Earlier this year it was reported that Grubhub, the mega-sized restaurant delivery company, was charging restaurants bogus fees for phone call orders that customers did not place. The way it works is Grubhub would setup and promote a unique phone number for restaurants listed on their platform. Apparently, when a customer called a restaurant using that number and the phone call lasted longer than 45 seconds, Grubhub would assume an order had been placed, and they took credit for it. The problem is that customers often call restaurants to make reservations, ask about the status of an order, or other reasons unrelated to ordering food. Unsurprisingly, their system resulted in restaurants being charged with bogus fees. One New York City restaurateur reported being charged more than $10,000 by Grubhub. Another restaurateur from Philadelphia filed a class-action lawsuit against the company over its fees.
When news of the charges broke, you’d think Grubhub would apologize profusely to their restaurant customers, reimburse all the bogus fees and announce that they’d work to fix the system that’s at fault. Instead, what followed was a textbook lesson of what a company should not do when their questionable business practices are exposed, and they face public and political outrage. They doubled down, refused to be accountable, and criticized the press and others who exposed their unfair tactics. This strategy resulted in journalists further investigating the company. The restaurant industry’s outrage at the company, which long bubbled under the surface, finally boiled over.
New York City Council Member Mark Gjonaj held what has been noted as the first of its kind oversight hearing into restaurant delivery platforms. I testified alongside restaurateurs on behalf of the organization I run, the New York City Hospitality Alliance, a not-for-profit industry group that supports restaurants. I was astonished by how many restaurateurs told me they were too fearful to testify publicly against Grubhub because the fear of retribution, such as their restaurants not showing up easily in the platform’s search results. And, while the fear of retribution is probably overstated, it shows how much real or perceived leverage the billion-dollar corporation has over restaurants.
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