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The Pasadena-based burger stand Lucky Boy has reportedly settled with the food delivery company Postmates for allegedly retaliating against the eatery for refusing to allow the courier service to carry its food to customers. The eatery had specifically accused the service of trademark infringement and unfair competition.
Lucky Boy, which operates its popular roadside grill off of Arroyo Parkway, alleged Postmates used its name without authorization and intentionally posted a menu bearing incorrect information for the diner, including lower prices, as retaliation. It originally sued back in Feb., alleging that because the eatery refused to be associated with the delivery app, Postmates retaliated by offering “alternatives with similar food when Lucky Boy is searched for, and this too diverts business away from Lucky Boy.”
In a notice of voluntary dismissal filed in Los Angeles federal court, attorneys for Lucky Boy reportedly stated that the eatery entered into a settlement agreement with Uber-owned Postmates.
According to the lawsuit, Postmates “generates revenue by charging delivery service fees to both the consumer and the eating establishment. For example, a restaurant has to pay a commission on the food that it sells and the consumer pays a percentage of the sales price.”
Food service delivery fees typically average 15% to 30% and have been a major point of contention for both customers and restaurants using the service. A New York Times story in Feb. 2020 found that foodservice delivery markups can cost up to 91% more than if you ordered a meal directly from a restaurant. California recently passed a bill requiring food delivery apps to provide an itemized breakdown of costs to both customers and restaurants for each transaction. This means that it must list food price, fees, tips, and commissions separately. Though the original bill proposed putting a permanent cap on delivery fees, the version that passed prohibits companies like DoorDash, UberEats, Postmates, and GrubHub from charging higher prices for food than what the restaurant charges its customers.
Moreover, DoorDash and Uber raised their prices for customers in California last year in order to fund the new driver perks they promised if Prop. 22 passed, which it did in the Nov. election.
Food delivery services including Postmates, DoorDash, Uber Eats, and GrubHub have become increasingly popular since the start of the coronavirus pandemic last year. According to NPD Group data, 47% of people in the U.S. ordered from one of the major delivery players by Mar. 2021, up from 38% from the year prior. In 2020, delivery orders overall increased 137% from 2019.
As reported by The Economist, the company with the largest chunk of the U.S.’ food-delivery market Doordash rose three-fold in the first quarter of 2021 compared with a year prior. Its main competitor UberEats enjoyed similar speedy growth, in part thanks to its multiple acquisitions including that of Postmates. The companies directly attributed their growth to the pandemic, which increased the number of users who have ordered delivered meals for the first time.
However, Lucky Boy has stated it still doesn’t want to be in business with Postmates because its service fees are too high. Lucky Boy is a family-owned corporation that has been in business since 1960, founded by two brothers from Greece who started in the San Gabriel Valley after Europe was decimated from war.
Moreover, app-based food delivery drivers have also voiced concerns over a lack of pay transparency, with many reporting having their tips taken by food delivery companies. A 2019 report in the New York Times revealed DoorDash was using customer tips to subsidize workers’ base pay, which was followed by the company reportedly agreeing to pay $2.5 million to settle a lawsuit alleging DoorDash kept customer tips that were intended to go to their delivery drivers.