Grubhub’s $100 million lifeline to restaurants hit by coronavirus slowdowns has some major strings attached

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  • Grubhub announced last week that it will suspend up to $US100 million in commission fees for independent restaurants impacted by the coronavirus, but the deal comes with some major caveats, first reported by Eater.
  • To get their fees deferred, restaurants must commit to partnering with the online delivery company for an additional year.
  • Grubhub could also start collecting the delayed payments two weeks after the “relief period,” which it anticipates will be “no later than March 29.”
  • “We’re doing everything possible to organise community support through orders and donations to keep these independent businesses solvent through the current crisis,” a Grubhub spokesperson told Business Insider.
  • Restaurants and bars are facing a tough road ahead and, depsite efforts by industry groups, they may need more assistance to help them survive.
  • Visit Business Insider’s homepage for more stories.

States ranging from California, where close to 1,000 people have become infected with COVID-19, to West Virginia, which confirmed its first case this week, have urged restaurants and bars to close or limit operations in an effort to slow the spread of the coronavirus.

As the industry grinds to a halt, online delivery platform Grubhub announced last week that it would suspend up to $US100 million in commission fees from independent restaurants who are already being hit hard by the coronavirus, saying the program would provide them with “substantial cash flow relief.”

Independent restaurants “make up the majority of Grubhub’s 350,000+ restaurant community and drive more than 80 per cent of the company’s orders,” according to the company’s press release, meaning many of its customers could be eligible for the program.

However, Grubhub’s deal comes with some major strings attached – first reported by Eater’s Nick Mancall-Bitel – that could put the restaurants it’s intended to help in a bind.

First, the terms of the new contract require restaurants to stay on the Grubhub platform for an additional year. Given that the US governments’ relief plan estimates the pandemic could last for up to 18 months, that’s a commitment some restaurants may be reluctant to make.

Additionally, the fees are only suspended for the duration of the “relief period,” which Grubhub said it anticipates will last “no later than March 29, 2020,” and it could begin collecting the delayed payments as early as April 13. While Grubhub has the ability to extend those dates, the current relief period is set to end far ahead of when many local governments and public health agencies expect businesses to be able to fully re-open.

“To increase cash flow and help restaurants pay their employees, we are deferring our own revenue from these local businesses – regardless if they’re long-standing partners or new to our platform – for the time being. We are also working closely with government officials to ensure that kitchens stay open for pickup and delivery even when dine-in capacity must be shut down,” a Grubhub spokesperson told Business Insider.

“To many of us in the restaurant industry, the Grubhub announcement rang out as a hollow PR move,” New York-based beverage consultant Estelle Bossy told Eater, adding: “Grubhub profits by taking a 15 to 30 per cent commission from each delivery, so why not really help out and reduce the commission itself?”

As restaurants, from large chains to independent businesses, face uncertain times, groups across the industry are setting up emergency funds to support workers whose livelihoods are at risk. But they’re trying to plug a big hole: lost wages in New York City’s restaurant industry could number between $US300 million to $US400 million, according to Patch.com.

More likely, restaurants will need much larger forms of relief, either from the federal or state and local governments.

Read Grubhub’s full statement:

“We know these are tough times for independent restaurants because people are not eating out. Our mission here is to help keep their doors open through delivery and takeout. To increase cash flow and help restaurants pay their employees, we are deferring our own revenue from these local businesses – regardless if they’re long-standing partners or new to our platform – for the time being. We are also working closely with government officials to ensure that kitchens stay open for pickup and delivery even when dine-in capacity must be shut down. We’re doing everything possible to organise community support through orders and donations to keep these independent businesses solvent through the current crisis.”