Pickup or Delivery? Class Action Alleges GrubHub Charges Restaurants Commissions for ‘Sham’ Food Orders Placed by Phone

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GrubHub has for nearly a decade withheld payments owed to hundreds of thousands of restaurants by improperly deducting “commissions” for sham food orders placed by phone, a proposed class action alleges. 

The 31-page breach-of-contract lawsuit claims GrubHub has, for at least nine years, if not longer, deprived more than 300,000 restaurants of revenues and profits by charging commissions on telephone orders “regardless of whether those calls were actually made to place orders for takeout.”

According to the complaint, GrubHub, a leading online and mobile platform that boasts that diners “do not need to place their orders over the phone,” has engaged in this conduct even though the restaurants themselves, and not GrubHub, take the phone orders, process them and prepare the food. Further, the lawsuit, filed by Zaytoon Restaurant & Market in Las Vegas, claims GrubHub charges these phone-order commissions without verifying whether the calls generated actual food orders, relying “solely on the length of the call to justify its withholding of revenues and profits that belong to the restaurants.” 

As the case out of Illinois’ Northern District Court tells it, GrubHub has gone so far as to admit that restaurants “may have been incorrectly charged” for the alleged sham telephone food orders. Per the suit, commissions restaurants pay to GrubHub for use of the company’s services can range from 10 to 20 percent of each order. GrubHub’s standard contracts stipulate that an actual food order must be placed by phone through the company’s platform in order for any commission obligation to arise, the complaint stresses. 

Summarizing the plaintiff’s allegations, the complaint claims GrubHub has: 

• Failed to disclose in its standard form contracts that it does not take phone orders, and instead “creates a new telephone number for each restaurant” advertised on GrubHub’s website that, when dialed, redirects the call to the restaurant itself and records the call;
• Misrepresented that commissions will only be charged on “actual food and beverage orders”;
• Failed to disclose in its standard form contracts GrubHub’s method, if one exists, for determining which phone calls generate actual food and beverage orders;
• Failed to disclose that GrubHub does not conduct any sort of analysis to determine which phone calls actually result in food and drink orders before charging commissions for them; and
• Misrepresented that commissions are being charged for orders placed through GrubHub.com and generated by Grubhub. 

“Grubhub’s actions, and failure to act when required, have caused Plaintiff and tens of thousands of other restaurants across the country to suffer harm, including but not limited to lost profits in the tens of millions of dollars over the past nine years,” the lawsuit, filed in Illinois’ Northern District Court, alleges. 

In reality, the lawsuit says, GrubHub does not actually have a telephone food ordering system, and instead merely creates for each restaurant a local phone number that’s used to advertise the eatery on the GrubHub platform. When a diner uses that number to place a food order, as opposed to ordering through GrubHub’s online or mobile platforms, the call is rerouted to the restaurant itself, and GrubHub “does not interface with the diner at all,” according to the case.

“In fact,” the lawsuit reads, “GrubHub does not play any role in the processing of telephone food orders.”

Given the fact that restaurants, and not GrubHub, handle food orders placed by phone, the defendant does not know whether a call has actually resulted in a food order or was in fact another type of call, the complaint goes on. Instead, because GrubHub is not privy to the types of calls going through its platform to restaurants, the company “simply assumes that any conversation longer than 45 seconds is a food order,” and thus charges a commission without verifying whether it’s appropriate to do so, the lawsuit alleges. 

The plaintiff restaurant claims to have come across GrubHub’s alleged phone-order commission improprieties after the filing of a 2018 lawsuit centered on the same allegations. After becoming aware of that class action, the owner and operator of the plaintiff restaurant tested GrubHub’s system and soon found that “any call over a certain amount of time was automatically treated like an actual food order” on the defendant’s ledger for a particular restaurant, the complaint says. 

While the plaintiff’s initial contract with Eat24, a service provided by Yelp before it was acquired by GrubHub around October 2017, called for the restaurant to pay a 12.5 percent commission on each order placed through Eat24’s online system, no provision existed for the imposition of a commission or fee for phone orders “taken by and placed with the restaurant itself,” the suit says.

“When Grubhub acquired Eat24 from Yelp, Grubhub did not send nor ask Plaintiff to execute a Grubhub contract,” the complaint claims. “Grubhub assumed Eat24’s relationship with Plaintiff and continued to charge the same commission rate on orders placed through the platform. Grubhub’s Eat24 conversion FAQs state that Eat24 restaurants are still subject to the ‘existing agreement with Eat24.’” 

The plaintiff restaurant was not advised at any point during the onboarding with GrubHub that it would be provided with a local phone number for its restaurant and that the number would be used to advertise the restaurant on GrubHub’s microsite, the suit alleges. The plaintiff restaurant ended its relationship with GrubHub in February 2020 after learning of the company’s commission-charging practices with regard to sham phone orders, according to the suit. 

The lawsuit aims to represent all restaurants in the United States who were improperly charged a commission by GrubHub for a telephone food order.

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