The food delivery website and app Grubhub has been getting on restaurateurs’ nerves for a while. In a class action lawsuit filed in January, multiple restaurants alleged that the site was sneakily charging restaurants for phone calls that weren’t orders, since the calls were placed through proxy phone numbers Grubhub set up. In July, New Food Economy reported that Grubhub was buying restaurant web domains without restaurants’ knowledge or consent, and though Grubhub argued it’s technically allowed to do that in the contract, it was still a bad look. So what is the company doing to endear itself to restaurants that increasingly rely on third-party services to offer delivery? Become even worse partners.
Grubhub CEO Matt Maloney said in a letter to shareholders that “promiscuous” diners are partially to blame for the company’s recent 43 percent stock fall, and in an earnings call yesterday said, “It’s very hard to trick a consumer to pay more than they want to pay,” which is sure to make consumers feel great about the honesty and transparency around their burrito orders. So in the face of increased competition and politicians looking to regulate the business, Maloney, as the New York Post writes, “has been piloting an initiative in recent months to expand its restaurant network without officially partnering with eateries.” That is, listing businesses without their agreement or permission.
In a statement to Eater, Grubhub said they’re adding non-partnered restaurants “so we will not be at a restaurant disadvantage compared to any other food delivery platform.” It says this is an opportunity for those restaurants to get more business, “but we’ll without hesitation remove any restaurant who reaches out to us and doesn’t want to be listed on our marketplace,” putting the onus on restaurants to either proactively check the site, or to be surprised when it starts getting Grubhub orders. Grubhub also admits “the non-partnered model is no doubt a bad experience for diners, drivers and restaurants. But our peers have shown growth – although not profits – using the tactic, and we believe there is a benefit to having a larger restaurant network: from finding new diners and not giving diners any reason to go elsewhere.”
Katie Norris, Grubhub’s Senior Manager of Corporate Communications, elaborated over the phone that Grubhub is simply following the industry trends, and that to compete, the publicly-owned company essentially has to add non-partnered restaurants. “We want customers to find the most restaurants when they land on Grubhub. When others in the space are doing this it’s creating a gap, and we’re closing the gap,” she said. Norris stressed again that this is a bad experience, and that Grubhub’s primary way of operating is through explicit partnerships. However, the company believes restaurants that are listed under the non-partnered model will be convinced. “We believe there’s a benefit to partnering with restaurants and we’re deploying a sales team to try to convert these restaurants to partners, because it’s a better experience for anyone involved,” said Norris. “We think when we add restaurants they’ll see orders, and see the benefit of the Grubhub platform.”
It’s true that this practice has become more common in the delivery industry over the past few years. But DoorDash and Postmates have also faced backlash for similar actions. In 2015, Doordash got in trouble for delivering In-N-Out without the restaurant’s permission. In Canada, DoorDash has added restaurants for a “trial” period if they note a particular spot is popular, and hope to lure it into a partnership essentially because, now that people see there’s an ordering option, the restaurant has no other choice. Postmates, too, has not asked permission from restaurants before adding them to the app. This tends to cause problems for restaurants, who may not want to offer delivery, and who are then forced to deal with third-party deliverers showing up for “take out” and then delivering their food elsewhere. If things go wrong, the restaurant has to deal with complaints about cold food or slow orders, when it may have explicitly not offered delivery for those same reasons.
Grubhub publicly released the letter they sent to shareholders, in which they estimate delivery is a $200 billion industry in the U.S. The company writes that “listing restaurants on platforms without any partnership allowed other players to expand restaurant inventory rapidly.” There’s been a boom in online ordering, and while Grubhub is already profitable, it’s fighting for market share with sites like Uber Eats, Postmates and more, as well as customers who are fine with using multiple sites in order to pay the least. Listing restaurants that have not partnered with the site “is expensive for everyone, a suboptimal diner experience and rife with operational challenges,” the company wrote to shareholders. “With that said, it is extremely efficient and cheap to add non-partnered inventory to our platform and it can at least ensure that all of our current and potential new diners have the option to order from any of their favorite restaurants now, even if it’s not the best solution.”
Nobody is happy when restaurants haven’t given permission for their business to be listed, but it’s the price delivery companies seem to be willing to pay at everyone else’s expense.