Despite saying in January this year that it would work to change a system that charged restaurants for calls that didn’t result in orders, Grubhub seemingly charged one restaurant near Columbia University for dozens of such calls between January 4 and April 20 this year, an Eater investigation has revealed.
The Expat, a Southeast Asian gastropub at 64 Tiemann Pl., near Claremont Avenue, received 54 phone calls via Grubhub between January 4 and April 20 — only three of which resulted in actual orders. Yet for all the calls, Grubhub charged the restaurant anywhere between $6.20 to $7.17 per call in commission fees, according to an analysis of the phone records.
In total, the phone calls cost the Expat $380, with just under $21 of that for calls that resulted in revenue for the restaurant. In some cases, the phone calls were questions about online orders — meaning that the Expat paid commissions to Grubhub twice, co-owner Andrew Ding alleges.
The phone numbers on a restaurant’s Grubhub page are different than the one on a restaurant’s website, a way for the delivery company to collect a marketing commission. But inaccurate charges can be a heavy burden for an industry that’s currently reeling from a $3.6 billion downturn in sales this month, Ding argues. As of Thursday morning, the restaurateur was still waiting to hear back from Grubhub following a request for a refund.
“Under normal circumstances this would be egregious, but under the current circumstances this is unconscionable,” he says.
A spokesperson for Grubhub tells Eater the company is going to conduct an immediate audit of the Expat’s calls. “Grubhub’s 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 restaurants and diners,” the spokesperson tells Eater in a statement. “This didn’t happen in this case.”
Grubhub, which also owns Seamless, first came under fire for allegedly erroneous phone order charges in May 2019. A group of NYC restaurateurs filed a class-action lawsuit against the company, claiming that Grubhub took hundreds of dollars from them in bogus phone charges. The delivery platform uses a computer algorithm to determine which calls result in orders, and in August, it pledged to refund restaurants that were charged incorrectly. However, the onus fell on restaurants to track which call charges were erroneous, and businesses were given a 120-day window to address their concerns with the Chicago-based delivery company.
Last October, more than 30 New York City Council members urged the delivery app to refund restaurants for all the times it had incorrectly charged fees; the company announced changes in January of this year. But in a survey of 300 restaurants this February, the NYC Hospitality Alliance, a group that represents thousands of restaurants in the city, found that Grubhub still hadn’t refunded 91 percent of the restaurants for incorrect charges.
Grubhub’s promised changes don’t seem to have translated over at the Expat either. Aside from the three calls that resulted in orders, a majority of the calls — 26 — were customers calling in with a variety of queries, including about specific ingredients in a dish, if the restaurant was open, and if the restaurant did delivery. Sixteen calls rang and went to voicemail, but Grubhub charged a commission fee on each of them, according to Ding’s records.
Perhaps most disconcerting, Ding says, was that nine of calls were about orders that had already been placed through Grubhub online. In each instance, customers were calling to report issues with the orders, such as a missing item or confirming that the order went through on the app. In another case, a customer called in to say he had received someone else’s order. For all of the phone calls, Grubhub charged the restaurant a commission fee for the order placed online and then an additional commission for the phone call, Ding says.
Grubhub’s call system prompts customers to select whether they are calling to place an order or calling to ask a question, a measure that went into effect in January. However, the onus is on the customer to make the correct choice. Restaurants cannot tell how the customers found their number or which option they chose, Ding says — and ultimately business owners bear the burden of contesting any erroneous charges.
The Expat’s allegedly bogus charges first came to light on April 21. Ding tells Eater that he logged into his business’ Grubhub app and noticed that there was a $7.16 commission charge on a phone order placed on April 20 at 6:44 p.m. When he listened to the audio recording for the phone call — Grubhub keeps audio records of each call for restaurant owners for a limited amount of time — he learned that the call rang and went straight to voicemail.
That prompted Ding to go through his restaurant’s phone order history on Grubhub, which led him to discover dozens of other similar charges for calls that had never resulted in orders.
Ding fired off a missive to Grubhub on April 21 outlining his concerns. “This is not only unethical, it’s predatory and scandalous considering how we are fighting tooth and nail to stay afloat in this crisis,” Ding wrote in his email to Grubhub.
He heard back the following morning from a representative, who informed him that Grubhub was prepared to conduct a one-time audit for a 120-day period. For all future issues, Ding or someone on his staff would have to review the calls themselves and dispute the charges via email or by calling a Grubhub phone number, the staffer told him in the email.
“The fact that you’re telling me I need to review each call is insane,” Ding wrote back. “How can you place the burden of contesting all these unjustified charges on the customer?”
The Expat’s delivery business has gone up dramatically since the beginning of the pandemic. Before the novel coronavirus hit, the restaurant did about 20 orders for delivery per week on the platform; throughout this March and April, it has tracked an average of 47 orders per day or a total of nearly 2,500 orders. Most orders come through Grubhub, while others come through the restaurant’s own website. The Expat hasn’t opted to work with Grubhub delivery workers and instead partners with the restaurant courier service Relay.
Ding also owns a couple of other restaurants further north in Harlem that haven’t had issues, but he fears Grubhub will retaliate against them now that he has come forward with his concerns about phone orders at the Expat.
And despite the rise in delivery business, the restaurant has lost 70 percent of business, and Ding has had to furlough nine servers and bar staff. Currently, the restaurant is working with a crew of eight, most of whom work in the kitchen to keep up with the delivery and takeout orders. “We’re only just managing to cover the cost of payroll,” Ding says.
Already, the Expat is paying Grubhub thousands of dollars in commissions, he adds.
Although Grubhub’s charging model for restaurants isn’t exactly clear to him, Ding tells Eater that Grubhub offered him three different commission models that ranged from 18 to 28 percent per order — the higher the commission fee, the more likely the restaurant will appear higher up in customer searches. On Grubhub’s website, it lists one commission for food and beverage totals, and separate commissions each for delivery, phone orders, and order processing. A sample provided on the site shows a 31 percent commission: $13.95 in fees for an order totaling $44.28.
The Expat initially signed up for the lowest tier on Grubhub, but when the restaurant didn’t appear much on searches, Ding decided to move up to the next level.
While across the country Grubhub has seen record numbers of new diners and restaurants on its platform, orders in NYC are below pre-pandemic levels, the company announced in its most recent earnings report. Shortly after the shutdown on dining-in went into effect in NYC in March, the company once again came under fire when it was revealed that its $100 million relief program for restaurants impacted by COVID-19 entailed only a deferral of commission fees, not a cancellation.
Earlier that same month, the New York City Council introduced sweeping legislation that would rein in third-party delivery companies like Grubhub by limiting commission to 10 percent, among various other provisions. Last week, Grubhub was named along with other third-party delivery companies in another class-action lawsuit filed by diners who allege that the excessive fees these companies impose on restaurants ultimately have to be paid by diners.
Still, Ding isn’t too hopeful for a positive outcome for his own issues with Grubhub, he says. “This is a criminally flawed system,” he tells Eater. “Can you imagine any other company doing this right now?”
Below is a copy of the email exchange between Ding and a Grubhub representative.