Lawsuit Accuses Grubhub Of Charging Restaurants For Bogus Phone Orders

The rapid rise of middle-man food delivery services like Grubhub, UberEats, and the like has been accompanied by a great deal of talk about how—and whether—restaurants benefit from these services. The apps tend to argue that by bringing every local establishment under a delivery umbrella, both consumers and restaurants benefit.

However, a New York Post investigation into an ongoing lawsuit between Grubhub and Philadelphia's Tiffin Indian Cuisine owner Munish Narula draws attention to alleged suspect practices from the tech company. Specifically, the suit alleges that Grubhub has for years been billing restaurants for phone calls routed through the app, whether or not the call resulted in an actual order. Grubhub says it only charges restaurants a commission when an order is placed, but the Post spoke to multiple owners who say they've been charged thousands of dollars for calls that weren't orders. The suit claims the practice is widespread.

Narula's allegations stem from Grubhub's practices of routing outside calls through its own phone numbers, instead of directly connecting diners to the restaurant itself:

Behind the hidden fees, according to the lawsuit and restaurant sources, is Grubhub's practice of setting up brand new phone numbers for restaurants it contracts with. It displays its phone numbers on its Web site and app instead of the restaurant's actual number.

Customers who rely on Grubhub's numbers may never know the difference because Grubhub automatically forwards its calls to the restaurants, which then fill the orders.

Fees for non-orders have the effect of doubling Grubhub's normal commissions of 15 percent to 20 percent of the final bill, restaurateurs say.

The basis of the lawsuit alleges that Grubhub has been shaving extra commissions through a "statistical model" that determines whether or not a call resulted in a placed order: "[it] claims Grubhub's statistical model is a mere egg timer—one that charges for any call above 45 seconds." Grubhub, for its part, replied with a public statement: "We believe the Tiffin case is without merit and dispute the claims." Tiffin's website now has a full-screen landing page urging customers to order delivery directly from the restaurant.

Regardless of how the lawsuit turns out—it's currently pursuing class-action status so it can loop in other restaurants—it offers a crucial reminder that meal order apps are still new technology, and like many tech innovations, are still governed with less oversight than some might hope. As business moves ever further into digital space, standards and practices will have to evolve alongside it.