Class Action: CloudKitchens Misleads Eaters Into Believing Their Food Comes from Real Restaurants, Not ‘Ghost Kitchens’

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A proposed class action alleges “ghost kitchen” operator CloudKitchens has misrepresented the true origin of the food it displays on UberEats, Grubhub, Seamless and Postmates. 

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The 38-page complaint says that although CloudKitchens, founded by former Uber CEO Travis Kalanick, purports on the online delivery platforms that its food comes from brick-and-mortar restaurants, the company’s so-called “virtual restaurants” do not exist, as the cooking is outsourced to other existing restaurants who used a shared kitchen, or ghost kitchen, to service other menus and their own. 

The suit charges that CloudKitchens' use of misleading names and food categories puts consumers at risk of health problems linked to cross-contamination and negligence of dietary restrictions. Further, the case alleges CloudKitchens' virtual restaurants “flout the hygiene scores issued by health departments and do not match the quality and appeal shown on their menus.” 

“Defendant does this behind the backs of consumers, who are misled into believing that their orders come from regular restaurants whose online menus match their physical presence,” the suit alleges.

Describing the defendant’s business model as “secretive,” the lawsuit explains CloudKitchens typically buys large commercial warehouses, remodels them to fit “numerous standalone kitchens,” outfits them with bare-minimum kitchen essentials, and then rents them out to restauranteurs interested in operating a delivery-only ghost kitchen. In the last two years, the filing says, CloudKitchens has achieved a valuation of roughly $15 billion. 

Despite this outsized growth, however, CloudKitchens “operates in the shadows,” with employees prohibited from naming the company on their LinkedIn profiles, the lawsuit relays. The suit notes that many of CloudKitchens' customers and workers “have left due to the company’s broken promises and toxic work environment.” 

At issue in the complaint is a branch of the defendant’s business referred to as “Future Foods,” i.e. the arm that operates the virtual restaurants that appear on online delivery platforms. In contrast to CloudKitchens' ghost kitchen business model, the Future Foods sector, rather than lease out commercial space to other restaurants, leverages the kitchens of existing restaurants to cook and prepare orders, the lawsuit says. Citing the company’s website, the case relays that these virtual restaurants are referred to as such because “the customer can only see and order from these storefronts online.” 

“In other words, Defendant’s Virtual Restaurants exist on the Platforms as a hoax—a mirage that permits struggling and/or opportunistic brick-and-mortar restaurants to make an additional profit without risking their reputation,” the suit reads. 

Many times, CloudKitchens' virtual restaurants operate from local establishments that “lack the capacity” to prepare certain dishes with the same quality and consistency maintained by eateries that handle large volumes of orders, the case adds. 

“In fact, the restaurants and delis that Defendant uses are often poorly rated—hence why they are willing to risk their own brands and reputations,” the suit says. “And because they use the same kitchen to prepare multiple menus, the chances of cross-contamination are high.” 

The lawsuit looks to cover all persons in the United States who, during the applicable statute of limitations period, bought food from CloudKitchens' virtual restaurants primarily for personal, family or household purposes and not for resale. 

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