GrubHub for Restaurants: How Does It Work + Is It Worth It

As more people opt for takeout and delivery, restaurants are shifting to online ordering to meet the growing meal demand.

Partnering with a third-party service for orders and delivery is a big choice. Knowing how the ordering and partnership process works is a great way to get started. Keep reading to find out how your restaurant can team up with Grubhub.

What does Grubhub do?

🔎Read more: What is Grubhub and How Does It Work for Delivery?

Grubhub is an online food delivery app that links customers to local restaurants. People can place takeout or delivery orders using the Grubhub app or website. With partnerships with over 365,000 restaurants across more than 4,000 U.S. cities, Grubhub simplifies food delivery for both restaurants and customers.

💡Fun Fact: Grubhub handled $10.1 billion in transactions in 2022, according to their earnings report.

How does Grubhub operate?

Many people know how to order food on Grubhub but might not be as familiar with how the platform works with restaurants and drivers.

For customers

Customers can use the Grubhub website or app to place orders. After signing in, they can search for a specific restaurant or browse by cuisine, like Mexican or barbecue. Once they've chosen their meal, they enter their payment information to complete the order. Grubhub accepts different payment methods, including credit cards, debit cards, and PayPal.

After placing an order, customers get real-time updates, letting them know when their food is ready for pickup or when it will be delivered. They can also track the driver on the app and message them directly if needed.

For restaurants

When a customer places an order, it shows up on the restaurant’s Grubhub dashboard. The restaurant staff then confirms they can fulfill the order and provides an estimated time for when the order will be ready and delivered. After that, the restaurant prepares the food for either customer pickup or courier delivery.

The process is almost the same as serving an in-person customer. The only added step is confirming the order through Grubhub's dashboard before cooking. Unlike in-person orders, restaurants can choose to decline orders if they're short-staffed or certain menu items aren't available

For delivery drivers

When a restaurant confirms an order, Grubhub notifies the nearest delivery driver. After accepting the delivery, the driver should head to the restaurant quickly to pick up the food. Once the restaurant finishes preparing the order, the driver delivers it to the customer. If there are any delays, the driver can contact the customer directly. After the delivery, the customer has the option to tip the driver.

📘Tip: Restaurants can cut costs by having their own staff handle deliveries instead of using Grubhub drivers.

Grubhub features for restaurants

Grubhub partners with restaurants across the country, offering various tools and services to support them throughout their business journey.

For restaurants new to Grubhub:

• The Grubhub Marketplace showcases restaurants based on what customers are searching for. New partners receive a Merchant Welcome Kit with marketing materials, a tablet to start taking orders, and the option to schedule a free photoshoot to highlight their menu.
• Grubhub Delivery lets restaurants use licensed Grubhub drivers to handle deliveries for online orders.
• The Grubhub Dashboard provides helpful features for restaurants. With its point-of-sale (POS) integration, managers can easily handle transactions, create bills, and manage invoices, making restaurant accounting simpler.

For restaurants aiming to expand:

• The Virtual Restaurants feature lets traditional restaurants set up a delivery-only menu. The restaurant handles the food preparation, while Grubhub’s drivers take care of the delivery.
• Loyalty and Promotion tools help restaurants attract and keep customers using free marketing resources.

For restaurants wanting to boost their online presence:

• Grubhub Direct offers a branded online ordering platform that eligible restaurants on the Marketplace can add to their existing websites at no extra cost. This platform includes both ordering and delivery options and automatically updates the online menu.

How Grubhub’s Restaurant Partner Program Works

Joining Grubhub’s Marketplace can increase your restaurant’s visibility, both online and locally. However, there are costs involved:

Commission rates and sponsored listings

Grubhub offers different commission rate models to fit your restaurant’s needs. To explain how the commission structure works, business.com contacted Grubhub for details. According to a sales representative, a restaurant's location and the number of nearby restaurants affect the rates. For instance, in New York City, where there are many restaurants in a neighborhood, the lowest commission for a sponsored listing is 20 percent. For a nonsponsored listing, restaurants in NYC might see a commission rate as low as 15 percent.

Differences between nonsponsored and sponsored listings

• Nonsponsored Listing
  With a 15 percent commission rate (specific rates may vary based on your location), your restaurant will be listed on Grubhub, allowing customers to place orders online. However, because it’s a nonsponsored listing, your restaurant won’t be prioritized in search results and may be buried several pages deep. This might not be an issue if your restaurant is already popular and customers know you’re on Grubhub. But if you’re looking to boost visibility and attract new customers through a food delivery service, it could be a problem. Nonsponsored listings might be more effective in rural areas or small towns where there’s less competition, increasing the likelihood that your listing will be seen.
• Sponsored Listing
  With a commission rate of 20 percent or higher, your restaurant will be featured as a top listing on Grubhub, appearing higher in search results. However, where your restaurant ranks on the page depends on how much competition there is in your area. To get a better spot, many restaurants choose to pay more than the 20 percent commission. If other restaurants in your area do this, you might pay for a sponsored listing and still not get the results you want. It’s similar to optimizing your website for search engines: you’re competing with other restaurants for a prime spot. In busy areas, it’s common for restaurants to spend 30 percent or more for a higher listing.

The advantage of the sponsorship program is its flexibility. There are no long-term contracts, so you can adjust your sponsored listing rate whenever you need to.

Delivery rates

You can be listed and process orders through an online ordering site without paying for delivery. For restaurants that have their own delivery staff, there’s no need to pay for Grubhub’s delivery service. If your restaurant doesn’t have delivery drivers, you can choose to use Grubhub’s delivery service for an extra fee.

Grubhub charges a 10 percent fee per order for delivery services, which means the total cost for restaurants using both Grubhub’s ordering and delivery services is at least 25 percent per order. In New York City, restaurants with nonsponsored listings and delivery services may end up paying at least 30 percent per order.

To get a clear idea of your costs, reach out to a Grubhub sales representative for details on commission rates in your area.

Processing delivery orders

Restaurants that sign up with Grubhub have several options for handling orders, and a POS system isn’t required. Once an order is received and confirmed, you’ll need to manually enter it into your POS system (if you have one) or record it in whatever format your restaurant uses for orders.

You can also add an Order button to your existing website at no extra cost. This allows customers to place and process orders online directly from your site. This feature is especially useful for restaurants with a strong online presence, as sales from the Order button don’t incur commission fees, only delivery fees if applicable.

Receiving payments and commissions from Grubhub

Getting paid and handling commissions through Grubhub is straightforward. Every week, Grubhub sends a direct deposit that includes the total amount from orders, minus the cost of your listing and any delivery fees if applicable. Tips are clearly detailed for each transaction, so your staff can get their share. Restaurants partnering with Grubhub should keep in mind how this payment process might impact their other business expenses.

Things to think about before partnering with Grubhub

While partnering with Grubhub offers many benefits, there are some downsides to consider.

The risks

Grubhub charges a high fee for its service, which can affect your profit margins. Choosing a nonsponsored listing might be more affordable, but depending on where you’re located, it could limit the effectiveness of the service. In busy urban areas, restaurants might face high commission rates to stand out.

Restaurants also worry that Grubhub could hurt their in-store sales. Although it can attract new customers, only some may visit your physical location. This can lead to fewer in-person sales of items like drinks and extras. Plus, if customers have a bad experience with Grubhub, there’s not much you can do to fix it.

The benefits

Despite the potential risks, partnering with Grubhub can offer several advantages for your restaurant. Joining Grubhub can introduce your restaurant to a new group of diners, including tourists who might have yet to find you otherwise and food enthusiasts looking for new places to try.

Grubhub can also boost your restaurant’s revenue. Being listed can quickly increase the number of takeout orders you get, which adds to your income.

Additionally, Grubhub provides customizable marketing and loyalty promotions to help attract new customers and grow your online presence.

Should your restaurant be on Grubhub?

Grubhub and similar services can offer great benefits, including some basic analytics. However, it’s hard to make a one-size-fits-all recommendation since costs vary based on location and sponsorship level.

Like any business service, you’ll get more out of Grubhub if you’re actively involved. If you start with the lowest nonsponsored level, add an Order button to your website, and promote your online ordering, Grubhub can likely benefit your restaurant.

If you expect Grubhub to perform miracles or replace other marketing efforts, you might be disappointed. Consider testing the service first. Start with the basic level, promote it yourself, and after a few months, evaluate whether the results justify the costs for your business.