Happy Khao Thai has an address on San Francisco’s Mission Street, but don’t go there looking for a storefront. A sign on the sidewalk reading “Food pick up here” points, improbably, through the maw of a demolished theater, of which all that’s left is the marquee. Behind it, in what would have been the lobby, is a parking lot, and way in the rear—backstage, perhaps—are a pair of portable toilets and a trailer. That’s the home of Happy Khao Thai, although the logos on the door suggest it could just as well serve tacos and wings.
Happy Khao is a so-called ghost kitchen—part of a network run by a Softbank-funded company that recently expanded from parking technology into parking lot–based food prep. This week, it became a central spoke in a quintessentially San Francisco mystery. How had the menu at this VC-backed, delivery-only kitchen, which includes a short list of Thai staples and—criminally to some—Vietnamese pho, been confused on Grubhub with that of Michelin-starred Kin Khao, a restaurant about two miles north that does not deliver at all?
The answer, it turned out, was bound up in the bizarre dynamics of the low-margin, highly competitive business of food delivery.
The saga began when Pim Techamuanvivit, Kin Khao’s owner, received a call from a patron asking for an update on their delivery. Techamuanvivit was confused, she tweeted on Saturday—after all, her restaurant doesn’t do take-out. But a quick online search revealed that, sure enough, Kin Khao had been listed on Grubhub, with the wrong menu to boot. Her posting went viral, and Twitter sleuths soon noted similarities with a menu for Happy Khao, a restaurant with locations in cities across the country.
Grubhub says the error was theirs, pointing to a glitch in an automated system that scrapes menus from websites and matches them with listings. The error occurred, says Katie Norris, a company spokesperson, when Grubhub tried to set up a new listing for Kin Khao. She added that no orders placed via the listing were linked to Happy Khao.
Reef Technology, the Florida-based company that operates the Happy Khao brand and others, did not respond to a request for comment. The phone number posted on the trailer for the company’s local operations hub was disconnected, and the Mission Street kitchen was closed at dinnertime Monday. In a statement on Twitter, the company said it was investigating “an error made by our delivery partners.”
As for listing Kin Khao for Grubhub delivery without its knowledge? That part was intentional, Grubhub says. The incident exposed a little-known aspect of the food-delivery business, practiced by the company and others. Kin Khao had been conscripted into a program to expand Grubhub’s portfolio by listing restaurants with whom it doesn’t have a contract. The company identifies “trending” restaurants in places where it has staff, and then pulls information and the menu from public sources to a Grubhub ordering page. Orders are sent directly to Grubhub, which sorts out how to get them to your door.
The model is inherently improvisational. Delivering food from restaurants without their knowledge is challenging, it turns out, especially when many of those places aren’t equipped for delivery at all. Grubhub staff need to figure out, case by case, whether it’s possible to call in an order, or whether a driver should, say, go in and order take-out themselves. In the case of Kin Khao, where the only way to take food out is to sit down, order a seated meal, and get the leftovers boxed up, Grubhub was apparently out of luck.
Restaurant owners have expressed concern about potential reputational damage if the restaurant is seen as canceling delivery orders—all the more so if it doesn’t even know those customers exist.
Kin Khao was far from alone in that position. Other San Francisco restaurateurs, including the owners of Third Cousin and Deli Board, were dismayed to find Grubhub pages they hadn't requested. Elsewhere, restaurants have been complaining for months. At Hathorne, a restaurant serving "new American" food in Nashville, Tennessee, chef and owner John Stephenson had received mysterious calls about delivery for weeks, asking for things like an extra gallon of iced tea with an order.
Stephenson couldn’t fulfill their request, he told them, because Hathorne doesn’t offer delivery for any of its dishes, which include venison short ribs and crispy redfish. “We don’t feel like it showcases what we do best,” he says.
When Stephenson asked to have Hathorne removed, he says he was bounced between customer service for Grubhub and Yelp, which partners with Grubhub to fulfill deliveries requested on its website. As of Monday, the restaurant had been removed from Grubhub but was still live on Yelp, with an out-of-date menu and a $5.99 delivery fee. Stephenson suspects the delivery workers have been using a loophole at the restaurant, which is to order takeout at the bar. Last week, feeling he had exhausted other options, he took to Twitter to complain.
On Monday, Yelp told WIRED it has requested that Grubhub remove all “non-partner” restaurants from Yelp pages.
In 2015, DoorDash was sued by California burger chain In-N-Out for delivering food without its permission, noting lack of control over delivery timing and safety. The lawsuit was later dismissed. Last year, two Chicago restaurants, one selling burgers and the other sushi, sued DoorDash again for similar practices, alleging trademark infringement and deceptive trade practices, and sought class action status for other “non-partner” restaurants. The case settled this fall.
In tweets, Techamuanvivit has expressed doubts that the listings are mere coincidence and has repeatedly said she intends to sue. Reached by phone on the floor of Kin Khao, she told WIRED that she and her lawyers need to continue investigating the situation before coming to any conclusions. "They messed with the wrong Thai restaurant," she says.
Compared with big restaurant chains, independent restaurants like Hathorne and Kin Khao are at a disadvantage when trying to control their online identity, says Alexandra Mateescu, a researcher at Data and Society. “Who has control can make or break a small business,” she says, pointing to lawsuits from small businesses over things like incorrect information on Google Maps and inaccurate reviews.
There are lots of reasons why restaurants seek to avoid the delivery companies, she notes, from their philosophy about dining to the economic pressures involved. The delivery industry has put a crunch on many restaurants, with high fees that cut into thin margins and disruptions to how they do business by shifting time and effort away from dine-in customers to juggling deliveries. Those forces, ironically, are the same ones that have spurred the proliferation of ghost kitchens like Happy Khao, which do away with much of the overhead to focus solely on delivery services. They are, in many ways, a venture-backed answer to the delivery companies the VCs helped create.
Grubhub says that it’s just trying to keep up with the competition. While the food delivery industry has grown fast, it's facing existential issues, with low margins and legal challenges to its labor model, which largely relies on contractors. DoorDash and Postmates, which have won a growing share of the food delivery business, have long listed restaurants without contracts. When Grubhub announced its initiative in October, along with a quarterly loss that sent the company’s stock down 40 percent, the company told Eater the “non-partnered” arrangement was not ideal but necessary to help prop up customer loyalty. “The non-partnered model is no doubt a bad experience for diners, drivers and restaurants,” the company said. Analysts expect Grubhub losses to continue when the company announces fourth-quarter results next week.
Updated, 1-29-20, 6:45pm ET: An earlier version of this story incorrectly said Grubhub was compensating drivers when orders are not completed. The company now says it is generally not compensating drivers.