Grubhub ‘cybersquatting’ outcry signals changing delivery landscape

Jul 11, 2019

JULIE LITTMAN — Restaurant Dive, July 11, 2019 |

Despite growing demand for delivery, operators have become increasingly concerned that third-party platforms are taking too big a bite out of their already thin margins.

Late June, independent operators took aim at Grubhub specifically, accusing the third-party provider of cybersquatting and registering 23,000 domain names without their permission to profit off of restaurant’s businesses. A recent New York City Council meeting also examined accusations of hidden fees imposed by Uber Eats and Grubhub when customer phone calls didn’t result in orders.

Grubhub has since defended itself, calling the charges of cybersquatting “reckless” and claiming its restaurant partners had agreed to the domain purchases and websites in their contracts as part of marketing their businesses, according to the Los Angeles Times.

“Allegations that Grubhub engages in cybersquatting or any other behavior that would harm our restaurants are absolutely false,” Grubhub Senior Manager, Corporate Communications Katie Norris told Restaurant Dive in an email. “In the past, we have registered domain names and created websites as a way for restaurants to drive more online orders. In every case, restaurants gave us explicit permission to do this, and we have always given restaurants the ability to assume control of any domain created for them.”

Norris said Grubhub stopped setting up microsites for restaurants in 2018, but didn’t indicate why they did so. The company remains committed to driving more orders for restaurants in its marketplace, she said.

“The question I have is why is all this bubbling up now when Grubhub [as Seamless] has been operating in New York for 20 years,” BTIG Managing Director and Restaurant Analyst Peter Saleh told Restaurant Dive. “My gut tells me it’s because digital orders were a very small percentage of sales … years ago and it is now more meaningful.”

Scrutiny over third-party aggregators will likely intensify, especially as delivery’s growth outpaces overall restaurant industry sales, and operators work out the kinks with delivery. Non-pizza delivery increased 63% in the last five years ending March 2019, NPD Group Vice President, Food Industry Advisor David Portalatin told Restaurant Dive. Comparatively, visits to restaurants have grown 1% during this time, he said.

“Consumers are voting with their wallet and saying, ‘we value delivery’,” Portalatin said.

As restaurants watch delivery sales grow, they also are seeing how much delivery providers are taking off the top from each transaction, Saleh said.

“There is a prize out there and everyone is going to have to share in that prize,” Portalatin said. “Aggregators are going to have to have a revenue stream, too.”

Despite discontent from partner restaurants, Saleh said he doesn’t anticipate any major shift in Grubhub’s operations.

“This may be a bump in the road and not a massive mountain [Grubhub] has to climb,” Saleh said.

The claims of cybersquatting likely stem from restaurants not understanding what Grubhub’s services include, which entails creating a digital presence, Saleh said.

To resolve issues surrounding phone orders, Grubhub’s algorithm may need to be tweaked to make sure restaurants aren’t charged for phone calls that don’t result in an order, Saleh said.

“I think it’s a little unfair that people see Grubhub as a bad actor or bad citizen in this,” ShiftPixy CEO Scott Absher told Restaurant Dive. ShiftPixy, which offers a scheduling and recruiting platform, has been building out a platform to assist restaurants in self-delivery. “I can’t imagine there being any bad intent. They are really trying to help these operators build their business.”

He said Grubhub will likely be more communicative in explaining its tactics and methodologies and how they help these operators going forward.

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