The owner of KFC and Taco Bell is suing Grubhub Inc., the Chicago-based online food ordering and delivery marketplace, alleging it violated terms of a distribution agreement, CNBC reported.
In 2018, Yum! Brands inked a five-year deal agreement with Grubhub. Under the terms of the contact, Grubhub would deliver food from KFC and Taco Bell. As part of the arrangement, Yum bought $200 million worth of Grubhub’s stock, a 3 percent stake, according to a press release about the agreement.
The deal also required the delivery app to provide Yum with discount pricing and favorable service for thousands of Taco Bell and KFC franchisees.
But Grubhub canceled the agreement earlier this month because Yum reportedly also had “interactions” with competitors Uber Eats and Postmates, the network reported.
As a result, Grubhub imposed additional fees totaling nearly 40 percent more in fees on KFC and Taco Bell franchisees after telling Yum that the restaurant company had breached the contract, the lawsuit alleges.
“Grubhub’s improper efforts to rid itself of a deal it no longer wanted and to line its pockets will cause enormous harm to consumers at a time when they can least afford it,” the company said in its complaint, filed on Thursday (June 11), in New York County’s Supreme Court.
The lawsuit alleges Grubhub CEO Matt Maloney improperly terminated the company’s contract with Yum on June 2. He sent Yum a letter saying the company’s collaborations with Uber Eats and Postmates violated the terms of the deal.
Yum has denied the allegation, the report said.
Yum said it demanded that Grubhub revoke its termination of the contract and enter into negotiations.
Instead, Grubhub contacted franchisees directly on Monday imposing a new pricing structure, according to the suit.
Grubhub did not immediately respond to a request for comment.