By Hilary Russ
NEW YORK (Reuters) – Taco Bell parent Yum Brands Inc sued Grubhub Inc on Thursday for allegedly violating a delivery contract, a day after Europe’s Just Eat Takeaway.com agreed to buy the U.S. food delivery company for $7.3 billion.
Yum invested about $200 million in Grubhub in 2018 and struck a partnership to deliver food from thousands of its KFC and Taco Bell restaurants across the United States.
But the relationship apparently soured after Yum – which also owns Pizza Hut and Habit Burger – broadened its delivery partners to include two of Grubhub’s biggest rivals, Uber Eats and Postmates, according to the complaint in New York state court.
That led Grubhub last week to throw out its exclusive five-year contract with Yum after just two years. Now Grubhub seeks to impose steeper fees on Yum’s franchisees and customers and said Yum had lost its right to a seat on Grubhub’s board, the complaint alleged.
Grubhub “vigorously” denies the allegations and will protect itself from Yum’s breach of exclusivity provisions, a spokesman said, adding that it is “very sorry about the situation Yum franchisees are in with millions of dollars now at risk especially in the midst of this challenging environment.”
The dispute comes as more restaurant brands have opened up once exclusive relationships with individual delivery partners amid an increase in demand, which accelerated during the coronavirus pandemic.
While Yum franchisees would still pay Grubhub 0% commissions for marketing and delivery, they would now pay the full 3.05% plus $0.30 per transaction, the complaint said.
Grubhub would also start collecting a 17% diners fee, which customers themselves could have to pay if Yum franchisees increase menu prices or charge service fees to make up for the extra cost.
The delivery agreement had required Grubhub to pay Yum a $50 million termination fee should Grubhub become controlled by a third-party – which could apply to Just Eat Takeaway.
(Additional reporting by Nivedita Balu in Bengaluru; Editing by Anil D’Silva and Tom Brown)