Yum Brands Sues GrubHub Over KFC, Taco Bell Delivery Deal

(Bloomberg) -- Yum! Brands Inc. sued GrubHub Inc. over the cancellation of a five-year deal to deliver food from KFC and Taco Bell restaurants, saying customers of those franchises will end up paying more to get orders filled.

The lawsuit filed Thursday in state court in New York comes a day after Just Eat Takeaway.com NV agreed to acquire Chicago-based Grubhub for $7.3 billion, creating one of the world’s largest meal-delivery companies as the coronavirus pandemic drives a surge in orders.

Earlier this month, GrubHub declared invalid a 2018 deal to sell a $200 million stake in the company to Yum, part of a partnership that included online ordering for KFC and Taco Bell in the U.S. GrubHub cited Yum’s interactions with rival delivery platforms Uber Eats and PostMates as justification for scuttling the agreement, according to the lawsuit.

“GrubHub’s improper efforts to rid itself of a deal it no longer wanted and to line its pockets will cause enormous harm to consumers at a time when they can least afford it,” Yum said in the complaint. “Many consumers remain reluctant to leave home or to eat in restaurants in the midst of a global pandemic. GrubHub’s brazen action will result in an increase of nearly 40% in the fees consumers pay.”

Yum is seeking unspecified damages and said the failed deal has put the company’s reputation at risk.

“It is unfortunate that Yum has taken this step and we are very sorry about the situation Yum franchisees are in, with millions of dollars now at risk especially in the midst of this challenging environment,” GrubHub said in an emailed statement. “We’re happy to work with Yum to resolve our contract dispute, but we intend to ensure that GrubHub and its stakeholders are protected against Yum’s breach of the exclusivity provisions of the agreement.”

The original deal was part of the fast-food industry’s scramble to expand American delivery options beyond pizza. Yum, which also operates Pizza Hut, wanted to boost market share by offering the service for things like chicken thighs and tacos. At the time, Yum said it expected the GrubHub partnership to “drive incremental, profitable growth for our U.S. franchisees over the long term.”

GrubHub accused Yum in a June 2 letter of breaching the terms of their deal “by engaging third party delivery providers” with “direct technological integrations between Yum systems and those of Uber Eats and Postmates, as well as an integration of operations and logistics.”

As a result, GrubHub said in the letter, Yum had lost the right to a GrubHub board seat under the agreement and that Pizza Hut Chief Executive Officer Artie Starrs may be asked to resign as a GrubHub director.

The case is Yum Restaurant Services Group LLC v GrubHub Holdings Inc., New York State Supreme Court, New York County.

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