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Under Pressure, Grubhub Changes Its Ordering System

January 9, 2020

Original content: The New York Times

Published Jan. 9, 2020; Updated Jan. 10, 2020, 12:58am ET

Responding to criticism that it was cutting into restaurant profits, the food-delivery giant said it was making a change to stop charging fees for calls that do not end with an order.

Facing mounting pressure from regulators and restaurant owners, the food-delivery giant Grubhub said on Thursday that it would revise its widely criticized phone-ordering system to avoid charging restaurants for calls that do not result in orders.

In recent months, restaurant owners have complained about the commissions — which usually range from 15 to 30 percent — that Grubhub and the other major food-delivery apps charge every time someone places an online order. The New York City Council is considering legislation to regulate the delivery industry, and large restaurant chains are pressing for better deals.

But Grubhub, which owns the Seamless brand, has come under particularly intense scrutiny for charging restaurants fees for phone calls placed through the app that do not lead to a delivery, like calls to inquire about a menu item or to make a reservation. 

In a letter to the Council on Thursday, Grubhub said it would address that problem by installing a “common sense” safeguard in its phone-ordering system. Customers who tap the number displayed on a restaurant’s page will now be asked whether they are placing a delivery order or calling about something else.

“Our goal is to get orders right — regardless of whether they are placed online, on our app, or via phone — while keeping the process fast and easy for both diners and restaurants,” the letter said. 

In addition, Grubhub said it would double the number of account advisers available to help restaurants draw new customers and resolve technical problems, including with its phone-ordering system.

For years, Grubhub used an algorithm to determine whether calls resulted in orders, and charged restaurants based on a range of factors, including the length of the call. But that formula was far from perfect; restaurants reported paying hundreds of dollars in fees for calls in which customers simply asked about a special or made a reservation. 

In August, Grubhub pledged to pay refunds to restaurants that could show they had been charged erroneously. It also doubled the time it gives restaurants to review recordings of calls, to 120 days from 60.

But those steps did not satisfy the company’s critics. In October, dozens of members of the New York City Council sent a letter to Grubhub’s chief executive, Matt Maloney, calling for him to hire a third-party company to evaluate the phone-order system and to issue refunds for “any phone call fees that did not yield a sale,” even outside the 120-day window.

“In the event that you do not take corrective actions,” the letter said, “we will explore potential legislative solutions.”

The changes that Grubhub announced on Thursday fell short of the Council’s demands. 

“The outstanding question is, when are they going to pay back all of the money they should not have taken in the first place?” said Andrew Rigie, the executive director of the New York City Hospitality Alliance, a trade group that represents restaurants and night life businesses. 

Mark Gjonaj, the chairman of the Council’s small business committee, has led the Council’s investigation of the food-delivery industry, which began with a hearing in June. In a statement on Thursday afternoon, he said the changes Grubhub had proposed were “insufficient.” 

“There is nothing in the proposed changes that would make whole the thousands of restaurants that have already paid for what in many cases were erroneous phone order fees,” he said. “These are hard-earned dollars.”

Marco Chirico, a restaurant owner in Brooklyn, called the changes a “good direction” for the company. But he still wants his money back. 

“I lost a couple thousand — that pays my rent, that pays my employees,” he said. “A lot of restaurants are hurting from that.”

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