(Disclaimer: This article discusses the legality of some of GrubHub’s practices. I am not an attorney or legal expert and this should not be taken as legal advice. You should speak to your own legal advisers if GrubHub is doing this to you.)
As someone who manages his fair share of restaurant websites that offer food delivery I’ve had experiences with GrubHub before. Those experiences haven’t been positive and for the most part I find much of what GrubHub does distasteful. They take a staggering percentage and routinely post “claimable” online AllMenus menus with out of date information and try to sell themselves to you when you ask for them to be removed.
They also employ a psychological creeping effect where you constantly have to be spending money to have a decent chance of appearing within GrubHub’s search engine. They operate on a “keep spending money” sunk cost fallacy that seems to focus more on monetizing their existing customers rather than monetizing a product or service.
GrubHub’s latest tactic designed to “retain” customers has nonetheless reached a new level of brazenly predatory behavior. The New Food Economy has an illuminating article on GrubHub’s strategy: GrubHub is registering tens of thousands of restaurant website domains that correlate with real restaurants. Author H. Claire Brown also talks about how GrubHub publishes “shadow” websites without permission or authorization from the actual restaurateurs. This one I can testify to personally, but we’ll get to that later.
The food delivery titan seems to consider the cost of annual domain registrations worth significant money. According to the article GrubHub has registered a staggering 23,000 domains, with subsidiary Seamless having registered thousands more. A full list of the domain registered can be viewed here; my advice is to make sure your restaurant doesn’t make any appearances.
If you were to be very conservative the GrubHub-registered domains alone would amount to $230,000 per year in renewal fees assuming a base registration of $10 per domain per year. That’s a princely sum that GrubHub has evidently decided is worth the investment, because the domain registration has continued well into 2019.
One restaurant owner, identified as Shivane who runs two mom and pop restaurants in New York City, asked only to be identified by her first name out of fear of retaliation by GrubHub. I should take an aside to point out that no company – ever – should inspire this level of fear in its customers. Even if Shivane’s fears were completely unfounded the fact that she’s doing a pseudo-anonymous interview speaks volumes about GrubHub’s tactics. If your customers ever fear “retaliation” from you you’ve failed as an ethical business at the absolute minimum. At worst you could be more of a protection racket than a business.
That said, I digress. When Shivane ran into the problems with GrubHub I mentioned earlier where she had to keep sinking increasingly vast quantities of money into the company to see business she wanted out. Shivane started exploring options to control her own web presence rather than have an external entity like GrubHub control it. This is also a key lesson to learn but I’ll get to that later as well.
She discovered that GrubHub had registered three different domains containing versions of Shivane’s restaurant’s name in 2012, 2013, and 2014. Shivane asserts that she never gave GrubHub permission to do this. I’m inclined to believe Shivane considering she wouldn’t have any reason to register similar-sounding domain names if she only runs two comparatively small restaurants. Plus I’m not sure who of their own volition would use GrubHub as a domain registrar; it’s not a service that they offer and not part of their business model in theory.
Shivane believes GrubHub had registered domains on behalf of her restaurants to prevent her from building her own online presence. This claim is reinforced by GrubHub’s use of standard-looking restaurant templates that are controlled and managed by GrubHub, not the restaurant entity itself. These pages display phone numbers controlled by GrubHub, which means customers who – knowingly or not – use GrubHub as an intermediary are giving a 30% commission to GrubHub.
To put it another way GrubHub has every incentive to actively compete with online real estate space against its own clients. GrubHub’s revenue is commission-based, which means the more that the company can position itself as the place to get orders rather than the direct phone number or the actual website of the restaurant, they make more money.
Needless to say this presents several massive problems. The first issue is the one of domain availability; intentionally or not GrubHub may have registered a domain that a restaurant client wants to use for itself down the road. Unlike simply registering the domain for $10 per year through GoDaddy or NameCheap the restaurant owner may find that the price of purchasing the domain from GrubHub may have been jacked up to several hundred or even thousand dollars.
I wrote in detail about my own experience with this, where a local barbershop signed with me to host a website that I’ve since built for them. They had declined to work with a previous web designer from several years ago who had nonetheless gone ahead and registered the barbershop’s domain name, likely as a way to keep them working with him.
When I subsequently reached out to this now ex-web designer he offered to sell the domain back to the business for a “discounted” price of $275. The client refused – a position I agreed with – and we found another domain, but I expect anyone looking to buy back their business domain from GrubHub would run into a similarly marked up domain. At the time the designer claimed that he wanted to make money back for the annual cost of keeping the barbershop’s name registered. If GrubHub is already predatory enough to try and muscle its own clients farther down in search results they would in all likelihood charge people premiums for domain purchases.
Controlling a business’s domain can be a very strong incentive to keep them under contract, especially when you effectively hold it to ransom if they try to sever ties with you. I suspect GrubHub knows this and wouldn’t be surprised if domain registration is a documented part of their “retention” strategy despite this offering nothing to benefit the customer. It only takes something away from the business in a way that makes the process of leaving a vendor too frustrating or expensive to be bothered.
The shadow websites that GrubHub sets up “on behalf” of restaurants present another series of problems. If a customer goes from a restaurant’s actual website to GrubHub to place their order GrubHub gets a smaller commission. This means once again that the more GrubHub actively overshadows the restaurant’s own website, phone number or E-mail, the more money they make.
This can lead to serious problems when GrubHub’s aggressive attempts to position its services over and above the restaurants themselves cause chaos in a small business’s Google search results. I’ve seen situations where GrubHub shadow websites actually outrank the websites of clients themselves. Or worse, when Google’s algorithm decides that a GrubHub shadow website actually is the business’s website and gets marked as such. Restaurant owners could be in a position where they’re unknowingly sending huge amounts of business to GrubHub simply because they’re not keeping track of their online presences.
This, of course, even assumes that the business is working with GrubHub in the first place, and this is where things get really spicy. Imagine you’re a restauranteur with zero affiliation with GrubHub, and GrubHub or one of its many affiliates simply sets up an ordering platform on your behalf anyway. I’ve unfortunately seen it happen often enough to not be surprised and the New Food Economy even reference it:
It appears that some of GrubHub’s shadow pages are competing directly with restaurants’ real websites. Take, for instance, Molly Hatchet’s Sub Shop in Daytona Beach, Florida. The real Molly Hatchet’s can be found at www.mollyhatchetssubshop.com. GrubHub’s page, purchased in December of 2018, is available at www.mollyhatchetssubshopdaytonabeach.com. The real Molly Hatchet’s has its own online ordering system that has nothing to do with GrubHub. The GrubHub shadow page for the shop displays a different phone number (because commission) and links only to GrubHub.
“Buying the URLs and positioning yourself in that way so that even in transactions in which the customer would want to go straight to the business, or the business has the opportunity to compete, to have a direct relationship with the customer—it’s predatory to do that,” Mitchell says.
This is, sadly, nothing new and far from limited to GrubHub. Food delivery services of all kinds routinely set up “claimable” menu pages scrapped from menus on the restaurant website itself. These menus are generally meant to be claimed in order to set up an online delivery account with the food delivery service. They often advertise it as a convenience: Look, we’ve set up your profile so you don’t have to! So if you’re a restaurant and all of a sudden you’re getting flooded with GrubHub, Urbanspoon or Seamless sales calls, Google yourself and look for listings that you didn’t set up.
What almost always happens instead is the restaurant – and I’ve had to do this often on behalf of clients – will need to “claim” the link in order to take it down due to not having any interest in working with that food delivery company. Unfortunately this process can often be difficult, frustrating and convoluted.
One of my own restaurant clients called me shortly after I began working with them to report that an AllMenus link – a subsidiary explicitly owned by GrubHub as noted in AllMenus link footers – was appearing at the top of Google search results with out of date menu items and pricing. They also insisted to me that they had never worked with GrubHub or AllMenus, meaning GrubHub likely went out of their way to set this up without the Italian restaurant’s permission.
It wouldn’t be as big of a deal if getting in touch with many of these companies weren’t such an ordeal. I linked to my GrubHub customer service support story, and indeed getting in touch with them was like pulling teeth. The first attempt ended in failure after considerable amount of time spent on holding, being bounced between departments and being evasively told that AllMenus’ “internal system” wouldn’t let them remove the link. I later called back, asked for a different service agent and was actually able to remove it when I emphasized that the client was unhappy.
TripAdvisor has a similar problem with their automatically generated “menus” that appear on TripAdvisor review pages. These TripAdvisor menus are generated by a company called Locu, a subsidiary of GoDaddy. Removing these out of date menus on behalf of not one but two of my clients was marginally easier but I had to manually E-mail GoDaddy’s customer service representative from domain based E-mails to prove that I was a valid agent of the business, which some restaurants may not have.
Even Google’s local search results aren’t immune from this trend. Google has emphasizes that it’s making it easier for consumers to find delivery services. At one point DoorDash had actually placed an advertisement on an upscale diner that I work with despite the diner having no business relationship with DoorDash. DoorDash had no phone number at the time so I actually had to contact a Google Local representative to get it removed.
So to summarize: GrubHub’s own business model causes it to develop an adversarial relationship with the clients it ostensibly exists to provide a service to, especially in an era where it’s a public company with shareholders that will demand ever higher returns with no endgame. GrubHub’s increasing aggressiveness towards retention leads it to register domains related to its clients and to set up what are effectively company websites sponsored by GrubHub without permission, regardless of whether or not the restaurant even works with GrubHub. Not to beat up too much on GrubHub but plenty of other food delivery services partake in these practices. GrubHub has just been particularly brazen about it.
Here’s the big question a lot of people are probably wondering: Is it legal?
As it stands, it probably is. Impersonating a business for the purpose of phishing scams or defrauding is certainly illegal. That’s still a far cry from what GrubHub is doing here. They’re not officially claiming to represent any of their restaurants. They’re careful to list that they are merely affiliated with the business, even if it’s in fine print in the footer of the website. Nowhere does GrubHub attempt to claim that it represents your restaurant.
I’m also willing to guess that the client terms of GrubHub effectively give GrubHub permission to do this on behalf of your restaurant. You’d need a fine-toothed comb to read between the lines of the legalese in this document, but section b near the top refers to “Marketing Services” where GH will include Restaurant on the ‘Systems as provided herein.’ In lay terms this appears to mean that GrubHub will include the restaurant in its own marketing and promotion. Although there’s no mention of what these “Marketing Services” specifically entail.
The only real mention of marketing services I was able to find while doing some research for this article was a press release announcing financials for Q4 and 2018. Here’s how GrubHub’s own financial details discuss what they refer to as marketing services:
Key business metrics include transactions placed on the Grubhub takeout marketplace or a related platform where the Company provides marketing services to generate orders (collectively, the “Platform”). The Platform excludes transactions where the Company exclusively provides technology or fulfillment services.
Again, you’d need a microscope to read between the lines, but the implication seems to be that GrubHub provides “marketing services” – which may or may not include these domain registrations and shadow websites – as part of what you’re signing up for. So regardless on whether you read the EULA – and like most people you probably don’t – you’ve likely signed off on all of this, unfair as it seems.
GrubHub responded to a detailed list of questions from Brown with the following statement, which is worth dissecting:
“Grubhub has never cybersquatted, which is identified by ICANN as ‘generally bad faith registration of another person’s trademark in a domain name.’
This is misleading. Even if GrubHub has never met the official, legal threshold for cybersquatting, there’s no way to argue that this was done in good faith. Not when restaurant owners are insisting that they never gave you permission to do it.
As a service to our restaurants, we have created microsites for them as another source of orders and to increase their online brand presence.
There it is. I’d like to thank GrubHub for coming quite close to outing these “microsites” as part of the “Marketing Services” it touts but doesn’t go into any detail about. This is still a threadbare statement that doesn’t address the conflicts of interest or Grubhub’s incentives to become the preferred order provider rather than the restaurant itself, but that’s what we’re given.
Additionally, we have registered domains on their behalf, consistent with our restaurant contracts. We no longer provide that service and it has always been our practice to transfer the domain to the restaurant as soon as they request it.”
“Consistent with our restaurant contracts” is the key term here. Even if it’s not in the terms, I expect these restaurant contracts are giving GrubHub explicit permission to do all of this. Even if you wanted to pursue legal action against GrubHub for harm to your business, their terms also mean you waive any lawsuits in favor of forced arbitration. This is a very consumer-unfriendly practice because large companies often have an advantage in arbitration rather than in a court and can more easily avoid accountability.
All in all? It’s a bad situation all around.
So what can you do as a restaurant owner?
There are, fortunately, some simple steps you can take in this situation:
Keep your domains registered and always make sure you have access to them. The simplest things often mean the most. Whether or not you use GrubHub or Seamless there’s no way you’ll be able to prevent them from registering every possible variant of your website domain. Grab the ones that mean the most to you and keep them all registered on an account with the same registrar; GoDaddy, NameCheap, whichever. Make sure you and only trusted business associates have access to those domains. Losing a domain you might otherwise want can be a potentially business-ending nightmare.
Mind your online presence diligently. Similarly, there’s no way to stop GrubHub from “enforcing” its sales practices or terms if you’re not working or working with them respectively. Google your restaurant regularly and keep an eye on your Google local listing. Make sure your website, social profiles and authorized delivery services all appear in search results. Contact the delivery services of any menu listings you don’t work with and have them removed. Mention legal action if you absolutely have to; sometimes it’s the only way to get them to cooperate.
Never rely entirely on middleman companies for your website. This is the big one. Never, ever rely on any of the following for your online presence:
-Social networks. By doing this you not only give these social networks control over how many of your customers you reach through their algorithms, but you also may be giving an even greater percentage to online delivery service. You also lose control over what you can actually display in terms of specials, services or what have you.
-Food delivery services themselves. If you decide to cancel your account you may wind up in a very GrubHub-esque situation where they won’t give you your domain or the website you thought you had back. In a worst case scenario the food delivery company is a startup that goes under, leaving you high and dry.
-Proprietary website builders. I admit my bias on this one but it needs to be said. On reflection what GrubHub is doing is not dissimilar to the tactics I see Wix, Squarespace, Weebly and countless other website builders employ all the time. These proprietary website platforms are different from open web hosts in that they irrevocably tie your online presence to their service. The intent is to never let you leave, or at the very least to make the process of leaving so inconvenient and unpleasant that the customers decides it isn’t worth the effort.
To employ another example let’s say you decide to start using Squarespace and you want to implement some sort of scheduling plugin. Squarespace won’t support it so you might think about changing from Squarespace to an open source web host – but whoops! You can’t take a Squarespace website with you and you’ll have to start all over again.
A number of my own clients have websites built on proprietary networks that I’ve rebuilt in WordPress, but the process is the same: Lock people in so that they keep giving you money regardless of how happy you are.
What can you do as a customer?
If you’re a conscientious customer you may be reasonably worried about what GrubHub is doing to local economies and restaurants. Fortunately there are things you can do as well. This article has mainly been aimed at educating business owners against GrubHub’s predatory behavior Natt Garun of The Verge has an excellent article outlining the various ways you can support local eateries as a consumer. Verifying local business phone numbers, ordering directly from the business itself, and being patient are a few of the ways they go into detail on.
The Internet evolves over time and nothing is set in stone. While it can be terrifying to feel like you’ve surrendered your business’s online presence to GrubHub or a third party company, you can take it back just as easily. When you a run your own business, you can run your own online presence too. So whether you’re worried about GrubHub or already working with them, there are always ways you can take back control. Treat your online presence the same way you treat your storefront and you’ll be okay.