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Breaking down Grubhub's $100M economic relief plan

As restaurants are under mounting pressure, as the coronavirus pandemic impacts business. Yahoo Finance’s Heidi Chung discusses Grubhub's $100 million economic relief plan with Zack Guzman.

Video Transcript

ZACK GUZMAN: We're learning more about the plotted move by restaurant delivery company Grubhub in the way that they had previously announced $100 million in terms of deferral costs for restaurants dealing with the delivery platform. But more details coming out now say that restaurants aren't necessarily getting the boost that they once thought would be coming to them. And for more on that, we're joined by Heidi Chung, who's been digging into the fine print. Heidi?

HEIDI CHUNG: Hey, Zack. Yeah, so let's talk a little bit about the environment that we are currently in. As you know, so many cities across the country have now made it not OK for people to dine in at a lot of restaurants, so a lot of these independent restaurants, as well as the large-- larger restaurant companies, have been relying on takeout and delivery. And so when we heard earlier this week, as well as late last week, that companies like Grubhub, as well as DoorDash and UberEats, would actually be implementing economic relief efforts to help these independent businesses, a lot of people cheered these efforts. But a lot of things were brought to light in recent times.

We had "Eater," that publication, calling Grubhub out for its program, saying that there are some things that are not stated upfront and you have to look at the fine print. So exactly one week ago, we had Grubhub announcing that along with a lot of other major cities across the United States, it would launch an economic relief effort of up to $100 million for independent restaurants and delivery partners impacted by COVID-19. So that was the headline, but what that truly meant was that Grubhub would temporarily suspend collection of up to $100 million in commission payments from those impacted businesses that we have been talking about.

So a couple of things that I want to highlight in this "Eater" piece was, first, that the commission deferrals work temporary to provide relief for the time being. And so I reached out to Grubhub for some more color on that, and the company told me that it currently does not have any set date on when these payments will be implemented once again, but the "Eater" point is absolutely correct, that this is just a temporary situation. I also want to highlight that DoorDash is implementing a similar strategy, where they're allowing a lot of different independent restaurants to defer their commission payments for about 30 days.

So it's similar to what we're seeing across the board here. The second point that I do want to note is that new restaurants that are listing on Grubhub will have to sign up for one year of being on the platform for these benefits. Now, Grubhub saying in an email to me that that is, in fact, the case, and that the email-- and in the email, they said, quote, "The primary goal was to find the most effective way of supporting existing partners."

Now, a spokesperson for Grubhub continuing their comments, saying, quote, "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 to help restaurants pay their employees. We are deferring our own revenue from these local businesses, regardless if their long-standing partners or new to our platform, for the time being."

Now, I do not want to downplay what these companies are doing. We do have to mention that they do not have to put any of these operational changes in place for these restaurants that are listing on their platforms, so this is in no way to downplay what they are doing. But it is important to note that when we see these headlines, we have to be vigilant about looking at the fine print and see what is actually taking place here. Zack?

ZACK GUZMAN: All right, Heidi Chung digging into the fine print and bringing us the latest on that front.

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