So it’s been an eventful few weeks for Grubhub. But not in a good way.
For starters, District of Columbia Attorney General Karl Racine has sued the delivery app for deceptive practices. Racine’s basic argument is that Grubhub misleads consumers about the true cost of meal delivery.
According to the complaint, Grubhub promises free online orders on basic Grubhub and unlimited free delivery on Grubhub Plus. Yet, according to Racine, these claims are misleading. The free online orders apparently apply only to pick up orders. And on the Plus delivery orders, hidden fees were until recently buried in the same line as taxes.
Delivery apps have become an easy target for local prosecutors and politicians. The general gist of the complaints involves gouging consumers and exploiting restaurants. And, of course, the pols and prosecutors often accused them of exploiting the Covid crisis for their own gain.
Racine ran this play in his statement announcing the lawsuit.
“Grubhub misled District residents and took advantage of local restaurants to boost its own profits, even as District consumers and small businesses struggled during the COVID-19 pandemic,” said Racine in a statement. “Grubhub charged hidden fees and used bait-and-switch advertising tactics — which are illegal.”
Sanctions Topple Russian-backed Buyk
The second inconvenient development for Grubhub involves Buyk. This is the New York-based, Russian-backed delivery startup that recently formed a quick commerce partnership with Grubhub. Buyk has been forced into bankruptcy as a byproduct of the Russian sanctions over the Ukraine invasion.
According to Protocol, the sanctions cut Buyk off from its sources of operating capital. The company is a subsidiary of the popular Russian delivery app Samokat, which is part-owned by the Russian bank Sberbank, which is now under sanction.
Buyk apparently ceased all operations in early March. The company, which has 39 dark store locations in New York and Chicago, filed for bankruptcy last week.
Buyk’s CEO said last week that the company just couldn’t find the capital they needed to keep going. The sanctions basically cut Buyk off from its sources of funding in Russia. T
In a statement, Buyk said it “intends to use the Chapter 11 proceedings to wind down operations and dispose of inventory and assets. As of March 4th, the company has ceased all operations from its 39 stores in New York City and Chicago.”
“We have diligently explored all possible options and partnerships to restructure Buyk and keep the business going. However, the war in Ukraine and subsequent restrictions in funding have unfortunately made it impossible to continue operations,” Buyk CEO James Walker said in a statement.
“I am extremely proud of the entire Buyk team for their amazing achievements since we launched the business last year. These are truly some of the most talented and dedicated people I have had the pleasure to work with in my career. And I wish them much success in the future.”
It was only last month that we wrote about the partnership between Grubhub and Buyk to launch a series of dark stores that would help get Grubhub into quick commerce. This is the segment of the local logistics space promising delivery of six-packs and smokes in 15 minutes or less.
It’s not yet clear how this development impacts Grubhub. Though it’s probably safe to assume the partnership is kaput.
