Page Contents
The takeout and delivery scam that’s killing restaurants
In the wake of the COVID-19 pandemic, restaurants have been hit hard, with many facing significant losses and closures. As they struggle to adapt to the changing landscape, some establishments have turned to takeout and delivery services as a means of survival. However, an alarming trend has emerged in which scammers are taking advantage of these services and further endangering the already struggling restaurant industry.
The startling statistics
According to a survey conducted by the National Restaurant Association in December 2020, 87 percent of full-service restaurants in the United States reported a 36 percent loss in sales due to COVID-19. Shockingly, 17 percent of these restaurants had already closed their doors. While reduced business is undoubtedly a factor, a deeper investigation by the Los Angeles Times reveals a more insidious threat to restaurants that rely on takeout and delivery: consumer fraud.
The growing role of food delivery apps
Food delivery apps like DoorDash and GrubHub have seen a surge in popularity during the pandemic. These platforms have more than doubled their revenue since the start of the crisis, leading some analysts to predict that restaurants may soon have no choice but to rely solely on delivery platforms to survive. However, this reliance on delivery apps also exposes restaurants to significant risks.
The two faces of consumer fraud
The Los Angeles Times investigation highlights two types of consumer fraud that are wreaking havoc on struggling restaurants. The first involves fraudsters using counterfeit cards to place orders. When the fraudulent nature of these orders is eventually discovered and disputed, the burden of the losses often falls on the restaurant. This can have devastating financial consequences for establishments that are already operating on thin margins.
The second type of fraud occurs when fraudsters exploit delivery apps by requesting refunds for ordered food, claiming restaurant error. Unfortunately, delivery apps tend to give customers the benefit of the doubt in these situations, leaving restaurants on the hook for mistakes they did not make. This unfair burden exacerbates the financial strain on struggling businesses.
Real Stories of Loss
The impact of these scams on individual restaurant owners is heartbreaking. Yoonjin Hwang, the owner of a Korean restaurant, says she lost not only money but also precious ingredients and time to fraudulent orders. Despite providing evidence of the fraudulent activity, she was still left to cover the costs. Another restaurant owner, Fern Kaewtathip of Thai Bistro, shares a similar experience, having lost thousands of dollars in 2020 due to disputed charges, many of which stemmed from customers falsely claiming non-delivery.
For small restaurants, the financial impact of these scams can be devastating. As Julie Fergerson, CEO of the Merchant Risk Council, points out, a loss of just $10,000 can mean the difference between making payroll or not for a small business. The cumulative effect of these losses pushes already struggling businesses over the edge.
The urgent need for action
The prevalence of these scams underscores the urgent need for action to protect the restaurant industry. Collaboration between restaurants, delivery apps and financial institutions is critical to developing robust fraud detection and prevention systems. In addition, increased consumer awareness of the impact of these scams can help reduce their incidence.
Restaurants must also consider implementing additional security measures and protocols to protect themselves from fraudulent activity. This may include enhanced verification processes for online orders, improved staff training to identify potential fraud, and clear communication channels with delivery apps to effectively resolve disputes.
Support local restaurants
As consumers, we play an important role in supporting local restaurants during these challenging times. By ordering directly from the restaurant’s website or calling them directly, we can help reduce reliance on delivery apps and minimize the risks associated with third-party platforms. In addition, promptly reporting any suspicious or fraudulent activity to the restaurant and the appropriate authorities can help combat these scams.
The takeout and delivery fraud plaguing the restaurant industry demands immediate attention and a concerted effort by all stakeholders. By working together, we can protect the livelihoods of restaurant owners, preserve our vibrant culinary culture, and ensure a thriving dining landscape for years to come.
FAQS
Takeout and delivery scams are fraudulent activities that take advantage of restaurants that rely on takeout and delivery services. Scammers use tactics such as placing orders with fraudulent cards or falsely claiming restaurant errors to obtain refunds, leaving the restaurants to bear the burden of losses.
How are fraudsters impacting the struggling restaurant industry?
Fraudsters exacerbate the challenges facing the restaurant industry, which is already dealing with the effects of the COVID-19 pandemic. By engaging in fraudulent activities, scammers inflict financial losses on restaurants, making it even more difficult for them to survive and recover.
Are food delivery apps to blame for these scams?
While food delivery apps provide a platform for scammers to exploit, they are not directly responsible for the scams. However, the policies and practices of these apps, such as favoring customers in refund disputes, can inadvertently place the financial burden on restaurants.
What are the consequences for restaurants that fall victim to these scams?
Restaurants that fall victim to these scams face significant financial consequences. They lose not only money, but also valuable ingredients and time invested in preparing fraudulent orders. These losses can be particularly devastating for small establishments, jeopardizing their ability to meet payroll or maintain operations.
How can restaurants protect themselves against these scams?
Restaurants can take several steps to protect themselves from these scams. They can implement enhanced verification processes for online orders, train staff to identify potential fraudulent activity, and establish clear communication channels with delivery apps to effectively resolve disputes. Working with delivery apps and financial institutions to develop robust fraud detection systems is also critical.
What can consumers do to support restaurants and combat these scams?
Consumers can play an important role in supporting restaurants and combating these scams. They can order directly from the restaurant’s website or call the restaurant directly, reducing reliance on third-party delivery apps. Promptly reporting any suspicious or fraudulent activity to the restaurant and relevant authorities can also help identify and combat these scams.