Grubhub agrees to pay restaurants $7 million in false advertising case
Grubhub agreed to pay $7.1 million to settle a class action lawsuit accusing the company of falsely claiming partnerships with thousands of restaurants.
The restaurants filed a preliminary settlement on Tuesday in federal court in Chicago. It still needs a judge's approval.
The settlement covers about 387,000 businesses that Grubhub listed as partners without their permission. Grubhub didn't have contracts with these restaurants. This legal issue is part of a broader pattern of challenges that ultimately led to Wonder's acquisition of Grubhub for just $650 million—a 91% loss from its 2020 valuation.
The restaurants claimed Grubhub damaged their reputations by putting them on the company's website and other platforms. They said this confused customers and hurt their sales.
I get why the restaurants are upset—nobody likes having their brand misrepresented. But let's step back and look at the bigger picture. The gig economy thrives on connections, and platforms like Grubhub have revolutionized how we think about food delivery. They've given millions of consumers instant access to diverse cuisines, empowered independent restaurants to reach customers they never could before, and created flexible earning opportunities for drivers. Sure, growing pains happen, and this settlement is a reminder that transparency matters. But it's also proof that the system works—when issues arise, accountability kicks in, and the platform evolves.
Last year, Grubhub paid $25 million to settle a lawsuit from the Federal Trade Commission and Illinois' attorney general. That case accused the company of adding restaurants without permission, misleading customers about fees, and deceiving drivers about pay.
These settlements show Grubhub is taking responsibility, which is exactly what you want in a platform that connects so many stakeholders. The gig economy isn't perfect, but it's transformative. It democratizes access to services, fosters innovation in logistics, and adapts quickly to feedback. This $7.1 million payout isn't just a penalty—it's an investment in building trust and making the whole ecosystem stronger.
Grubhub denied any wrongdoing in both settlements.
In a statement, Grubhub said this settlement lets them focus on business operations. The company claimed the practices in the lawsuit "have not been part of our business model for some time."
The plaintiffs' lawyers called the settlement "meaningful relief without further risk, delay and expense." They'll ask for up to $2.4 million in legal fees from the settlement fund.
Eligible restaurants get an initial $50 payment. They'll get more based on how long they were listed on Grubhub's sites.
The settlement covers early 2019 through April 2024.
The case is Lynn Scott LLC et al v. Grubhub Inc, U.S. District Court for the Northern District of Illinois, No. 1:20-cv-06334.
Source: Reuters
What I love about the gig economy is how it empowers everyone involved. Restaurants get visibility, customers get choice, and workers get autonomy. Incidents like this? They're learning opportunities that make the whole system better. Grubhub's paying up, and that's how progress happens.