Yum brands are the parent company of Taco Bell and the food giant is now planning on suing Grubhub on which they spent $200 million for three per cent stake in 2018. The verdict from both brands is that the opponent violates a deal that was made in the same year.
A contract was part of the deal that was made between the two brands, stating that Grubhub would be giving preferable pricing to Yum Brands restaurants which significantly were Taco Bell, KFC etc. Grubhub has violated this contract according to Yum Brands, which is why they have filed a lawsuit stating that their new pricing structure will result in customers paying 40% extra in delivery fees.
Grubhub says that Yum Brands also worked with UberEats Postmates which violates the exclusivity clause in the agreement. To this accusation, Yum brands say that they only reached out to other delivery services because of the pandemic going on. The importance of reliable and accessible delivery options during a time like this was extremely high for restaurant owners, small businesses and consumers.
Yum brands also claim that the violation of the contract is Grubhub’s way to get rid of a deal they no longer wanted. It is also in line to increase the weight on their pockets which is actually in harm to the customers at a time they will be able to afford it the least.
All the noise that is being created by the lawsuit filed by Yum Brands comes at a time when delivery could not be more popular. Recently, Grubhub has also been acquired by a Dutch delivery company in light of similar requirements, even though the same company earlier planned to merge with Uber Eats.
Many delivery services have come under fire for charging unnecessary amounts on delivery fees which is also something that Grubhub is being accused of, as Yum brands say they have been implementing recently.
The lawsuit against Grubhub has now been filed in New York county’s Supreme Court, stating that the company’s CEO Matt Maloney improperly terminated the contract that the two companies had since 2018. A letter was also sent by him to Yum brands saying that their work with Uber Eats violated the terms they had agreed on, which has been denied by the Taco Bell owner.
Yum brands are now demanding Grubhub to revoke the termination of their contract and enter into negotiations with them on the same. Instead of entering negotiations, Grubhub has retaliated by reaching out to more franchises and introducing the new pricing structure that started the troubles in the first place.
The lawsuit also states that Grubhub was showing signs that they were regretting the contract with Yum which had been the reason for the company backing out from many ventures that were open for business during the pandemic, as supported by Yum.