Grubhub’s free lunch promo for workers backfires for NYC restaurants

Yahoo Finance's Brooke DiPalma details how restaurants managed under Grubhub's free lunch promotion this week as surges in orders caused an overflow in demand and loss of income for restaurant owners.

Video transcript

SEANA SMITH: Grubhub's a free lunch offer in New York City turned into a disaster yesterday. Now, the system crashed. Restaurants were caught off-guard. Thousands of Grubhub users got their orders canceled. Some people even gave up on trying to order because they couldn't get through to the site. Brooke DiPalma is following this for us. And Brooke, we were so excited about this offering just a few days ago. What the heck happened?

BROOKE DI PALMA: That's right, Seana. What happened here? Well, some customers were definitely left hangry on Tuesday after restaurant owners in New York City just could not simply fulfill the unprecedented demand that they saw on the app yesterday. Now I spoke to a restaurant owner in Harlem. The name of the restaurant is Harlem Public. It's on 149th Street and Broadway.

And Chad said that right at 11:00 AM when the promotion started, the staff saw this-- 25 times more than the normal amount of orders that they see on any given day. Now, the Harlem Public Restaurant uses a third party delivery service in order to fulfill those Grubhub orders. And they said that the delivery service was also slammed and that they simply shut off their services because they could not deal with the amount of orders that they were seeing.

Now, while Grubhub did have good intentions here, the owner of Harlem Public did not have good feedback for Grubhub. Chad told Yahoo Finance in a statement, we were not notified about this. I have no idea who thought it'd ought to be a good idea to offer free lunch to one of the largest metropolitan cities in the world during the same exact three-hour time span. It's unbelievable, really.

Now this restaurant owner did say that even though they were able to then make the orders, since that third party company was not able to deliver the orders, the restaurant is actually going to have to eat the cost of those orders.

DAVE BRIGGS: That is awful. There is no such thing as a free lunch, still true for most of us. So they didn't tell the restaurant partners. I hope they learned a valuable lesson here. I was told one restaurant, in fact, Brooke, closed and just said, forget it. We're not going to fulfill any of these orders. So what did Grubhub say? What have they learned?

BROOKE DIPALMA: Yeah, no, of course, it started lots of commotion on social media, many customers saying that they're not going to get their orders and they never did. Now we did reach out for Grubhub in a statement, and they said, quote, "We gave advance notice to all the restaurants in our network, which included multiple forms of communication across various platforms. We also increased driver incentives to help support demand. And even with that preparation, there was, unfortunately, strain on some restaurants due to the unprecedented demand."

They said, we have great learnings to help us optimize and mitigate this in the future. Now, they also noted that customer care is working to credit diners who weren't able to get it. But, however, we noted restaurant owners may be eating those costs.

DAVE BRIGGS: That is the real tragedy here. By one account, there were 6,000 orders per minute at the peak. What a debacle. Brooke, thanks so much. Interesting story.