It also appears to publish shadow pages without owners’ consent—sometimes in direct competition with real websites
ew York City restaurant owner Shivane M. says she was ready to leave GrubHub.
She owns two small locations in Brooklyn and Queens with her husband, where they serve classic American breakfast and lunch—egg sandwiches, burgers, fries. It’s a mom-and-pop shop, and they rely on phone orders for delivery to get through the slow winter months.
Shivane signed up to add both of her restaurants to GrubHub’s online delivery platform several years ago. Its services were promising: It would handle delivery orders and show her menu to new customers in exchange for a commission on each order placed through the platform. It sounds like a great deal. Restaurants can reach customers who want to order online without having to build and manage their own websites, and the platform’s marketing services can replace cumbersome, old-fashioned advertising strategies like hand-delivering take-out menus.Related: Restaurants to eaters: Please, for the love of god, stop using Seamless
But over time, Shivane says, she slowly watched her profits fall, even as sales held steady. She fell behind on her bills. She just couldn’t figure out why exactly she was losing money: business was the same or better than before, she says, but she wasn’t seeing a boost to her bottom line.
So she reviewed her statements. It was obvious. GrubHub’s commission fees had been inching upward over the years she’d been working with the platform. There was the flat transaction fee, which hovered around 3 or 4 percent. Then there were marketing fees and costs for additional promotions. Shivane says she feels like the platform is increasingly pay to play: Spend more to promote your restaurant, and see your search rankings rise. Cut down on marketing spend, and watch your restaurant fall to the bottom of the page and lose sales. “It’s putting us in a financial hole. Last month, I paid $7,000 to GrubHub. That’s my rent for the month,” Shivane says. The New Food Economy viewed the company’s invoice to Shivane’s restaurant—it was actually $8,000. We agreed to use only her first name and last initial in this story because she still uses the platform and fears the company could retaliate by dropping her restaurant to the bottom of its search rankings.
Frustrated, Shivane started exploring other options. She says she thought about bulking up her restaurant’s web presence and offering orders on her own site through a different service, one that offered a flat monthly rate and no commission fee.
There was just one problem: Someone already owned the web domain that matched her restaurant’s name. She looked up the buyer. It was GrubHub.
The New Food Economy has found that GrubHub owns more than 23,000 web domains. Its subsidiary, Seamless, owns thousands. We’ve published the full list here. Most of them appear to correlate with the names of real restaurants. The company’s most recent purchase was in May of this year.
Grubhub purchased three different domains containing versions of Shivane’s restaurant’s name—in 2012, 2013, and 2014. “I never gave them permission to do that,” she says.
Shivane believes GrubHub purchased her restaurant’s web domain to prevent her from building her own online presence. She also believes the company may have had a special interest in owning her name because she processes a high volume of orders. She rattles off a list of names of local restaurants that she suspects may be in the same predicament. I find versions of about half those names on the list of GrubHub-owned domains.
Additionally, it appears GrubHub has set up several generic, templated pages that look like real restaurant websites but in fact link only to GrubHub. These pages also display phone numbers that GrubHub controls. The calls are forwarded to the restaurant, but the platform records each one and charges the restaurant a commission fee for every order, according to testimony from GrubHub executives at a hearing at New York City Hall on Thursday. This happens on the GrubHub platform itself, too. The phone numbers you see displayed in the app typically aren’t a restaurant’s actual phone number, they’re the numbers that GrubHub uses to make sure it’s getting its commission.
… For the customer, the experience is the same. But for the restaurant, it couldn’t be more different. If a customer calls a restaurant on its actual listed phone number, GrubHub never gets involved. The company doesn’t get a commission, and the restaurant makes more money, about 30 percent more, if it’s lunch at Shivane’s.
GrubHub’s fee structure is based on its marketing services. If a customer finds out about a restaurant in the platform’s app or through a GrubHub-run promotion, the platform can charge the restaurant a higher commission, because it’s bringing in new business. Likewise, if a customer navigates from a restaurant’s real web page to GrubHub’s ordering system to place their order, GrubHub’s commission is smaller than it would be if the customer “discovered” the restaurant on the platform, because the customer clearly already knew about the restaurant and is simply using GrubHub’s services to place an order. The shadow pages complicate this equation: If a customer Googles a restaurant’s name and lands on a GrubHub-owned site that looks like a real restaurant’s site, who should get the commission? And is it fair if GrubHub can outrank its own restaurants on search engines?
Here’s where things get hairy. 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.
In a hearing at New York’s City Hall on Thursday, company executives estimated that GrubHub made about $30 million in phone commissions last year. And those commissions are under increasing scrutiny of late. The company uses an algorithm to determine whether or not a phone call has resulted in an order, a system that results in mistakes. GrubHub has said it expects restaurants to log into its back end and listen to all phone recordings to make sure they aren’t being charged for calls that didn’t yield orders. A Philadelphia restaurant recently sued the company over its practices. (More here.) Shivane says she just learned about this, and estimates she’s owed about $30,000 in overcharges from the company.
…As for Shivane, she says she hopes to start educating customers about what she sees as GrubHub’s predatory business practices. She wants people to start calling her direct line again, like they used to. And she thinks her customers will be happy to help her as soon as they learn more about what’s going on. She adds, “I don’t think a lot of people realize how shady GrubHub is.”