As delivery services’ fees rise, small eateries feel the pinch

After 11 years, Muddaddy Flats in Troy is closing its doors.

“It’s terrifying, nerve wracking, frustrating, scary as hell, but at the same time, there is nothing else like it. I have loved being Muddaddy for 11 years,” said Dan Frament, owner of Muddaddy Flats.

Frament said the closure is in part due to high fees from meal delivery services like Grubhub.

He’s been tracking his sales through the company since he partnered with them a a few years ago. He says they collected 29% of his sales on average, meaning he barely broke even every time a customer ordered from Grubhub.

“We don’t make money,” said Frament. “It just keeps things moving.”

“We have a long-standing commitment to supporting restaurant partners and offer merchants a range of options to build and maintain their own loyal base of diners, through their own channels and the Grubhub Marketplace to expand their marketing reach,” a Grubhub spokesperson told Spectrum News 1. “Merchants do not pay Grubhub anything unless they receive orders made through our platform, and we offer flexible options with marketing rates as low as 5%.”

“Right now we are making pennies on the dollar. Restaurants tend to make a 3-5% profit margin; we don’t have the room,” said Melissa Fleischut, president and CEO of the New York State Restaurant Association. “We don’t have the room to give away 20, 30%. But on the other hand, do you have the ability to turn away that customer that wants to get delivery and doesn’t want to come into the restaurant that night? And it’s been a really hard choice for a lot of restaurants to have to make.”

Fleischut says Frament’s experience with delivery services reflects that of many of the business owners they work with.

“I think the important part for our restaurant members is that they understand what these contracts say and they read all the fine print before they sign up because there’s a lot of detail in there,” said Fleischut. “Sometimes the contracts will say that the restaurant can’t charge more for delivery, even though they have to give away that 20, 25, 30%. So that’s going to really impact their margins. And they have to understand that and weigh it very carefully.”

In Grubhub’s 2023 Community Impact Report, the company said it prides itself on supporting independent restaurants, and works with more than 355,000 restaurant partners in more than 4,000 U.S. cities and have awarded them more than $7 million in grants.

Frament says surviving in the restaurant business as long as he did meant he had to partner with Grubhub because convenience trumps all now. If he wasn’t on those third party sites, he said, customers would simply choose a restaurant that was.

“The small businesses are part of the community,” said Frament. “They’re not a corporate piece. They’re not an elsewhere-located headquarters. They’re your neighbors, your family, your friends.”

Frament plans to work with other local businesses and advocate for them. He suggests ordering directly from your favorite spot and picking up the order yourself.

“Go see your neighbors,” said Frament. “Go find somebody small, because if you lose that, you lose a lot.”

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