Why Grubhub Created Its Own Websites for Restaurants
Grubhub’s CEO has called the resulting controversy “false narratives."
When it rains, it pours, and for Grubhub, it’s been hurricane season. Over the past few months, the online ordering platform has been accused of charging restaurants with unwarranted phone fees, leading to a potential class-action lawsuit and an invite to appear before the New York City Council. That issue seems to have led to more digging, and last week, a new controversy arose: that Grubhub was creating “fake” websites for the restaurants they work with.
Robbing restaurants of fees and generating illicit websites seems a bit gratuitously evil for one of the largest companies in a still extremely competitive online ordering industry where pissing off your partners probably isn’t good for your long-term business prospects, so clearly there are two sides to this story. As reported by New Food Economy — the site that broke the websites story — as far as fees are concerned, Grubhub has said the onus is on the restaurant to make sure they aren’t being mischarged. Apparently, there’s a similar story behind the “fake” websites as well.
I’ve been putting the word “fake” in quotes because these websites are very real. Grubhub set them up as a place where people can find the restaurant online and then place an order through Grubhub. Frankly, a free website doesn’t sound like a bad deal until you understand how Grubhub’s commission structure works: The company gets a bigger cut depending on how an order was generated, and ostensibly, an order coming through a website created by Grubhub could result in a higher commission than one placed elsewhere. Along those lines, the bigger issue is when the Grubhub-created site is competing directly with an “official” site created by the restaurant itself. In those instances, Grubhub can be poaching business (again, potentially at a higher fee) from the restaurant they’re supposed to be helping. Making the whole thing look even more suspicious, though the Los Angeles Times reports that Grubhub does reserve the right to create these “microsites” in their contracts, at least some restaurant owners say they didn’t know it was happening.
Still, in Grubhub’s defense, you can see why the company would want to create websites for restaurants that don’t have one. And Grubhub Chief Executive Matt Maloney sent a five-point email to employees (which was obtained by the Times) calling the whole thing “false narratives.” His argument: The permission to make the sites was “very clear,” and the sites generated more sales with actually lower commissions than those charged elsewhere. He also stressed that these domain names would always be turned over to the restaurant owners free of cost if requested. And finally, he added that Grubhub had stopped this process last year anyway. “These orders made very little money for us and in many cases we lost money,” he said at one point.
Overall, it would seem like both sides have valid points here. So whether these “microsites” are truly as devious as some have made them out to be is up for interpretation. And yet, in light of Grubhub’s phone fees issue — where the company has actually been refunding significant chunks of money to some restaurants — it’s also easy to see why owners might suddenly question everything that Grubhub has been doing without their explicit knowledge, regardless of what the intentions may be.