Grubhub Sued for Forcing "Partnerships" on Restaurants
Grubhub has been one of the businesses that have benefited from the COVID-19 lockdowns as people have ordered food in their homes. However, their business practices have come under attack from restaurants that claim that they are not partners with the company. In a class action lawsuits, some restaurants claim that Grubhub listed them as a partner without their permission. These restaurants claim that Grubhub used them and their reputation to portray a picture of corporate growth that led to a $7.3 billion sale of the company. In the meantime, restaurants said that their own reputations were potentially compromised.
Grubhub generally works with partner restaurants to bring their food to the public. For the restaurants, it is a way of expanding their reach so their food is available to more people. However, these depended on an agreement between the two companies. Grubhub was allowed to use the restaurant's name and logo on their website. For Grubhub, it allows them to show that they have a wide partner network. It also allows them to gain customers by showing them that they offer a wider variety of selections.
Grubhub Advertised Restaurants as Partners Without Their Permissions
In the past, Grubhub had always entered into explicit agreements that were partnerships. In other words, these restaurants had given Grubhub permission to use their information on the website. However, the plaintiffs alleged that this changed in the recent past. After the company was faced with increased competition in the marketplace, it began to face slowing growth with more companies in its same line of business. This led to slowing growth. As a result, the stock price took a hit, and Wall Street analysts slashed their growth forecasts for the stock. In turn, Grubhub promised that it would expand its network of restaurants.
It was here where the plaintiffs say that Grubhub began to take some liberties. The lawsuit alleges that Grubhub began to list their own restaurants on their website and app as partners without having an explicit agreement. The plaintiffs claim that Grubhub did this to make it look like their network was larger. Eventually, Grubhub sold the company for over $7 billion, making a healthy profit for their shareholders and corporate executives.
One may wonder why Grubhub listing a restaurant as a partner would upset restaurants. However, the plaintiffs allege that this served to damage the restaurants' reputation. They had no choice or say over how their business was represented to the public. If Grubhub did not do a good job or provide acceptable customer service with a sale, customers may come to associate the bad experience with the restaurant itself.
Not All Restaurants Want to Work With Grubhub
Some restaurants do not want or need to deal with Grubhub. They have enough orders and business of their own where they do not need Grubhub to boost their business. The plaintiffs claim that this can even have a harmful effect on business that do not want or need additional orders and takes away their own control over customer service. Many restaurants already have their own delivery service and do not need to work with Grubhub.
The plaintiffs claim that Grubhub even went so far as to initiate a scheme where drivers posed as customers to hide their true affiliation from the restaurants. Grubhub knew that its own orders may be refused by the restaurant. In these cases, the driver paid for the order posing as the end customer so restaurants would not know the true origin of the order. Some drivers have even refused these orders because they lead to a bad experience for the drivers.
As far as the public is concerned, these restaurants are partnered with Grubhub. Therefore, if there is any blame to be assigned, the public would place it at the foot of the restaurants. In the meantime, the restaurants did not necessarily get any benefit from their names and businesses being used. Accordingly, the lawsuit claims that Grubhub hijacked local businesses to benefit its own bottom line.
Moreover, the lawsuits claims that Grubhub stole the businesses' intellectual property in using their logos and names without permission. The plaintiffs are seeking an injunction to halt the practice of unwanted partnerships and are also asking the court to grant them monetary damages. First, the plaintiffs are requesting class certification so the lawsuit can proceed as a class action on behalf of all restaurants that experienced this practice.
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