Yum! Brands, Inc. (NYSE:YUM) filed a complaint against GrubHub Inc (NYSE:GRUB) over the alleged violation of the contract. The 3% stake acquired by Yum in GrubHub allows favorable service and pricing for the franchisee operated Taco Bell and KFC restaurants of Yum.
Improper termination of the contract
According to the lawsuit filed in the New York Supreme Court on June 11, 2020, Matt Maloney, GrubHub’s CEO, has terminated the accord poorly signed in 2018 on June 2, 2020. In a letter, Matt said that Yum’s deal with Uber Eats of Uber Inc and Postmates violates GrubHub and Yum.
Seeks restoration of favorable pricing
Yum, in its lawsuit, demanded the withdrawal of termination order issued for the contract executed in 2018 by GrubHub. According to Yum, GrubHub is charging a 40% higher fee for deliveries from Yum’s franchises with effective June 8, 2020. The company asks GrubHub to restore favorable pricing and services. According to Yum, GrubHub violated contract terms in February 2020 and denied participation for its KFC and Taco Bell restaurants in the subscription service and demanded a higher fee.
As per the terms of the agreement, GrubHub is liable to pay the termination fee of $50 million to Yum if it comes under a third party control that competes with Yum. A delivery company based in Dutch – Just Eat Takeaway on Wednesday announced that it is merging with GrubHub. It attracts a termination fee of $50 million.
GrubHub denies support to Yum restaurants
GrubHub declined to support the restaurants, which are functional, of Yum during coronavirus pandemic. As per the agreement, GrubHub needs to extend support with no extra fee, but the delivery app demanded additional payment. The coronavirus crisis forced the restaurant industries like Yum to depend on 3rd party delivery apps. GrubHub collected a commission on restaurants every time. Most of the consumers placed the orders through GrubHub delivery app during the COVID-19 pandemic.
According to the complaint filed in the Supreme Court, GrubHub introduced subscription services in February 2020 and not allowed KFC or Taco Bell to participate and required an additional fee.