The New York City Council passed a bill on Wednesday to cap the fees that third-party food delivery apps can charge business owners. The measure is designed to alleviate the pressure on restaurants who have been forced to rely on apps like Grubhub/Seamless, Postmates, and Uber Eats to stay afloat during the pandemic.
The legislation caps the fees at 20 percent of the cost of the order, excluding tips and taxes—15 percent for delivery orders, 5 percent for all orders placed through the app. Companies like Grubhub/Seamless currently charge as much as 30 percent—20 percent for deliveries, and 10 percent for app orders.
"It's highway robbery," said Melba Wilson, owner of her eponymous soul food restaurant in Harlem, who is also the president of the New York City Hospitality Alliance.
Wilson told Gothamist that she had to furlough 15 of her 34 workers when restaurants were forced to shift to take-out or delivery only. A recent order totaling $52.90 resulted in Grubhub taking $15 in commissions, a 28 percent cut. "We do hundreds of orders of Grubhub a day. That money adds up. That money could help me bring on another employee," Wilson said.
Delivery apps are also known to charge restaurants as much as $9 for phone calls placed through search engine ads, even if they don't result in orders. A separate bill passed today also bans that practice.
Fines for imposing order and delivery fees past the legal mark range from $500 to $1,000. The bills will be in effect through the duration of the pandemic, and for another three months after Governor Andrew Cuomo lifts the state's ban on dine-in service, as a way of allowing restaurants to regain their footing.
Grubhub/Seamless, which controls roughly 62 percent of the market in New York City, and recently reported $363 million in revenue during the first quarter of 2020, did not immediately respond to our request for comment.
"These tech companies are not industry saviors," said Councilman Francisco Moya, the lead sponsor of the bill to cap fees. They’re about profit at all costs, and to me, this cutthroat strategy ends up killing the restaurants that they’re feeding off of."
He added, "If third-party food apps were nibbling away at neighborhood restaurants before COVID, they’re bleeding them dry now.”
The measure—which is similar to other statutes passed by major cities across the country—is part of a bill package intended to ease the financial burden of businesses that have struggled to remain open during the pandemic.
The bills now require Mayor Bill de Blasio's signature. "This is one where we want to make sure people are treated fairly," said de Blasio yesterday, when asked about the legislation. "And [the council] saw something that wasn't fair to everyday people going through so much, and I think it's smart legislation, so I will support it."
