A Big Domain Fail for Grubhub

It has been reported all over the Internet that Grubhub, a food delivery marketplace, has been hurting the Web presence of their restaurant clients by registering domains that either are a direct match or contain the restaurant name. Then building fake sites on these domains to rank in the top search results for those restaurants. This is an example of how NOT to use domain names to grow your business.

The news was first reported by The New Food Economy website.

The article talks about one mom-and-pop restaurant owner who discovered this practice when they tried to register a domain for a website for their business. They found out it was already registered and by Grubhub.

The New Food Economy conducted an investigation that found Grubhub and subsidiary have squatted on at least 24,000 domains and published that list.

Grubhub has been developing websites that appear like they belong to the actual restaurant when in reality it competes with it. Effectively preventing the restaurant owners to use an ordering system of their own and redirecting visitors to Grubhub’s platform.

Take for example, an Indian restaurant in Cary, North Carolina (go to Cary for currie, right?). If you search for their name on Google, the first result is the exact match domain, which is registered by Grubhub. The actual restaurant’s real site is using their name + Cary at the end, which is the 7th result. The domain registered by Grubhub has a registration date of 2016-02-04. And the restaurant’s real domain was registered 12 days later and uses a different platform for online ordering. So the restaurant was forced to go with a weaker domain.

Domains were being registered as far back as 2011 or possibly earlier. The fake sites built on them also included photos with logos of the restaurants.

Grubhub has put out an email statement after the news got traction online:

“Grubhub has never cybersquatted, which is identified by ICANN as ‘generally bad faith registration of another person’s trademark in a domain name.’ As a service to our restaurants, we have created microsites for them as another source of orders and to increase their online brand presence. Additionally, we have registered domains on their behalf, consistent with our restaurant contracts. We no longer provide that service and it has always been our practice to transfer the domain to the restaurant as soon as they request it.”

By quoting ICANN that cybersquatting is “generally bad faith registration of another person’s trademark in a domain name” is truly hairsplitting. The vast majority of small mom-and-pop restaurants would not register a trademark, they would have no reason for the added legal expense. But the domain name registrations were made in bad faith because they were registered without the restaurant owner’s consent. Furthermore, they were built out to compete and in most cases prevent the restaurant owners from having their own website and fulfill their own online orders.

What makes many people so upset is that Grubhub is a significant expense for restaurants. Here are their current charges to restaurants:

Marketing Commission – 20%

Delivery Commission – 10%

Processing Fee – 3.05% + $0.30

Delivery Tip – 15%

Sales Tax – 8%

(Source is available here)

Grubhub’s strategy here is to create a situation where mom-and-pop restaurants are prevented from establishing their own online presence and from using another delivery option, either their own or from a competitor.

However, this strategy is backfiring as it is instead creating negative press from restaurant owners who are rightly upset by this practice.

UPDATE: John Berryhill, a prominent domain dispute lawyer, made a comment on NamePros referencing the part, “Additionally, we have registered domains on their behalf, consistent with our restaurant contracts.” So it appears that Grubhub will just have to deal with the public relations fallout as it appears they have protected themselves through the restaurant contract.

 

 

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