What Grubhub’s “Free Lunch” Cost Us

Last Tuesday, Grubhub offered us a free lunch. Even with tax, tip, and delivery fees excluded, still the promotion was a good deal.

It did not quite work out that way.

Grubhub’s Free Lunch

On Tuesday, between 11 and 2, Grubhub paid for a $15 lunch. You just had to live in New York City, Long Island, parts of New Jersey, or Pennsylvania. At 6,000 orders a minute, the response was overwhelming. One NYC person even got a whopping number 3,922 in the queue.

According to Slate Money, the avalanche of orders surprised eating establishments. Then, making it worse, while consumers used the promo code, restaurants got no money upfront.

Our Bottom Line: Land, Labor, and Capital

As economists, we can always say that there is no such thing as a free lunch (TANSTAAF). Even if we pay no money, still, the sacrificed alternative is our cost.

With Grubhub’s offer, the costs were everywhere. We saw them through the extra “land” that restaurants used to fill the unexpected orders. Meanwhile, some lost money because order sizes shrunk. Others, unable to manage the onslaught, had to temporarily close. Correspondingly, labor switched its normal activities. Millions of people lost time when their orders were delayed. Then also, we can add diverted capital. Nothing was normal during those three hours for delivery vehicles, kitchen equipment, even the implements that went in every package,

Because time and resources that might have been delegated elsewhere were sacrificed, Grubhub has a new $5 offer to make up for what their last free lunch cost us. You can use it three times:

My sources and more: Thanks to the always interesting Slate Money podcast for alerting me to the Grubhub fiasco. From there, I found the details in this article However, if you go to just one link, do listen to this podcast history of food delivery. It was interesting and excellent.

Originally published at https://econlife.com on May 22, 2022.

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Econlife Team

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Located at the intersection of current events, history, and economics, econlife® slices away all of the layers that make economics boring and complex.

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