PALM BEACH, FL – Most of the dust has now settled, but back in late June/early July of this year, restaurant ordering service GrubHub, found itself boiling in hot water when a domain name strategy of building ‘micro-sites’ or ‘landing pages’, using what you could call, confusingly similar domain names of its customers, was called out in media headlines far and wide across the Internet.
Grubhub Inc. GRUB (NYSE) is a Chicago-based online and/or mobile food ordering service that connects local consumers with restaurant takeout menus and ordering processes, which many restaurants are initially very eager to sign up with. The company makes money by charging a commission on the orders they send restaurants and for providing phone calls which are recorded and tracked and customers charged when it is determined by a computer algorithm, the calls have resulted in sales.
Some restaurant owners believe they are being charged for calls that don’t add up as well as feel that the commission fees GrubHub charges are getting too excessive and are driving them out of business, but food ordering services such as GrubHub, and similar competitors such as “UberEats” or “DoorDash” are becoming so popular, business owners can’t afford to do without them.
Making a bad situation even worse, some of GrubHub’s customers realized the company was registering domain names in the name of their business and creating landing pages or micro-sites to (what GrubHub called) add additional ways to “increase the digital footprint” of the restaurants they serve. What these micro-sites also did were increase GrubHubs number of referrals and commissions from customers landing on these sites and placing orders.
It appears that some of GrubHub’s shadow pages are competing directly with restaurants’ real websites. Take, for instance, Molly Hatchet’s Sub Shop in Daytona Beach, Florida. The real Molly Hatchet’s can be found at www.mollyhatchetssubshop.com. GrubHub’s page, purchased in December of 2018, is available at www.mollyhatchetssubshopdaytonabeach.com. The real Molly Hatchet’s has its own online ordering system that has nothing to do with GrubHub. The GrubHub shadow page for the shop displays a different phone number (because commission) and links only to GrubHub.
Unfortunately for GrubHub, many of these news articles were calling these landing pages “fake” “shadow” websites and accusing the publicly traded company of ‘cybersquatting’ – although likely bending the envelope between advertising and squatting, this practice didn’t seem to be that far from the truth.
GrubHub’s defense though, was that their advertising contracts state, albeit probably burred in textual legalese, that the service would include purchasing a URL for the restaurant owner and using it to promote the restaurant, but most people upset about the issue didn’t want to hear it.
If a customer Googles a restaurant’s name and lands on a GrubHub-purchased site that looks like a real restaurant’s site, who should get the commission? And is it fair if GrubHub can outrank its own restaurants on search engines?
Grubhub Founder and CEO Matt Maloney said the whole thing was basically, ‘baloney‘ – saying these news reports were “totally false” and that the company doesn’t make copycat websites to compete with customers.
At no time did our behavior in this regard constitute cybersquatting,” Maloney said, noting the program was “a drag on profitability” but “the right thing to do to support our restaurant partners.”
GrubHub has since discontinued the process of purchasing these domain names and has setup a specific website where restaurant owners can claim their domain name if so desired.
One of the ways Grubhub worked with restaurants in the past, and as part of our contractual agreements with them, was to register domain names or create websites (called “microsites”) to increase their digital presences. While we stopped registering domain names and microsites in 2018, some still persist. It has always been our policy to allow restaurants to claim ownership of these domain names and microsites – no questions asked and at no additional cost – simply by asking their dedicated account advisor. Now we’re making this even easier by creating an online request process.
That’s not what the owner of a Brooklyn restaurant told The NY Post when Abracadabra Magic wanted abracadabrabrooklyn.com (which is stilled hosting a GrubHub landing page). The owner said the process was so difficult and complicated they eventually gave up saying “this is what they do, you can’t do anything” that it was too difficult for his “very small business.”
GrubHub was already beginning to feel the heat from their commission rates and customers claiming that they were paying for phone calls that didn’t convert into sales garnering the attention of the National Restaurant Association, which began investigating Grubhub’s billing practices. Adding on the domain name situation only fueled the fires and made matters much worse (There are many more news stories about the domain issue than there are on the overcharging worries – not to mention much worse titles which put GrubHub in a sleazy light citing ‘fake’ / ‘scammish’ / ‘cybersquatter’ tactics).
Now, regulators in NY State say Grubhub’s stiff commission fees should be illegal.
Under our view of the law, they shouldn’t be charging anything, percentage-wise,” said Vincent Bradley, New York State Liquor Authority’s chairman. “They can charge a flat fee, whatever they want, whatever the market will bear. But they shouldn’t be taking a percentage of profits, revenues, whatever the case may be.”
In August, the New York State Liquor Authority proposed a policy that could put a cap on commissions charged to restaurants with liquor licenses. If food delivery services such as GrubHub don’t comply, they could be forced to register as partners on restaurants’ liquor licenses, a process said to be “a bureaucratic nightmare”