This article is part of an investigation with Underunderstood, a podcast that explores stories the internet missed. You can subscribe to Underunderstood on Apple Podcasts, Spotify, or wherever you listen to podcasts.
NEW: As of May 14, 2020, New York City has passed a bill to ban the practice of third parties charging a fee for phone calls that don't end in a sale. You can read about that here.
A few months ago, I opened the Yelp app, typed in the name of my favorite sushi restaurant, and clicked on the phone number. Two options popped up: “Delivery or Takeout” and “General Questions."
That’s new, I thought. I dialed the number for “Delivery or Takeout,” which played a perky greeting—“This call may be recorded to ensure awesomeness”—before a woman at the restaurant picked up. I asked why they were recording the call for awesomeness; she had no idea what I was referring to. I asked about the number I had just dialed; she didn’t recognize it.
“What number did I just call?” I asked. She told me the number that was listed for “General Questions.” Then she asked what I wanted to order.
As it turns out, the number listed for “General Questions” in the Yelp app is the restaurant’s real number. The number listed for “Delivery or Takeout” is owned by Yelp partner Grubhub.
The Yelp app lists a restaurant’s direct phone number on the actual listing. That’s (212) 262-8300 in the case of Judge Roy Bean Public House. But when you click on the phone number, this dialogue shows up: Delivery or Takeout and General Questions.
When a user clicks on the “Call” button labeled “Delivery or Takeout,” they are taken to a different number, (646) 394-9837, which is owned by Grubhub.
The “Call” button next to “General Questions” leads to the restaurant’s real number.
Even though restaurants are capable of taking orders directly—after all, both numbers are routed to the same place—Yelp is pushing customers to Grubhub-owned phone numbers in order to facilitate what Grubhub calls a “referral fee” of between 15 percent and 20 percent of the order total, I learned while researching an episode for the podcast Underunderstood.
Yelp has historically functioned like an enhanced Yellow Pages, listing direct phone numbers for restaurants along with photos, information about the space, menus, and user reviews. But Yelp began prompting customers to call Grubhub phone numbers in October 2018 after the two companies announced a “long-term partnership.”
“It’s not fair because this is our customer who called directly into our restaurant. It’s a trick.”
Restaurant owners may not be aware of the change. Mohammad Zaman, an owner of Afghan Kabab and Grill House in Brooklyn, insisted the phone number that showed up in Yelp was a mistake until a call placed to the number rang at his desk.
“It’s not fair because this is our customer who called directly into our restaurant,” he said. “It’s a trick.”
Robert Guarino, CEO of the Manhattan restaurant group 5 Napkin Burger and a board member at the New York City Hospitality Alliance, was also not aware that Grubhub numbers were showing up in Yelp for two of his four restaurants.
“We're working with these companies to help generate orders, but so many times, we're put in a position where we need to compete against them to get access to our customers,” he said. “So many of these practices make it hard to trust the companies. To not have all the practices clearly spoken about and understood by the businesses is really scary in my eyes.”
Grubhub offers a “marketing” service to restaurants, which includes being listed on the Grubhub platform, for between 15 percent and 20 percent of each order total. It also offers a physical delivery service, which costs restaurants another 10 percent. Grubhub says it provides phone numbers for restaurants that sign up for marketing but not delivery in order to capture all orders that could be eligible for its fees.
“It is our understanding that Grubhub has marketing agreements with some restaurants that allow Grubhub to utilize referral numbers on third party partner sites like Yelp,” a spokesperson for Yelp said in an email. She deferred further questions to Grubhub.
"It is important to keep in mind that we are a marketing platform and, in almost all of these cases, the diner would not have discovered or placed an order with this restaurant without our platform,” Brendan Lewis, a spokesperson for Grubhub, told me in an email. “The order is the result of our marketing efforts.”
In other words, Grubhub is claiming that every phone call to a restaurant originating specifically from the Yelp app is attributable to Grubhub’s marketing efforts. The Yelp website does not list referral numbers.
Both companies said they do not measure call volume. However, people have been using Yelp as a directory since long before it partnered with Grubhub. This suggests that Yelp may be driving callers to Grubhub rather than Grubhub’s marketing efforts driving callers to Yelp and then to restaurants.
Grubhub’s CEO seemed to say as much in March 2018 when the two companies announced that customers could now order through Grubhub from within Yelp.
“We’re thrilled to complete our integration with Yelp, which enhances the online ordering experience for diners and will drive more orders to our restaurants from Yelp’s tens of millions of monthly users,” Matt Maloney, Grubhub’s founder and chief executive officer, said in a press release at the time.
The average user may not understand how this works, either. In June, H. Claire Brown at The New Food Economy reported that the food delivery platform Grubhub has been creating thousands of websites in restaurants’ names, sometimes surpassing the restaurant’s own website in search engine visibility, in order to drive more online orders and commissions for Grubhub. The piece sparked a backlash from conscientious customers pledging to order directly in the future in order to protect their favorite restaurants’ profits. Natt Garun, a Verge writer whose parents own a restaurant, wrote a guide to finding a restaurant’s real contact information and avoid Grubhub’s fees to businesses. This involves dodging Grubhub-owned properties (Seamless, AllMenus, LevelUp, Tapingo, MenuPages, and Eat24) as well as the Grubhub-created websites and the Yelp app.
The Yelp calls may also be concerning to restaurant owners because of the number of false positives generated by Grubhub’s phone tracking system. Munish Narula, who owns restaurants in Pennsylvania and New Jersey, sued Grubhub in December 2018 for $5 million, claiming false charges for phone calls from customers asking questions and not actually ordering anything. The New York Post has also reported extensively on these false charges with a series of stories starting in May. One restaurant in New York negotiated a $10,000 refund for bogus charges, the Post reported, dating back to 2014.
Grubhub says it analyzes the call recordings to determine if an order has actually been placed and censor personal information. The recording of a call that results in a charge is sent to the restaurant. Grubhub says it retains these recordings and uploads them to the private page that restaurants use to manage their service so that restaurants can audit them and dispute any errors. Grubhub says it does not use the recordings for any other purpose. Grubhub also says only 35 percent of calls placed through the numbers result in charges.
The call was a customer who had his restaurant confused with another restaurant. It took four minutes to figure this out before the customer hung up without placing an order. “I got charged almost $8 for that phone call.”
The commissions charged for phone orders are also frequently inaccurate because unlike with online orders, Grubhub does not actually know how much a phone order costs. It calculates its marketing commission based on the average of the last six non-phone orders.
Andrew Martino, owner of the delivery and takeout-only restaurant Ghost Truck, only learned about the phone commissions in July when he was going over his books and realized he was off by a significant amount of money.
“I couldn't figure out what I was missing,” he said.
He signed into his private Grubhub page where he noticed a few transactions with just a fee and no order total.
“There's a button where you could hit play and so I was like, what is this?” he said. “I hit play, and the first call was me on the phone, which freaked me out because I didn't know I was being recorded.” The call was a customer who had his restaurant confused with another restaurant. It took four minutes to figure this out before the customer hung up without placing an order. “I got charged almost $8 for that phone call.”
I reviewed some of the recordings for Ghost Truck Kitchen and found multiple false positives, where Grubhub charged the restaurant between $7.80 and $7.92 per call for informational phone calls that did not result in an order.
Most recordings beeped out identifying information, but one recording included an address and full name that were not censored.
Restaurants are becoming increasingly vocal about the financial pressures they feel from high fees on online ordering apps. New York City council member Mark Gjonaj, head of the Committee on Small Business, held a hearing in June where restaurant owners testified beside representatives from Grubhub and UberEats.
Grubhub representatives said that it is only driving incremental orders, meaning they are orders that come in on top of whatever business the restaurant was already doing. They also said that Grubhub takes professional photos, increases average order sizes, and gives businesses data-driven advice.
“There is a restaurant on the Upper East Side that serves sushi. We worked with them and we said that there's a trend for poke bowls. We suggested that they start adding some of these items to their menu,” Grubhub senior vice president Kevin Kearns said at the hearing. “They did this and within one month, they doubled their orders, and within three months they 7x’ed their orders to 1,600 orders a month. This is a small business that went all the way up to 1,600 orders a month, and they actually changed the name of the restaurant to put poke in their name because it works so well.”
Afterward, Gjonaj asked the state Attorney General to investigate Grubhub for antitrust violations and Senator Chuck Schumer threatened to recommend that the Federal Trade Commission investigate Grubhub if the company did not refund restaurants for erroneous fees.
I asked Grubhub if there was any movement to revisit the way it handles referrals based on the backlash to the news reports and in the City Council hearing. “We have never abused the trust of our restaurant partners or built our business through trickery and fraud,” Lewis wrote in an email. “Through Seamless”—which Grubhub merged with in 2013—“we have supported restaurants in NYC for over 20 years, driven billions of dollars in food sales for them, managed millions of care issues on their behalf and institutionalized takeout as a fundamental core of eating in New York.”
Grubhub did make one change in response to public pressure. It extended the window in which restaurants can dispute erroneous charges from 60 days to 120 days, the Post reported.
Martino, the owner of Ghost Truck Kitchen, complained to Grubhub about his erroneous phone charges. The company agreed to stop charging him for phone commissions unless a call was over 800 seconds, “which is great,” he said, but “also makes you think they know they're doing something wrong.”
Martino gets about 50 percent of his sales through Grubhub. However, he’s hoping to get that percentage down. He now takes orders online himself through his website and encourages customers to order there or through his direct phone number. “I definitely implore people to forgo the three seconds of convenience to help neighborhood businesses,” he said.