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Delivery could mean a dystopian future for restaurants

Fake domains, ghost websites and unreasonable charges pose a major problem for the industry going forward, says RB’s The Bottom Line.
Photograph courtesy of Grubhub

the bottom line

Third-party delivery companies have been at the center of a growing number of controversies lately.

Late last year, the operator of an Indian restaurant in Philadelphia filed a class action lawsuit against Grubhub, accusing the online ordering service of charging restaurants for phone calls never intended for food orders.

According to the New York Post, these problems are occurring at restaurants across the country. Now, the New York City Council is probing the practices, as is the U.S. Small Business Administration.

Meanwhile, according to The New Food Economy, Grubhub has registered 23,000 domain names that are similar to the names of local restaurants—without those restaurants’ permission. The New York Post has since put that number at 30,000.

And lest you feel the problems are all with the providers themselves, there is this: A New York TV station has found that many restaurants themselves are using false identities on the delivery sites.

Taken apart, all of these represent aggressive and potentially troublesome practices by companies looking to take advantage of a rapidly evolving market.

Taken together, however, they point to a future for the restaurant industry that is altogether dystopian—particularly if demand for delivery makes the service as important as some prognosticators think.

If that happens, providers will be able to dictate how much they charge restaurants for the right to be on their service. Restaurants may also be forced to take sometimes-drastic steps to remain on the services, while some of these services are apparently willing to mimic the locations’ websites to keep popular brands’ business.

In the end, it may be difficult for restaurant consumers to know where they’re ordering from. It could take away some of the control an operator has over its brand—placing it directly into the hands of an aggregator that is charging higher prices.

It could also give restaurant chains a significant advantage as delivery grows. As it is, numerous chains have pushed back against third-party services, charging higher prices, such as The Habit Burger Grill does, or negotiating lower fees, as McDonald’s has done. Some chains are also unafraid of turning it off altogether, believing they are better off without the no-profit service.

Chains can also more easily afford to push people to their own websites and mobile apps.

And if practices like this keep up, they could threaten the services’ overall growth as more companies begin to frown on using delivery, government steps in to regulate the services or customers lose trust in using them.

To be sure, much of this is indicative of the Wild West nature of third-party delivery at the moment. There is a major race between delivery providers to grow their business and generate sales. Restaurants also feel a growing need to get in front of these customers, perceiving them to be the future of the industry.

But it also emphasizes the importance of brand control. While it’s long been easy for people to register domains and create websites, these days, those sites can come with the actual delivery of food.

What can operators do? Take control of your domain names, even similar ones. Don’t be afraid to push back against third-party providers.

And do your job. A restaurant’s best defense these days, after all, is to have a really good offering that consumers love. That way you won’t need to create a separate brand online to get diners.

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