False GrubHub ads in coronavirus pandemic hurt restaurant: Federal lawsuit

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A lawsuit filed in federal court Monday accuses food delivery service GrubHub of deceiving customers over the availability of local restaurants amid the coronavirus pandemic.

Denver restaurant Freshcraft alleges in the lawsuit that GrubHub falsely told its users that restaurants were closed or not taking orders when they were actually open.

The lawsuit seeks class-action status on behalf of all U.S. restaurants.

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Freshcraft's attorney Ross Ziev told FOX Business some of the restaurants listed as closed on Grubhub don't normally partner with the food delivery service.

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"Nobody from Grubhub reached out to us to see if we were open or delivering before telling the world that we were closed and pointing my potential customers to restaurants that were paying Grubhub," Erik Riggs, the owner of Freshcraft, noted in a press release. "We are doing what we can to stay afloat and Grubhub is just feeding off people's troubles."

Ziev believes GrubHub was displaying false information to steer customers to restaurants that are GrubHub partners.

GrubHub told FOX Business it does not comment on pending litigation. "We're committed to helping restaurants during this challenging time," the company said.

Riggs told FOX affiliate KDVR he chose not to be a GrubHub partner because he wanted to better control delivery services and avoid partnership fees.

"It's been a problem," Ziev noted. "Other business owners have been pointing this out. I'm sure there are restaurants out there this is happening to."

Ziev told FOX Business he noticed this problem personally when ordering around town.

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"If I research a restaurant I want to eat at, and I go to the first search result, and it says it's closed, you're probably not going to search even further to make sure that restaurant is actually closed," Ziev said. "People don't have the time, the energy or the effort for that."

Food delivery demand has been at an all-time high during the coronavirus pandemic, with many Americans sheltering in place.

According to data analytics company SEMrush, Doordash, GrubHub and Uber Eats are the most-searched delivery apps on Google.

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Uber Eats saw gross bookings of $4.68 billion in its first quarter, up 52 percent over a year ago, TechCrunch reported. Meanwhile, Chicago-based GrubHub experienced gross food sales spike to $1.6 billion, up from $1.5 billion during the same time period last year.

But just last week, GrubHub missed earnings expectations and didn't issue revenue guidance because of the coronavirus pandemic.

GrubHub's stock soared Tuesday on a report Uber is in talks to buy the food delivery service in an all-stock deal that would merge two of the country's largest on-demand meal platforms.

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A GrubHub spokesperson told FOX Business earlier this month that the service had seen an uptick in new restaurants joining the service.

In late March before this lawsuit was filed, GrubHub CEO Matt Maloney told FOX Business' Maria Bartiromo the small businesses are really hurting during coronavirus.

"It's the independent restaurants, the small businesses, that are really bearing a huge burden during this crisis," Maloney said in the March 26 interview.

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Maloney noted during the March interview that small businesses don't have a lot of cash on hand to deal with coronavirus, which led his company to defer its revenue and look for ways to better support restaurants.

"We wanted to make sure to bridge them for as long as possible," Maloney explained to Bartiromo.

Since the lawsuit was filed, GrubHub has reportedly removed Freshcraft's inaccurate landing page and did reach out to Ziev's law firm.

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"Falsely telling consumers that a restaurant is not open or taking orders is not only deceptive but for many of these restaurants, it could mean the end to their businesses," Ziev wrote in a press release.

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"It is a tough time for us more than any," Riggs said of local restaurants to KDVR. "Your McDonald’s, your Starbucks, your Walmarts of the world, they will be just fine. It's people like me that own businesses that work hard to keep these businesses afloat that are working even harder right now."

Ziev told FOX Business that since the lawsuit was filed, other companies have come forward saying a similar thing happened to their restaurants.

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