Grubhub and Yelp did not disappoint


August 7, 2019

Today, Barneys looks for a buyer and the revenue in youth sports couldn’t be higher, but first…
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Listen to our podcast 🎧 Episode #7 of My First Million is live. Listen here to learn how Michael Birch sold his company for $850m… then bought it back for $1m years later.

Yelp swaps restaurant phone numbers with Grubhub’s to boost referral revenue

According to a Vice report, Yelp is “screwing over” restaurants by secretly removing their direct phone numbers under the “Delivery or Takeout” tab and replacing them with Grubhub’s referral line to justify charging a marketing fee.

According to the report, Yelp started prompting customers to call Grubhub phone numbers in October 2018 after the 2 companies announced a “long-term partnership.” 

But restaurant owners claim they were never notified of the switch.

What does it all mean?

Grubhub offers a “marketing” service to restaurants, which includes being listed on the Grubhub platform, for between 15% and 20% of each order total — they call it a “referral fee.”

Basically, it’s free money. Also, the perfect swindle: If a customer is transferred to Grubhub (albeit unknowingly), why not opt to order through the company’s physical delivery service? 

But, delivery through Grubhub bills yet another 10% fee to the restaurant. 

“It’s not fair because this is our customer who called directly into our restaurant,” says Mohammad Zaman, an owner of a Brooklyn kabab and grill house. “It’s a trick.”

Is it time to finally call a spade a spade?

Earlier this year, Yelp avoided a Blackfish-esque takedown after snatching up the domain for the website Billion Dollar Bully, a crowd-funded documentary of the same name that takes aim at how the company extorts small business owners for advertising fees.

And Grubhub isn’t a stranger to the shade either: In June, The Verge reported that Grubhub bought as many as 23k domain names that resemble some of the restaurants on their platform in order to upcharge customers with commission fees.

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Wes Schlagenhauf, News Writer at The Hustle
@wesschlagenhauf

My review of the Yelp/GrubHub partnership thus far: “That’s one eh-shady meat-uh-ball-uh.”
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Why is one of the hottest ad agencies becoming a consumer goods retailer?

New York-based ad agency Gin Lane has launched and grown brands including Harry’s, Hims, SmileDirectClub, Stadium Goods, Warby Parker, Sweetgreen, Everlane, and Bonobos.

But yesterday, the agency — which claims to have created $15B of brands — announced that it’s closing its agency doors and starting over as a consumer goods company called Pattern.

So… why leave it all behind?

The company that promoted brands wants to run them 

Gin Lane was known for its consistent approach to designing and marketing partner brands — modern fonts, bright colors, and racially diverse millennial stock photos (see: Hims, SmileDirectClub, etc.).

Most creative agencies take less than 1% equity in their clients, but since 2015 Gin Lane has formed joint venture partnerships with clients where it owned 25% or even 50% equity — foreshadowing Pattern.

Now, after cracking the code to millennial branding, Pattern will use its expertise for its own “multi-brand consumer goods company” that’s designed to “help our generation find more enjoyment in daily life.”

How is it going to pull that off, you ask?

By creating what it calls ‘direct-with-consumer’ brands

Pattern wants to extend the successful direct-to-consumer model it has helped pioneer by offering lifestyle products — and also tips, guides, and meetups to help people use them enjoyably.

Pattern’s first brand, Equal Parts — a line that sells both cookware and also “personal guidance” that’s “designed to help people find a sense of comfort and intuition in the kitchen” — will launch in the fall.

The company has raised $14m, and it plans to launch its 2nd brand in early 2020 and subsequent brands — each which Pattern says “will have a distinct identity and story while laddering up to [the] overarching mission of enjoying daily life” — every few months.

» (br)And One

The paradoxical success of the $17B Kids Sports Industrial Complex

As youth sports businesses continue to rake in more cashola, the number of young kids actually playing sports has decreased significantly, reveals a survey reviewed by Axios.

The youth sports market has doubled in the last decade…

Recently hitting a staggering $17B in the US. 

So, since that money doesn’t come from Little League registration fees (Little League participation is actually down 20% from its peak around 2000), where does it come from?

Mostly, from private youth sports programs including pay-to-play extracurricular club teams and expensive summertime tournaments.

… But fewer kids actually play youth sports

The number of 6- to 12-year-olds regularly playing team sports fell from 45% in 2008 to just 38% today. Why? 

The same reason the market’s rakin’ in so much money: Team sports are becoming so expensive that many families are being priced out before their kids ever even step up to the plate. 

Some families pay north of $20k for a year’s worth of youth sports, and participation rates diverge across socioeconomic lines: According to a Time report, more than 2x as many kids whose families earn $100k+ play sports as kids whose families earn less than $25k (41% vs. 19%).

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Barneys takes the plunge into bankruptcy

After months of speculation, Barneys is the latest chain to fall to bankruptcy. 

The restructuring plan has the luxury retailer, which operates 22 stores, shutting its doors in areas like Chicago, Las Vegas, and Seattle.

According to WSJ, the company will continue to run 7 remaining stores, including Manhattan and Beverly Hills, while its current owner, the New York hedge fund Perry Capital, looks for a buyer.

The ol’ retail meteor strikes again

In only a matter of years, we’ve watched legacy storefronts like Toys ‘R’ Us, Sears, Macy’s, and many others fall to the rough ridges of the e-commerce trail.

But that wasn’t the only economic force at play against Barneys and Perry Capital: This year, rent for Barneys’ flagship store in Manhattan nearly doubled, which is unfortunate timing for a company that’s almost $200m in debt. 

Where there’s a bankruptcy, there’s a private equity

In the 11th hour of the hearing, a pair of investment firms stepped in to bail the beleaguered Barneys out of its hole with a $218m loan. 

Barney’s new loan is expected to fund the company’s stay until the end of October as it looks to find a buyer.

» Oof
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