Grubhub under scrutiny…Food delivery wars heat up

New York is gearing up for an epic food fight.

Senate Minority Leader Chuck Schumer, D-N.Y., singled out Grubhub over the weekend, calling for greater oversight after allegations of unfair trade practices. The senior New York senator was reacting to recent reports that the delivery app company had improperly charged restaurants fees even when an order had not taken place.

Councilman Mark Gjonaj, the New York City lawmaker spearheading the push to regulate Grubhub, said it goes beyond just bogus fees.

“These mom-and-pop shops have an unfair disadvantage,” Gjonaj told CNBC’s “Fast Money ” on Monday. “They’re competing against billion-dollar venture capital-invested companies. The fee structure is up to 33% of the total charges, and we know [their] profits are 6% to 12%. On every order, there is a net loss to these small businesses.”

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Why it’s Hot!

Grubhub, DoorDash, UberEats, etc. have created a huge benefit for consumers to easily have food delivered easy peasy, but whenever someone wins, somebody else usually loses. In this case the consumer is winning with food delivery wars creating tons of competition and incentives for us to have food delivered for a small fee and ultra convenience.

Well this story shows how it impacts these local restaurants with crazy fees that result in net losses in a low margin business to begin with. This brings to light if these disruptive digital businesses are viable with their high fees and increasing costs (higher minimum wage), etc.

DoorDash recently passed up GrubHub in revenue and eyeing an IPO, but for that convenience are small and local businesses going to be able to afford those fees or will only the larger establishments with high volume and margins be able to survive?