In-N-Out sues a food delivery startup

A third-party service is willing to pay full-price and deliver your goods to a customer for free. Sounds like good deal, right?

Well, In-N-Out filed a lawsuit against food delivery startup DoorDash to stop the service from delivering its burgers without permission because of concerns around quality, food handling and safety.

According to the lawsuit, the burger chain was particularly concerned that the use of the restaurant’s logo on DoorDash’s website inferred In-N-Out had a relationship with the retailer. The suit charged DoorDash’s delivery doesn’t meet "the standards that consumers expect" from In-N-Out. The chain says it has no control over the time the delivery will arrive, the food’s temperature, overall food handling and the safety practices of DoorDash’s drivers.

Like many similar delivery startups, DoorDash uses an Uber-like courier service that relies on freelancers.

DoorDash as well as competitor Postmates have faced similar complaints in the past. One big issue is that, with the implied relationship, any problems around delivery often lead to customer complaints to the restaurant or a negative write-up on Yelp.

DoorDash dasher

Photo: DoorDash

The use of third-party delivery services also upsets the traditional delivery model, including not only the jobs of the restaurant’s own drivers but the tips the drivers hand out to kitchen staff.

DoorDash and Postmates also work with restaurants directly for a commission to enhance marketing, create better display menus on their apps, and optimize pick-up and delivery for couriers. DoorDash, which recently received a $1 billion valuation with talk of a potential IPO, earned acclaim for becoming the first third-party service to work with Taco Bell and recently partnered with 7-Eleven to mark its first non-restaurant delivery service.

A DoorDash spokesperson told TechCrunch, in response to the In-N-Out lawsuit, "While we have various relationships with different merchants, we are proud to help people get their favorite food delivered directly to their door."

Despite complaints by others, Sisha Ortuzar, co-founder of Wichcraft, a sandwich chain in New York City, told Eater.com he found DoorDash better at meeting the needs of establishments, while leader Grubhub focused more on customers. Overall, he favors the outsourcing of delivery logistics so restaurants can focus on food. He said of DoorDash, "They’ve been a great partner."

BrainTrust

"In the case of In-N-Out the customer is outsourcing the pickup function. I can readily understand the restaurant wants control over the product until it reaches the customer. Consider all the food poisoning incidents that have occurred."

Steve Montgomery

President, b2b Solutions, LLC


"While there is potential for a mutually beneficial relationship between restaurants or retailers and delivery services it is essential the retailers/restaurants protect their brand and quality by building intentional partnerships with these services."

Zel Bianco

President, founder and CEO Interactive Edge


"In-N-Out certainly has the right to sue regarding the use of their logo without permission. But to prevent DoorDash from delivering product is quite a stretch."

Gene Detroyer

Professor, International Business, Guizhou University of Finance & Economics and University of Sanya, China.


Discussion Questions

Do you think In-N-Out is making the right decision in suing DoorDash? Should restaurants or retailers be open or wary about outsourcing delivery to third-party services?

Poll

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Steve Montgomery
Steve Montgomery
8 years ago

Outsourcing used to mean the company elected to have a third-party handle a function. In case of In-N-Out the customer is outsourcing the pickup function.

I can readily understand the restaurant wants control over the product until it reaches the customer. Consider all the food poisoning incidents that have occurred. It is bad enough to have an issue caused by something in your control, but adding a non-sanctioned third party makes it even more complicated.

There have been numerous discussions regarding customers blaming the retailer when a delivery gets messed up. I am sure the same would happen with freshly prepared food.

Phil Rubin
Phil Rubin
8 years ago

To the extent that DoorDash engages time- (and burger-) starved In-N-Out customers, then it’s the wrong decision. Each time those customers shift to a competitor, it will cost In-N-Out business. The Uber comparison seems analogous not just for retailers but for taxi and limo drivers. If DoorDash better delivers (pun intended) a customer experience to satisfy hungry consumers then good for them, just like Uber. The option remains for In-N-Out to employ their own delivery service.

Zel Bianco
Zel Bianco
8 years ago

While there is potential for a mutually beneficial relationship between restaurants or retailers and delivery services it is essential the retailers/restaurants protect their brand and quality by building intentional partnerships with these services.

Chris Petersen, PhD
Chris Petersen, PhD
8 years ago

Live by the sword, die by the sword.

One of the greatest challenges of meeting today’s omnichannel consumer expectations is “delivery: the last mile.”

I can not comment on the legal merits of In-N-Out’s case of DoorDash impacting their brand identity or quality.

What Tom Ryan points out is the power of social media like Yelp. Negative reviews can significantly impact local restaurants and service businesses. And those reviews tend to stick around on the internet forever! Since quality of delivery is the last touch point, and very critical in terms of the customer relationship, In-N-Out is rightfully concerned about third-party delivery. (Just ask Amazon about failures to deliver through third parties last holiday season.)

Outsourcing delivery to third parties is increasingly a critical link in the consumer relationship. While outsourcing delivery might be cheaper, cheaper is not always better.

David Livingston
David Livingston
8 years ago

I will always trust the good judgment of In-N-Out. They have high standards and the delivery of cold burgers and hour late might hurt their image.

Naomi K. Shapiro
Naomi K. Shapiro
8 years ago

In-N-Out is completely right to sue DoorDash for providing the delivery services without the tacit consent of In-N-Out. It’s completely true that any complaints, comments, poisonings and impressions will revert to the name company, which doesn’t have control of their own product under these circumstances. Should restaurants and retailers be wary about outsourcing delivery to third-party services? Not necessarily. Depends on the kind of formally established relationship and contracted responsibilities and liabilities.

Ed Dunn
Ed Dunn
8 years ago

I believe a consumer lawsuit can only determine the true outcome of liability risk. If food become room temperature en route and sickens the customer, who is at fault? Is the food provider at fault for knowingly providing the food to the delivery service, not having a sign saying third-party delivery services are forbidden from using consumer pickup? Is the delivery service at fault even though they have not prepared the food or prepared it properly for transport? Or is the consumer at fault for knowing the risks of receiving food in this manner?

The best approach is for In-N-Out to quickly advertise no third-party delivery services allowed at their pickup and work with a vendor to ensure the delivery service meets their standards. I’m fully expecting the FDA/OHSA/Local Food and Health inspector to intervene and regulate this perishable fast food delivery business very quickly to protect safety and shut down a lot of minor players.

Gene Detroyer
Gene Detroyer
8 years ago

In-N-Out certainly has the right to sue regarding the use of their logo without permission. But to prevent DoorDash from delivering product is quite a stretch. Once In-N-Out sells its product it is out of their hands.

This really isn’t any different than me giving a neighbor kid a couple of bucks to pick up some hamburgers and fries for me at any fast food establishment.

Liz Crawford
Liz Crawford
8 years ago

I think third-party delivery services will be increasingly de rigueur, in order to reach customers in a restaurant’s trade area. However, the restaurant needs to build and manage those relationships to ensure quality. This will hold true for grocery and grocerants moving forward too.

These phenomena are emerging due to digital search and order mechanisms, coupled with urban migration. Population density will continue to evolve consumption paths in several categories.

Mel Kleiman
Mel Kleiman
8 years ago

This is a very open ended questions with a lot of variables.

  1. Will the service help or hurt your brand?
  2. How will it help or hurt your service or your product?
  3. Did you give them the right to use your brand or did they just start using it?
Ben Ball
Ben Ball
8 years ago

I’m not so sure about In-N-Out’s right to sue for the service itself. It is actually the consumer who is engaging DoorDash to perform a service for them. The issue of having the In-N-Out logo on the Door Dash website (assumed to be without In-N-Out permission) would be a different matter, however.

Kenneth Leung
Kenneth Leung
8 years ago

There are two parts, the logo and delivery. The use of the In-N-Out logo for marketing purposes has to be protected from a legal ground. In this case DoorDash they probably need to back off using restaurant logos without permission first. The second part relating to the delivery of food, if In-N-Out does not feel their packaging is designed for food delivery to maintain quality, it is within their right not to use them or insist on a disclaimer. However I don’t see In-N-Out being able to stop delivery people from ordering food from them either. Where there is a need there is a way.

Craig Sundstrom
Craig Sundstrom
8 years ago

Who will customers thank when this works? Doordash. Who will they blame when something goes wrong (and it will)? Everyone. In-N-Out is quite right to try to distance themselves from an element in the supply chain they don’t have control over… indeed, they don’t even want there to be a supply chain.

Jehangir Jasavala
Jehangir Jasavala
8 years ago

Has anyone taken delivery of a burger from In-N-Out with an expiry or best if eaten by date time stamped on the package?

Gordon Arnold
Gordon Arnold
8 years ago

The money spent for litigation will not recover any consumer confidence. A smarter move would be to offer delivery without third party sourcing or to simply remove any pick up options other than by the customer. The e-commerce side of retail is making it far more difficult to charge for delivery and so this issue an anchor around the neck of the entire industry. Our ever shrinking world economy making the fight for market share necessary is killing off many good businesses. Who should we blame for that?

Jerry Gelsomino
Jerry Gelsomino
8 years ago

Restaurants and retailers should be very wary about outsourcing delivery to third-party services. It is the company’s reputation at stake if the delivery service makes a mistake. That being said, if the company checks out the delivery service and trusts them to respect the brand, third-party delivery can help to grow the restaurant or retailer.

Todd Hale
Todd Hale
8 years ago

Yes they should be wary, but it also speaks to demand for delivery services and if In-N-Out doesn’t figure out their model, then they will likely see sales erosion.

Shep Hyken
Shep Hyken
8 years ago

I’m not going to comment on a law suit, but if In-N-Out doesn’t want a third party delivering food to the customer, they should not have to do so. And, DoorDash should not use the In-N-Out name with permission.

Now, with that out of the way, I completely understand and agree with In-N-Out’s concerns. I have a client in the restaurant business doesn’t do “to-go” orders. They are concerned about all of the same quality issues, not to mention the presentation, that In-N-Out has.

What if DoorDash, or any other vendor is slow to deliver the food, which means the hot sandwiches aren’t hot anymore and the french fries are soggy? Who do you blame?

There are so many points that are well taken from In-N-Out’s viewpoint, but there is also the customer’s viewpoint. DoorDash (and others in the same biz) offer a great service, and some restaurants are happy to do business with these types of companies — and they should. Yet if the restaurant doesn’t want to do business this way, they shouldn’t have to. They don’t even need a reason, although the ones mentioned in the above article are pretty good ones.

Shilpa Rao
Shilpa Rao
8 years ago

Last mile delivery is critical, especially for food with food safety as a priority. When food is delivered, it is expected to be in certain condition — temperature, crispy, moisture and others. If the last mile delivery does not carry your brand promise, then it could impact your brand.

While I cannot comment on the legal side of things, third party delivery services have to partner with food outlets for a win-win.