Class action suit claims Waitr's fee hike broke contracts

Dive Brief:

Little Rock-based Bobby's Country Cookin' has brought forth a class action lawsuit against Waitr, claiming the third-party delivery company broke its contract with thousands of eateries when it increased fees from 10% to 15%, according to Law360.
The suit alleges Waitr raised the fee in 2018 prior to its initial public offering and suggests the food delivery app unilaterally raised fees to maximize its revenues ahead of the securities sale, therefore breaching its contract.
According to Law360, Waitr requires restaurants to agree to a pre-printed contract before they can join the network. The term is for one year, is auto-renewable and both parties must provide written notice at least 30 days prior to the end of the term if they don't want to continue. The suit alleges that Waitr disregarded these agreements when announced the fee increase in an undated letter.

Dive Insight:

This specific complaint accuses Waitr of gleaning millions of unearned dollars to boost its appeal and value to investors prior to its IPO. Indeed — if these allegations are proven — a five-point increase in fees is a significant chunk of money to glean from restaurant partners.

The suit will determine whether or not Waitr's restaurant customers, many of whom are smaller operators, subsidized the company's move to go public after Lancadia Holdings completed a $308 million acquisition of the firm. Since then, the food delivery company has experienced its share of legal turmoil. A collective action lawsuit was filed against Waitr in February alleging its employees were paid below the $7.25 federal minimum wage, while a month later, a similar suit was filed against the company.

Waitr isn't the only delivery app fending off such suits. DoorDash has been accused of tip theft for using worker tips to supplement their base wage in a February class action lawsuit. Also, in January, a class action lawsuit alleged that Grubhub charges restaurants for "sham" food orders over the phone.

What these suits possibly indicate is that the delivery space is growing too fast for third-party companies to keep up with the proper due diligence and protocols, particularly as they apply to the gig workforce. Wages and fees are hardly the only challenges facing delivery companies, however. There is also the restaurant versus delivery company struggle over who owns customer data, employee disgruntlement over inflexible working conditions, insufficient benefits and more.

It may be this sort of tumult that is starting to give restaurants — at least the bigger brands — a bit more leverage. McDonald's, for example, is reportedly re-negotiating its contract with Uber Eats, its exclusive delivery partner since 2017. The main objective is to push down Uber Eats' fees, which has been a sticking point among franchisees.

If McDonald's is facing challenges making money on Uber's 10% take rate, then Waitr's 15% fee is undoubtedly a much bigger hurdle. If the class action suit tips in the restaurants' favor, it could further bolster leverage restaurants have with their third-party delivery partners. After all, those restaurants are the reason companies like Waitr exist in the first place and it's best not to bite the hand that feeds you.