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Why is Grubhub Slashing Delivery Fees? Are they Stealing Tips?

In the middle of a pandemic like this, why is Grubhub slashing delivery fees?

Or are they?

I have to chuckle a little.

I'm not sure I realized just HOW many drivers are pretty new to Grubhub. Not until I saw all the shock and anger when Grubhub started offering deliveries for ONLY $8. Or God forbid, as low as $7 now.

Almost inevitably, I will see comments in the Facebook groups that it must mean they're starting to steal tips.

How could they do this? Why did they change the pay model?

Is Grubhub starting to steal our tips? Why are they paying us so much less now?
Is Grubhub starting to steal our tips? Why are they paying us so much less now?

Grubhub is not slashing our delivery fees.

There is no change in the pay model.

Grubhub is not slashing delivery pay. And they are not stealing tips.

We are not entitled to nine dollars or more for any delivery. In other words, you are not being ripped off if Grubhub offers only seven dollars.

Or five.

Or three dollars.

The only one ripping you off is yourself, if you agree to a three dollar delivery. If you agree to the delivery, that's on you. No one is forcing you to accept anything.

Remember the part of your contract that agreed that you were an independent contractor?

That is the part that gives you the right to be the boss. To make decisions. And to say no.

But the bottom line is, Grubhub isn't doing anything wrong now that the nine dollar minimums seem to be going away.

But aren't we supposed to get at least nine dollars per delivery? Why are they taking that away?

If you were delivering prior to the pandemic, you probably already know my answer to that first question.

There is no $9 minimum delivery. This is not and has never been part of Grubhub's pay model. And it probably never will be.

It may have been $3. I'm not totally sure that a $3 minimum was ever officially part of their pay structure, to be honest. $3 is the lowest offer I've seen on Grubhub, and I have seen a lot of those.

Officially, Grubhub's pay model is based on time and distance. About mid year in 2019 (more than a year ago as I write this) Grubhub rolled out a new pay model nation wide.

In their explanation, they identified that it was based on overall distance and the estimated time they expected a delivery to take.

Chart sent out to Grubub couriers when the pay model change was introduced mid 2019.

The existing Grubhub pay model in a nutshell.

Here's how it works.

Grubhub calculates their delivery pay based on time and distance.

They've done a lot of extra things lately, and to be honest, how they did it has kind of muddied the water. Their lack of transparency in HOW they calculated things didn't help much. Either way, nothing has ever been announced that suggests that the base pay model has changed.

The actual amounts in their calculations may vary by market. The thing is, when Grubhub rolled this model out, they never specified exactly what the metrics were in any particular model.

I emailed my driver specialist several times asking what the formula was for Denver. I never did receive a response.

The best that I could figure was that it was 13¢ per minute and 23¢ per mile here in Denver. For the longest time that seemed pretty consistent.

Unfortunately Grubhub never completely breaks that down in their pay reports. They do show the miles and what they pay for those miles, but the time component is never broken out. I think that's the part that leads to confusion.

Screenshot of a pay summary for a stacked delivery (two deliveries from the same restaurant)
Screenshot of a pay summary for a stacked delivery (two deliveries from the same restaurant)

In the above screenshot, you can see that delivery pay was $3.24 for the first delivery and $2.00 for the second. The mileage amount was broken out but they never did break down how many minutes they were paying for.

Grubhub started adjusting the ‘Delivery Pay' portion in order to get orders picked up.

Grubhub has always had a problem getting contractors to accept the deliveries when there is no tip added on. Too many drivers understood their rights as independent contractors and realized that the $3 deliveries didn't pay well enough for the time and effort.

There was a time where you would see the breakdown and there would be a ‘bonus' line added to the delivery explanation.

It was with this bonus that Grubhub could add a little extra if there were a problem getting a delivery accepted. This was typically on offers where the customer didn't tip or where the tip was quite a bit lower.

One thing I noticed was that over time, the bonus line disappeared. Instead, Grubhub just added the money into the Delivery Pay portion.

And then the Pandemic happened.

Next thing you knew, people were staying home.

And they started ordering delivery.

And all of the delivery platforms had to scramble to keep up with the demand. I think this was especially challenging for Grubhub because they already struggled to fulfill their deliveries.

At least in my market, Grubhub made an adjustment without ever announcing anything. All of a sudden, I stopped seeing the $3 and $4 offers. Nothing was less than $9.

Did you ever receive anything announcing a $9 minimum? I never did. No text, no email. It just started happening, sometime around March.

Here are two different delivery breakdowns. I can tell you that the McDonalds order took less time than the other order – yet the delivery pay was much higher.

Screenshot of two different pay breakdowns. The first delivery was longer distance and took more time but had a larger tip. The second delivery was quicker and shorter but with a $2 tip, the delivery pay was nearly three times as high.
Screenshot of two different pay breakdowns. The first delivery was longer distance and took more time but had a larger tip. The second delivery was quicker and shorter but with a $2 tip, the delivery pay was nearly three times as high.

Had that McDonalds order not tipped at all, the Delivery Pay would have been $8.47 and the total pay amount would have been $9.00.

Grubhub figured out that to keep the deliveries going, they needed to pay more, especially on deliveries where the customer did not tip. Essentially, they supplemented the lower or non existant tips to make the delivery worth while.

But the thing is, they just did it. It was never a permanent pay change. It was never meant to be a long term policy. Grubhub just started paying extra in order to get their orders fulfilled.

However, things are slowing down for Grubhub.

I think things are slowing down everywhere.

At the end of July, the additional $600 weekly benefit under the Pandemic Unemployment Assistance program expired. That's a lot of extra money that just went away. As of this writing, Congress is scrambling to figure out whether to extend it and for how much. However, right now that could lead to a huge drop in delivery business.

It could also lead to a lot of drivers who were on unemployment coming back into the delivery field and saturating the market.

Either way, Grubhub suddenly isn't as desperate for drivers as they were a month or two ago.

That means they're not going to continue to offer sky high supplements like they were when things got really crazy.

So Grubhub starts cutting back on the supplement in a very Grubhub kind of way.

On July 11, I received the following email from Grubhub.

Screenshot of Grubhub email: "Earn at least $8 per offer: We see the hustle delivery partners like you make to deliver food to hungry customers. So this weekend, yhou'll earn at least $8 on every offer you receive Friday through Sunday! Schedule your blocks today and hit the road this weekend."
Screenshot of Grubhub email offering a minimum of $8 for every offer (sent at a time when the minimum offer was $9)

This is a very Grubhub kind of thing to do.

If you were around when Grubhub announced their new pay model, you might remember this: “We're improving the way you are paid.” The new pay model was about a 20% DECREASE in what they paid.

So here we are getting a minimum of $9 and Grubhub sends this. They phrased it to look like we're getting a great deal when in reality they're DECREASING the minimum by a dollar.

Grubhub being Grubhub.

But there were two things about this: One, it signaled that the end of the $9 minimum was at hand. The other was that by providing a deadline, it opened the door to them dropping the minimum further (or eliminating it altogether).

The minimum did remain at $8, in my experience, for several days. This past weekend I've noticed deliveries dropping down into the low 7's.

In other words, Grubhub is slowly weaning us off the $9 minimum.

Why is this happening?

One thing I'm noticing, both in my own experience and in hearing from other drivers: It seems like things are slowing down for Grubhub maybe even more than with other platforms.

The bottom line is, they can't afford to keep doing this.

Delivery is a money loser for every single one of these platforms. Grubhub is the one delivery company that has been profitable from time to time.

However, Grubhub's profitability comes from them having other offerings beside delivery. Their larger marketing platform for restaurants is profitable. Delivery isn't.

To continue to supplement lower pay offers when things are slowing down isn't sustainable.

And in the end, that means it's time for Grubhub to start moving back to what they were before the pandemic.

Grubhub is not cutting delivery fees. They're just moving away from the INCREASES that were temporarily put in place when deliveries during the Pandemic were going through the roof.

That's a big difference.

Those who have been delivering for Grubhub for more than a few months already know this. We remember getting the $3 offers.

I think we've all been waiting for when it will get back to normal.

Guess what's happening?

In the end, I don't think Grubhub's doing anything wrong.

They aren't stealing anything from us. They aren't cheating us. None of that.

This is part of a bigger picture we need to be prepared for. We went through a crazy boom, something we'll probably never see again. The earnings potential was unbelievable.

And if you watched it all objectively, you had to know one thing: This can't last. It won't last.

And that's what's happening now.

Summer is normally a slow time for delivery. Normally we'd have been noticing it more than what we have. But when you couple the massive hiring that was done during the pandemic, the loss of income with changes in unemployment, and the usual slowdown for summer, things like the reduction in minimum pay from Grubhub are bound to happen.

There's one more important factor to remember here.

You're running a business.

I don't care if you don't think that's what you're doing. I don't care that you might not feel like it. You are, legally and by definition, running a business.

It's what you agreed to when you signed up with Grubhub.

You don't like that your customer (Grubhub) is paying a dollar less or two dollar less as a minimum? Tell that to the restaurant owners who have had to shut down because they weren't allowed to stay open but still had to keep paying rent and other bills.

Tell that to the business owners who lost everything in this pandemic.

Your worst case scenario is that you end up back at the same pricing levels that existed prior to the pandemic.

I can't tell you how many people would LOVE to be anywhere close to the same place they were before the pandemic.

Grubhub doesn't owe you anything. They have no obligation to you.

And you agreed to that.

Personally, I don't give a crap if they're going back to offering me $3 deliveries. I'm not taking them. It's as simple as that. That's my right as an independent contractor.

As a business owner.

The reality is that when you are running a business, things outside your control can get in the way of your ability to earn. That's part of the risk that goes with running a business. My guess is, things are going to slow way down soon.

How will you adjust?

Could this help someone else? Please share it.