Delivery apps have been growing more and
more around the world. But many of these apps have been causing many problems
for restaurants, leading to them having a harder time being successful. Grubhub
is a food delivery company that started in 2004. Obviously not being the only
delivery service available, Grubhub has made a good name for themselves and has
rose to be one of the top delivery services around. Despite their success, many
complaints have come up with Grubhub, mainly from the restaurants they work
with.
Multiple
lawsuits have been filed against Grubhub for a couple of different reasons. One
reason being Grubhub putting restaurants on their site without ever contacting
that restaurant. Many restaurants have claimed this, leading to multiple cases
against them. Another issue that has been mentioned multiple times was the
amount of money taken from each order. Many restaurants that are partnered with
Grubhub feel that they get too much money per order. This also led to multiple
lawsuits being filed against them.
This
paper will compare the actions of Grubhub to ethical theories like
individualism, utilitarianism, Kantianism, and the virtue theory. Comparing the
actions of Grubhub to these theories will prove if the company is acting
ethical or not. From an individualist view, Grubhub would be considered an
ethical company because they focus on maximizing their profit. But for the
other three theories, Grubhub would be considered an unethical company. For
utilitarianism, maximizing happiness for both parties is what is most
important. Grubhub only focused on the happiness for their company and not the
businesses they worked with. For Kantianism, acting rationally and following
the rules is very important. Also, respecting people’s needs is important in
Kantianism. The restaurants that work with Grubhub have their own needs that
need to be considered before working together. Forcing them to join and taking
a big percentage of earnings proves that Grubhub doesn’t fully listen to the
needs of these establishments.
Background
Grubhub
is a food delivery company founded by Matt Maloney and his co-worker, Mike
Evans. People from around the U.S can sign up to deliver food for Grubhub. It
started when Maloney and Evans were working as developers for a company called
Apartments.com. Working in Chicago, Maloney and Evans were getting tired of the
lack of dinner options and the hassle of calling and ordering food. They
started by going around to different restaurants in Chicago and getting their
menus to put onto their site. Restaurants were charged $140 to be on Grubhub
for six months. Many of these restaurants already had their own website so they
didn’t see a reason to pay to be on the Grubhub site. Restaurants agreed with
Grubhub when they offered to take a 10% commission on what they sold. After
getting business in Chicago, Maloney and Evans flew out to San Francisco in
2007 to try and start business over there. Once they realized that business was
going good in San Francisco, they started expanding all over the U.S. In 2010,
Maloney and Evans developed a mobile app to make ordering even easier, which
led to more and more business. Maloney and Evans knew about competition that
would make expanding in some places a little more difficult. In New York, a
company called Seamless was already doing a similar thing. In 2013, Grubhub
bought Seamless but kept it running in New York. Keeping it running made it
cheaper for them because they wouldn’t have to advertise Grubhub in New York
and they didn’t have to advertise Seamless outside of New York. As of 2020, Grubhub
is one of the biggest food delivery services in the United States.
Matt Maloney and Mike Evans
Case
Two
restaurants filed a class-action lawsuit against Grubhub for the fact that they
have been listing restaurants without their permission. The Farmer’s Wife in
California and Antonia’s Restaurant in North Carolina filed a lawsuit with
Gibbs law Group. Both these restaurants claimed that they were added to the
Grubhub site without wanting too. These aren’t the only restaurants this has
been happening to. 150,000 restaurants have claimed that they have also been
listed on to the Grubhub site without agreeing to the partnership. Grubhub
incorporated this as a business strategy to get more restaurants to agree to a
partnership. This has caused many problems for these restaurants, the people
ordering, and the Grubhub drivers. If a restaurant was on the Grubhub site
without knowing, they wouldn’t get the order called into them. The grubhub
drivers would have to find a way to get the food from the restaurant and deliver
it to who ordered. Some cases, the menu used on the Grubhub site was outdated
and had wrong items and prices on them, so when the drivers went into the
restaurant, they weren’t able to order anything and would have to cancel the
order. When asked about the lawsuit, they claimed that they wanted to keep
doing this to other restaurants, so they had more dining options than the
competitors. Grubhub claimed that if someone were to have an issue with being
on their site, they could reach out to Grubhub and they would be taken off the
site.
This
is not they only case against Grubhub. Many restaurants that partner with
Grubhub filed a class-action lawsuit against them for the percentage of money
that they take from orders. Every time an order is ordered and delivered
through Grubhub, around 30% of that order goes to Grubhub. For smaller
restaurants, 30%could really be an issue if they do not have much in store
activity. Another complaint that came with the amount of money they take is how
they charge for non-orders. When a restaurant partners with Grubhub, they are
given a new phone number for the app. The number is used for communicating with
the restaurant and ordering food from that restaurant. Grubhub has an algorithm
that they use to determine when a call to a restaurant is an order or not. The
problem is, Grubhub, in many cases, has charged for calls that weren’t orders.
It was seen at a restaurant in Philadelphia called Tiffin. Minush Marula, the
owner of Tiffin, claimed that they were charged up to $9 for non-orders. In the
lawsuit, it was argued that charging for calls isn’t fair because majority of
phone calls are to ask questions and not order food.
Stakeholders
If
Grubhub wants to continue being successful, they are going to have to fix these
issues to gain new restaurants and keep the ones that they have. If Grubhub
keeps forcing these restaurants into these unfair and unwanted partnerships,
then they are going to have a tougher time getting restaurants to willingly
partner with them. The company will not grow if they try to force businesses to
work with them. Stakeholders also aren’t going to want to work with Grubhub if
they don’t change the way they make money from these businesses. Taking too
much money can easily loose them business. For some orders, taking 30% would
leave restaurants with a small profit margin, causing some restaurants to not
produce as much revenue as expected. This can lead to smaller restaurants to
not put their business on this site.
Grubhub
also has to make sure that they keep the consumers happy. With the news in the
case, some restaurants are put on without knowing. This causes some restaurants
to get orders that won’t ever be delivered to the consumer. Many people try to
order from certain restaurants without knowing that the food will never
actually get to them, causing many customers to be upset with Grubhub. If
Grubhub doesn’t change their ways, they are going to lose business to other
delivery services.
Individualism
From
an individualist point of view, Grubhub is running their business well and
trying to maximize their profits. Milton Friedman was an economist that has a
theory of individualism claiming that the only goal for a business is to gain
profit. Tibor Machan is a philosopher and libertarian a slightly different
individualist theory. Machan agrees that a business should always try to
maximize their profits. The only difference is that Machan claims that other
goals can be had. Not just profit. Grubhub fits under this category for many
reasons.
First, Grubhub was trying to force these
restaurants to partner with them. As explained throughout the case, a technique
that Grubhub uses to gain new partners is putting menus from different
businesses on their site without communicating with that business. Their plan
was to put these restaurants on their site without actual confirmation in hopes
that eventually, they would agree to a partnership. This technique has been
incorporated because Grubhub wants to grow and make money. Another way that
Grubhub fits this category is because of the amount of money they charge these
restaurants per delivery. The main case against Grubhub is how they take around
30% of the money from each order delivered. Many restaurants claim that this is
too much and for some orders, they make almost nothing. This follows the
individualist theory because Grubhub is still working towards making a profit.
When a business decides to partner with Grubhub, the percentages that they are
charged are explained. Although the restaurants make money, and in some cases
more business, the 30% can add up. Grubhub also makes money from restaurants
when customers call in an order. Grubhub provides a new number for restaurants
when they agree to a partnership. This number can be used for when an order
needs to be placed or to contact the establishment with any questions. Grubhub
incorporated an algorithm to tell when an order is placed, automatically
charging the restaurant. The problem is, this algorithm has proven to be flawed,
charging non-order calls, and practically stealing money from these businesses.
Utilitarianism
Utilitarianism
is maximizing happiness for yourself and others. For a perfect utilitarian
view, both parties, Grubhub and their partners, would both be happy with the
outcome. The cases prove that what Grubhub is doing would be considered
unethical in the utilitarian theory.
Grubhub
has been maximizing happiness for themselves. Grubhub has a lot of business
around the country, being one of the biggest delivery services. They can get
many restaurants to agree with their terms of the partnership and spread their
name around enough to get plenty of customers. The problem comes with how they
deal with their partners. Many complaints come in from businesses about the
rates they get charged from Grubhub. With all the money this company makes, it
comes from other businesses that feel they are taking too much. Because of
this, they clearly aren’t maximizing the happiness of these companies. To fit
this theory, Grubhub would have to fix their rates to something that more
people would agree with. The cases against them prove that something can be
done to make more people happy. It is also seen with the cases against them
signing restaurants up without permission. Again, this is maximizing the
happiness of Grubhub because they are giving themselves more partners to make
money. But the problem comes because they aren’t considering the other party.
If a business doesn’t want to work with Grubhub, then forcing it onto them will
not make them happy. The fact that they don’t communicate with the restaurant
before putting them on their site causes the unhappiness. To connect with the
utilitarian theory, Grubhub should reach out to these establishments
beforehand. This way, both parties can get a say in what they want to maximize
happiness on both ends.
Kantianism
Kantianism
is a theory that was developed by a man named Immanuel Kant. One of the main
rules of Kantianism is to act rationally and not consider yourself exempt from
the rules. Another important rule for Kantianism is to respect people and their
needs. The last main rule of Kantianism is to do what is right because it is
right. Both cases prove how Grubhub would be considered an unethical business
under Kantianism.
With
focus mainly being on doing what is right because it is right, the first case
proves how Grubhub doesn’t follow the rules of Kantianism. The first case
explains how many restaurants were put on the Grubhub site without knowing. For
Grubhub, the right thing to do is contact the business and explain what they
have to offer. The second case also proves that Grubhub isn’t focused on doing
what is right. If Grubhub were to fit into the rules of Kantianism, they
wouldn’t charge restaurants so much per delivery and they wouldn’t charge for
phone calls to the restaurant. Grubhub is basically stealing money from
restaurants in situations like this. Charging 30% per order also doesn’t help
this case. Some restaurants, especially smaller ones, have a hard time
affording this. Recently, COVID-19 has caused more people to order food due to
restaurants not allowing people inside. Taking 30% from small restaurants
during the pandemic barely leaves any money for them to stay running. If
Grubhub were to focus on the rules of Kantianism, they would realize this is
the wrong thing to do but because they continue to stay the same, they are
considered unethical.
Justified
Ethics Evaluation
In
my opinion, Grubhub is an overall unethical business. Both of the cases against
Grubhub prove how they really care about personal gain and not the wellbeing of
their partners. If Grubhub wants to be deemed ethical, they have to change the
way they get new partners. Forcing restaurants into a deal is not ethical. They
also need to realize that they can’t charge these restaurants so much money. It
gets to the point where they’re basically stealing money from these businesses.
Both of these cases can be fixed but also could’ve easily been avoided.
Action
Plan
It
is easy to see what two complaints occur most when businesses partner with
Grubhub based of the cases. As of now, there hasn’t been a solution to either
of these issues, meaning that Grubhub has still been adding restaurants to
their site and they still charge restaurants too much. Because there hasn’t
been a solution incorporated yet, other restaurants might start filing their
own cases against Grubhub. If they don’t come up with a plan to make their
partners happier, then their success could be in jeopardy.
On
the positive side of things, the solutions can be fairly simple for Grubhub to
fix. The first main problem mentioned was how many businesses found themselves
on the Grubhub site without ever communicating with Grubhub. Grubhub claimed
that putting restaurants on their site without permission was a business
technique. Their plan was to have more restaurants available on their site than
their competitors. This technique would also help in convincing restaurants to
join Grubhub. The easiest way to fix these complaints for Grubhub is to start
reaching out to new restaurants. Sending out an email to businesses around the
country is an easy way for Grubhub to find new restaurants to put on their site
without making anyone upset. Another way Grubhub could gain restaurants is
reaching out to them and giving them a trial of their services. After reaching
out to these restaurants, Grubhub could set them up in their site for a few
months so a restaurant can get an idea of what working with them is like. A
simple solution such as this can make business grow. Instead of forcing people
into a partnership, they explain what the service is and let the restaurant try
it out. After the trial is over, they reach out again and finalize if they want
to partner or not.
The
second case also has some fairly simple solutions. Many restaurants argue that
Grubhub charges them too much per order in a partnership. Especially with the
global pandemic, 30% per order can cause some serious revenue issues for
businesses. Also, giving these businesses a different number and charging them
for calls causes a lot of issues, especially if they continue getting charged
for non-order calls. A simple solution is incorporating different levels of
partnerships. For example, bigger restaurants could likely afford the 30% per
order rather than smaller businesses that could not. When starting a
partnership, Grubhub should offer options of a partnership that restaurants
could choose from. Grubhub should offer bonuses to the businesses that decide
to choose the 30% per order deal and offer a deal that has a lower percentage
per order and no bonuses. Giving the option will allow Grubhub to gain new
partners and keep the partners they also have. Also, to help with keeping their
existing partners, they should get rid of the new phone numbers. Instead, put
the actual phone number of the restaurant on their site and incorporate a new
program for them to put orders in themselves. Clearly, the algorithm Grubhub
uses now is occasionally faulty, charging restaurants for no reason. If a
worker at the restaurant is able to answer the phone and fill out the order
themselves, there won’t be any situations a business gets charged for a
non-order.
In
order to keep their business successful, Grubhub need to incorporate some core
values. These values will focus on keeping partners happy, so they don’t lose
business. These core values should be being honest, being supportive, and being
fair. When approaching a new restaurant, Grubhub should consider the size of
the business. If Grubhub wants to partner with a smaller restaurant, they
should be honest and let them know if it a good idea financially. They should
also let them know which plan would be best for them. Grubhub should also be
supportive of these businesses, especially during the pandemic. Many
restaurants have been having a hard time staying in business because of
COVID-19. Being supportive could mean being understanding of the struggles a
business can face and not forcing money out of their pockets. Being fair comes
with gaining new partners. Grubhub should value communicating with new partners
before putting them on their site. Sometimes partner with Grubhub wouldn’t be
beneficial for a business so forcing them into a partnership isn’t fair and
pretty selfish.
In
order to ensure ethical productivity and monitoring of ethics, Grubhub needs to
keep up with communication after partnering with a restaurant. Grubhub needs to
ensure that their partners are satisfied with working with them. This
communication could come in the form of a monthly form. Sending a form for
restaurants to fill out monthly can let the people at Grubhub know how people
are feeling with working with them and knowing if they need to change anything
to keep business going.
References
“Fees.” Grubhub for
Restaurants : Learning Center, learn.grubhub.com/archives/basics/what-fees-does-grubhub-charge.
“Grubhub History.” Grubhub, Inc. - About Us - Company Timeline,
about.grubhub.com/about- us/company-timeline/default.aspx
Salazar, Heather. The Business
Ethics Case Manual: The Authoritative Step-by-Step Guide to Understanding and Improving the
Ethics of Any Business. Print.
Saxena, Jaya. “Delivery
Apps Aren't Getting Any Better.” Eater, Eater, 29 May 2019, www.eater.com/2019/5/29/18636255/delivery-apps-hurting-restaurants-grubhub-seamless-ubereats.
Saxena, Jaya. “Grubhub Hit
With Lawsuit for Listing Restaurants Without Permission.” Eater, Eater,
28 Oct. 2020, www.eater.com/21537215/restaurants-sue-third-party-delivery-service-grubhub-for-listing-businesses-without-permission.
TodayShow. “This Is How
Much Restaurants Really Make When You Order from Grubhub or Uber Eats.” TODAY.com,
11 May 2020, www.today.com/food/viral-post-raises-questions-about-how-much-restaurants-earn-delivery-t180675.
Welch, Liz. “How GrubHub Got Its Start.” Inc.com, Inc., 31 Oct. 2014,
www.inc.com/magazine/201411/liz-welch/how-i-did-it-matt-maloney-of-grubhub-and-seamless.html.
No comments:
Post a Comment