the end user would have to pay more for the convenience of someone else using their labor to deliver them food.

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Contractual terms.

For example, from Uber's terms for UberEats restaurants[1]:

"Notwithstanding anything to the contrary in this Section 5, Merchant may not make any Item available to Customers through the Eats App at a price that is higher than the price that Merchant charges in-store for similar Items. Merchant agrees that you will not make an Item available under this Agreement at a price higher than the amount Merchant is charging for similar Items through any comparable platform for food delivery services."

[1] https://www.uber.com/legal/en/document/?country=united-state...

That's fascinating, because out of all of the restaurants I have browsed on Uber Eats, I noticed about half had higher prices than they do on location (and generally significantly so—it wasn't uncommon to see a 20-30% difference). So they must not currently enforce it.

Edit: Even more interestingly, I rarely see this behavior on GrubHub. Maybe they have a history of enforcing it? Or are just more explicit about the rule? Or just coincidence? I'm not sure.

Enforcement varies city to city. They only start to enforce it when they have most of the resturants in a city on the platform.

That makes sense, because GrubHub is by far the biggest player where I live. Uber Eats has a small slice of the pie in comparison.

Couldn't they increase the cost of all items, and then provide a 30% reduction on direct orders.

Isn't that why discount for cash exists at gas stations etc? To get around these sorts of policies from the credit card companies.

I don't think it's that easy. See https://www.pymnts.com/visa/2018/non-compliant-cash-discount... for example.

This seems to depend on the country, for instance https://medium.com/@joelleparenteau/why-uber-eats-is-a-neces... in Canada have higher prices on uber.

Every restaurant that I have seen on Uber Eats charges more for items on UberEats than they do in store. In some cases, the prices are 50% higher.

However, they don't charge more on UE than they do on competing delivery apps.

Also, the attorneys general of CA and NY have begun investigating these app pricing policies, so it's very likely they'll be deemed illegal by the end of the year.

Our office started looking for a service to use for collective ordering for about a dozen people: we tried grubhub, postmates and a few local services. We usually ordered from a set pool of local restaurants. When we started ordering prices went up considerably after a few orders. Some orders just got cancelled inexplicably and some just started adding a group service fee. We also had situations where we were limited to orders of a certain size so would have to split our groups to be able to order food for everyone. Our suspicion was that some places found ways to adjust to the demand and in some cases decided that the cost of doing business with us was too high due to some factors that were unknown to us. We also had a few of those services that dropped us as clients which is why we went through so many.

I once compared the fee across four major delivery sites for the same order at the same restaurant. It turns out, the food did vary by a few bucks between services.

My accounting is here (I mainly focused on the fee structure but the base food cost is there too)

https://twitter.com/paulgb/status/1219013003577872387?s=19

GrubHub prevents it (or at least tries to). I think they enforce by fear, but I've seen restaurants get around it by giving smaller portions to grubhub orders than they would otherwise.

They do charge more, among other strategies. I think these sites/services drastically increase the competition for restaurants though, and I think delivery food prices are more elastic than the restaurants can handle if they increase prices to match previous net income.

Expedia gets away with charging 20% and hotel chains are (or at least were) pretty powerful businesses.

The sales funnel is pretty valuable, and they’ll cut you off/derank you if you undercut.

There is also a contract but I don’t think that’s the main motivator.

Hotels are masters of pricing the same room for different amounts, depending on how you ordered it, though. Their margins on rooms are very high, too.

Restaurants are banned by these services from charging more. So they end up eating the 30% delivery fee.

It's against the GrubHub T&C's, and a resturant will be banned if they are caught doing this. Many still do though.

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