As restaurants struggle to survive during the coronavirus pandemic, many have shifted their operations online, especially as more people use third-party delivery apps, some of which charge restaurants staggering fees, to get their meals. But this online shift has left restaurants vulnerable to a new type of scam.
First reported by the Los Angeles Times, the scam is a virtual version of the dine and dash, where customers will sneak out of a restaurant without paying for their meals. It involves customers placing orders, then disputing the charge with their credit card company or telling a third-party delivery application that they didn't receive the order. That usually results in a refund, and in some cases, the restaurants have to eat the cost.
The Times featured one restaurant, Spoon by H, that lost nearly $730 on a scam like that. Spoon by H had been seeing less customers than usual during the pandemic, and over the summer, owner Yoonjin Hwang said that she noticed more people disputing charges or claiming missing items. Trying to manage it on her end was taking up hours of time.
The final straw came in November, when a customer placed what the Times called "one of the largest orders" the restaurant had ever received: Four elaborate meals that totaled $728.76, ordered through Tock, a third-party app. Hwang said that she helped the man carry the food out to his car, but just two weeks later, Tock sent Hwang an email saying that the customer had disputed the charge, with the cardholder saying someone else had used their credit card number to place the order. As a result, the payment was removed from her account, and in January, she lost an appeal and was told that she was responsible for the full amount despite showing evidence that the order had been given to the man.
Tock did not respond to a request for comment from TODAY Food, and Hwang did not respond to an email sent to the restaurant. While she initially planned to close the restaurant in February, a successful GoFundMe campaign has raised more than $70,000 for the establishment, which will help them keep their doors open for at least six months.
"To all of our Spoon By H customers, friends, and supporters, thank you from the bottom of our hearts for the love you've shown us this week and always," the restaurant wrote on the GoFundMe page. "We'll never be able to find the words to express how incredibly grateful we really feel … We don't take a second of it for granted and the raised funds will go towards a new beginning for Spoon by H."
While it's tough to track down just how many restaurants have been dealing with this type of scam, several restaurant associations in the country say they're aware of the scam, and reports of virtual dining and dashing have popped up in Nevada and Minnesota, too. According to CNBC, credit card fraud has increased in 2020, which can have a major impact on small businesses.
“For a big business, they can absorb a loss on even a pretty significant loss,” Julie Fergerson, CEO of Merchant Risk Council, told CNBC in January. “If a small one-shop business or a restaurant all of a sudden has a $10,000 loss, that could be the difference between making payroll and not making payroll for that company.”
Restaurant owner Kathi Turner, who operates several restaurants in Massachusetts, said that one thing that has made it more complicated for restaurants is the shift to online payment for orders.
"Unless you actually had the card present and it was (tapped) or the (chip) was inserted into an EMV reader, you would be responsible for all chargebacks," said Turner, referencing a 2015 policy change that holds restaurants responsible for some credit card charges if certain payment methods aren't used. "You basically have no defense."
Third-party delivery apps have offered some protection for businesses. Larger apps like DoorDash and Uber Eats told TODAY that, while customers can dispute charges, they try to make sure restaurants are not unfairly penalized.
"We take fraudulent behavior seriously and have filters in place to monitor user behavior," said an Uber Eats spokesperson. "We will not make adjustments on suspicious refunds."
A DoorDash spokesperson said that "depending on the issue," the company "will take on the cost of any refund credit" and will "not pass the cost onto the merchant unless we have strong evidence to believe there were missing or incorrect menu items in the customer's order." The company also reserves the right to deactivate consumers who frequently misuse the credit and refund policy, and also will help investigate reports of fraudulent credit card activity.