By Glory Jun, 12, 2020 Private

 A lawsuit was recently filed against Grubhub by Yum Brands (YUM), owner of Pizza Hut, Taco Bell, and KFC, with allegations that Grubhub violated a distribution agreement between the companies. The lawsuit was filed just after Grubhub signed an acquisition deal of $7.3 billion with Just Eat Takeaway.

The lawsuit was filed in New York County Supreme Court, with claims that Grubhub CEO Matt Maloney terminated a contract between both companies on June 2, after receiving a letter that claimed that Yum Brand’s collaboration with Uber Eats and Postmates violated the initial agreement. 

In February 2018, Yum signed a contract with Grubhub to buy $200 million in shares, and simultaneously enter a deal for pickup and delivery of Taco Bells and KFC meals. Pizza Hut president Artie Starrs was strategically added to Grubhub’s board as a part of the agreement.

Although Yum requested Grubhub to cancel the termination, the delivery firm refused to do so. Rather it accessed the franchisees directly, imposing new prices on them, according to the allegations made. 

“We vigorously deny allegations in the complaint,” a Grubhub spokesperson said in an email. Adding that, “It is unfortunate that Yum! Has taken this step and we are sorry about the situation Yum Franchisees are in with millions of dollars now at risk especially in the midst of this challenging environment.”

The spokesperson went further to say that Grubhub was going to work with Yum! To resolve the contract dispute. Adding that, Grubhub intends to “ensure that Grubhub and its stakeholders are protected against Yum!’s breach of the exclusivity provisions of the agreement.”

The lawsuit showed that Grubhub regretted entering the contract with Yum. It was also allegedly stated that Grubhub blacked out the few Yum restaurants that were open for business during the coronavirus lockdown. It was also shown in the lawsuit that at various times, the delivery app insisted on receiving payments for services that it was supposed to deliver at no extra charge based on the requirements of the agreement. It was thus stated that when Grubhub launched its subscription feature in February 2020, it prevented Taco Bell and KFC restaurants from participating unless they paid additional fees, thereby breaching the terms of the contract.

The contract also allegedly included a condition for a $50 million termination fee for Yum Brands if Grubhub partnered with a third-party that out rightly competed with Yum’s business. Earlier this week, Netherlands-based food delivery company, Just Eat Takeaway signed a $7.3 billion acquisition deal with Grubhub. In a joint statement, Just Eat Takeaway and Grubhub said they’ll be merging in an all-stock deal.

Tags: Yum Brand sues Grubhub

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