Class Action Lawsuit Alleges Grubhub Charges Restaurants Commissions for ‘Sham’ Telephone Food Orders

Two Pennsylvania and New Jersey restaurants have filed a proposed class action lawsuit in which they allege Grubhub has for years taken commissions from eateries for phone calls in which no food order was placed, effectively depriving “more than 80,000 restaurants” of revenues and profits.

The 27-page complaint claims Grubhub charges commissions on telephone calls of a certain length made through its platform to restaurants without so much as verifying whether a food order was even placed, and inexplicably relies “solely on the length of the call” to determine whether to charge a commission.

What are we talking about here? I still order food the old-fashioned way.

Grubhub is the leading online and mobile platform for placing pick-up and delivery orders with restaurants. Grubhub has, in fact, become so central to the now largely impersonal food delivery landscape that more than 80,000 restaurants nationwide use the service to connect with diners and improve their online visibility.

How it usually works is a hungry consumer visits Grubhub’s website or mobile app, searches for a restaurant or type of food with the help of a number of customizable parameters, and places a takeout order. Grubhub then processes the consumer’s order and transmits it to the restaurant to be fulfilled. In exchange for use of its services (and sometimes for greater exposure on the company’s platform), restaurants pay Grubhub a percentage-based commission on each food order.

“In reality, there is no Grubhub telephone food ordering system.”

Though its bread and butter is its mobile, human-interaction-free food-ordering service, Grubhub also allows for diners less disinclined to speaking with other people to place takeout orders through its platform by phone. In effect, Grubhub serves as the middleman between you, the Hungry Consumer, and a restaurant that cooks whatever you feel like eating.

A crucial caveat the case notes is that restaurants are told upon signing on with the defendant that Grubhub gets paid “only on food orders it generates for restaurants that use its service,” including on those placed by phone. The plaintiffs, however, claim that Grubhub’s telephone food ordering system is no more than a revenue-masking façade, especially considering the company not only does nothing for telephone food orders aside from rerouting calls to restaurants, but often has no idea if a food order was even placed:

With respect to the telephonic food orders, the restaurants do all of the work: they take the phone order; they process the order; they prepare the food; and they deliver it. Grubhub plays no role in the process.”

As for how Grubhub supposedly determines whether to charge a commission on a phone call, the lawsuit stresses the company relies only on the length of a call to make the decision.

“Because Grubhub is not privy to these phone calls as they are taking place,” the lawsuit reads,  “Grubhub simply assumes that any conversation longer than 45 seconds is a food order and charges a commission without verifying whether an order for food was actually placed.”

Calls about food allergies? Calls about delivery ranges? Calls about the availability of particular menu items? Calls about, say, what hours a restaurant may be open? Calls about wheelchair accessibility? Calls to check on the status of an order you already placed? Even if no food order is placed, Grubhub charges a commission if the call lasts longer than 45 seconds, the plaintiffs say, going so far as to claim that “most telephone calls are not food orders.”

Either way, the plaintiffs argue Grubhub’s conduct with regard to phone calls placed to restaurants through its platform has been suspect for years, a charge backed up by the defendant’s alleged handling of call records. More from the complaint:

Grubhub claimed that restaurants had access to all telephone recordings, but in reality no restaurant had any access to a single telephone recording because Grubhub had universally disabled such access in an effort to conceal Grubhub’s unlawful business practice. Moreover, one of Grubhub’s account advisors acknowledged that without these recordings, restaurant orders cannot review the calls and audit them to determine which calls actually generated food orders.”

With regard to how much Grubhub charges restaurants for 45-second-plus phone calls, court documents say the amount is “determined by [a] restaurant’s monthly fee average as determined from month to month.”

You think that’s your favorite pizza place you’re calling?

According to the case, Grubhub creates a local telephone number for each restaurant that agrees to use its services and then advertises that number—which, to be clear, is different than an eatery’s actual phone number—on its platform. When a diner places a call to a restaurant through Grubhub’s app or website, the suit says, that call is merely rerouted by the defendant to the restaurant itself.

According to the case, restaurants and diners are often unaware that Grubhub has created a local telephone number that’s displayed on an eatery’s landing page that’s different than the business’s real phone number. While this poses an inconvenience to restaurants, which may be unaware that a call they’ve received has been rerouted to them through Grubhub, it’s diners who often end up unintentionally placing food orders through the platform under the belief that the number they're calling is a restaurant’s actual phone number:

For example, if a diner uses a search engine like Google to search for a specific restaurant, that diner will invariably click onto the restaurant’s Grubhub landing page, as Grubhub has secured primary placement with all popular search engines. Typically, a restaurant’s microsite on Grubhub is the first search result that appears, even above the restaurant’s own website. After landing on the Grubhub page, the diner would then dial the telephone number advertised there, mistakenly believing that he/she is contacting the restaurant directly. Instead, Grubhub diverts these calls to the restaurants and records the calls.”

The lawsuit looks to cover all restaurants in the United States that were allegedly charged improper commissions by Grubhub for telephone food orders.