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Customers trying to avoid online delivery platforms like Grubhub by calling restaurants directly might be dialing phone numbers generated and advertised by those very platforms — for which restaurants are charged fees that can sometimes exceed the income the order generates. Restaurant owners and the New York City Council say the practice is further squeezing businesses already stretched thin by the coronavirus pandemic and the lockdowns.
“If a customer calls to place a coffee order, we’re paying a $6.42 fee — for a coffee,” Rafaela Negrao, co-owner of Gourmet Kitchen in Brooklyn and the “ghost kitchen” Palmito, told BuzzFeed News, explaining that she pays a flat fee per phone order. “You are paying for someone to drink your coffee. If you look at it that way, you see how much it hurts.”
Here’s how phone fees work: Grubhub (which also owns Seamless, MenuPages, Tapingo, and LevelUp) generates a unique phone number for each restaurant on its platform; it appears on the restaurant’s Grubhub or Seamless page and redirects to the restaurant's own phone line (a restaurant cannot list its own phone number on its Grubhub or Seamless page). The redirect number can also appear higher in Google search results (including the Google panel for that business) than the restaurant’s own line. This leads some customers to call it even if they don’t intend to use Grubhub. Some restaurant owners have also raised this concern about Yelp, which lists Grubhub numbers, according to Vice.
This is a long-standing practice for Grubhub, which was founded in 2004 and charged a commission for phone orders before online ordering took off.
When a Grubhub number is dialed, the caller hears an automated message that says “Press 1 to place an order. Press 2 for all other information.” It does not mention Grubhub. After the caller is connected, the platform can charge the restaurant a fee. Each restaurant's phone order fee is a flat dollar amount based on a percentage of its average sale.
Grubhub charges that fee using an algorithm (which factors in a number of things, including the length of the call) — even, in some cases, when it did not result in an order. A restaurant owner can challenge a phone charge within a certain period of time, but the onus is on them to see which charges are erroneous.
But despite hiding in plain sight for years, that practice is now coming under fire from authorities.
“In peacetime, it’s devious. In wartime, it’s just ugly greed.”
“Most people don’t even realize when they google the phone number for a restaurant, 9 times out of 10, they’re pulling up Grubhub’s forwarding number for that restaurant,” New York City Council Member Justin Brannan told BuzzFeed News. “In peacetime, it’s devious. In wartime, it’s just ugly greed.”
On Wednesday, the New York City Council passed a bill prohibiting platforms from charging for telephone calls in which a transaction did not take place during the state of emergency. It also capped fees that platforms may charge restaurants for orders and deliveries during an emergency.
A Grubhub spokesperson told BuzzFeed News: “We explain exactly how the process works to restaurant owners when they sign the contract. We give owners a transcript of all phone orders almost instantaneously, and then we give them four months to review the orders and raise questions.”
In an investor call last year, Grubhub CEO Matt Maloney defended the phone commissions, which are the subject of an ongoing class action lawsuit, saying, “We still allow restaurants to review telephone orders via their manager portal so we are completely transparent. We believe this is fair. If Grubhub is sourcing and driving the order, we should collect a commission. This has been our policy for years and is explicitly laid out in our restaurant contracts.” He also said that calls represented a “single-digit percentage of our orders.”
“People don’t realize they are doing this, that by dialing a phone number they’re charging the restaurant [almost] $8.”
But some restaurant owners have a different take. “Unless you go on and go through all your phone calls, you get charged. I don’t have time for that, but you have to do it. It’s nonsense, but it adds up,” Jackie Juliano, owner of two Patsy’s Pizzeria restaurants in Brooklyn, told BuzzFeed News.
In a recording of a phone call made to Patsy’s during the coronavirus pandemic, a customer said, “I don’t want to go through a third party.” But the customer had used the phone number supplied by the platform — and Grubhub charged Juliano’s restaurant $7.45 for that call.
“People don’t realize they are doing this, that by dialing a phone number they’re charging the restaurant [almost] $8,” said Juliano.
Tony Gentile, co-owner of LoneStar Bar & Grill in Brooklyn, told BuzzFeed News, “You’re working so hard, it’s insanity. ... After all the fees, it’s all gone.” Gentile said he is trying to get customers to call the restaurant’s own line by including menus with the store’s phone number and promotions with all deliveries. But it's a hard climb.
“When you sign up with Grubhub, you’re basically agreeing to sell your soul to the devil as a business owner,” LoneStar co-owner Tracy Blaise told BuzzFeed News.