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Grubhub's restaurant delivery service sounds like a win-win-win: Restaurants get access to customers who don't want to leave their couch; diners get great food without having to put pants on; and Grubhub itself cleans up a tidy 15 to 20 percent commission on the final bill.
But it's that last part that proving tricky for the company "disrupting" the restaurant industry. Grubhub claims to only charge restaurants for food orders it helps to generate, but a new lawsuit alleges the company has been billing them for all kinds of calls, including questions or complaints, and sometimes doubling their commission.
Hello, I'd Like to Place an Order for Delivery ...
According to a report from the New York Post, Grubhub cofounder Mike Evans, admitted as far back as 2013 that his company can't listen in on each call, so it uses a "statistical model" to determine whether or not a phone call through its system resulted in an order or not. "It turns out to be possible to predict with a high degree of accuracy which calls are orders or not," Evans said.
Upon what is that statistical model based? A timer, claims a class action lawsuit filed by Munish Narula, owner of Tiffin Indian Cuisine in Philadelphia. His suit claims Grubhub bills restaurants for any call over 45 seconds, regardless if an order was actually placed or not. That means Grubhub is receiving commissions on non-orders, and doubling their commissions if someone calls, then places an order later, as the Post explained:
Last November, a woman called Italian eatery Enoteca at 6:50 p.m. to ask if they had gluten-free pasta. The Brooklyn restaurant was charged a $9.07 fee for the call -- even though no order was made -- by Grubhub, America’s largest food ordering service ...
Fees for non-orders have the effect of doubling Grubhub's normal commissions of 15 percent to 20 percent of the final bill, restaurateurs say. For example, the woman who called about the gluten-free pasta placed an order on Grubhub's app two minutes later, earning the company an additional $9.18 -- or a 36.5 percent commission on the single order, documents show.
Not All Orders
And there's not much customers can do about it, other than ordering outside of Grubhub or its delivery service Seamless. Grubhub often sets up brand new phone numbers for restaurants it contracts with, and displays the new phone numbers on its app. Grubhub automatically forwards its calls to the restaurants, so customers may never know the difference because.
The lawsuit, filed in Philadelphia federal court in December, is seeking $5 million in damages. But litigation could eventually involve tens of thousands of restaurants, and cost Grubhub tens of millions.