The NYC Council hopes to eventually pass permanent legislation in the future.

By Mike Pomranz
May 14, 2020
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Even before the coronavirus pandemic, the fees charged by online delivery services had become a controversial issue. Some benefits were undeniable: Namely, online ordering was growing, and customers want to use it. But what isn’t always clear is—after a service like DoorDash, Grubhub, or Uber Eats took their cut—whether the resulting income was beneficial enough for the restaurant. As a result, cities like New York were already looking to put caps on these fees.

But once COVID-19 struck, many restaurants found themselves pivoting to delivery orders as their primary—if not only—source of income. With shutdowns already leaving restaurants struggling to stay in business, many local governments choose to swiftly take action. San Francisco and Seattle led the charge, and now, New York City is also capping online fees.

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The new bill, passed yesterday and expected to be signed by Mayor Bill de Blasio, will cap the fees third-party delivery platforms can charge in New York City at 5 percent for non-delivery services (in part become some restaurants provide their own drivers) and 15 percent for delivery service. Therefore, overall, the new legislation would cap total fees at 20 percent.  “This will bring significant relief to local restaurants that are currently paying up to 33 percent on food orders,” Council Member Mark Gjonaj, chair of the NYC Council Small Business Committee, said in a statement. “There is little doubt that the passage of these bills will save restaurants and jobs.”

The new restrictions will last for 90 days after Governor Andrew Cuomo lifts New York State’s lockdown. However, Gjonaj also said he still seeks a permanent solution. “While I am grateful that we are providing this much-need and immediate relief to restaurants looking for a lifeline during this pandemic, I remain confident that we will pass the full slate of third-party food delivery reform legislation that was introduced earlier this year,” he continued. “This includes enacting a permanent cap on commissions and prohibiting erroneous phone order charges.”

As you may recall, last year, Grubhub was accused of inappropriately charging fees on some phone orders, even if the call did not result in a sale. The New York City Council also passed a bill that will ban companies from changing these kinds of fees.

As expected, Grubhub—which has long been New York City’s top online ordering platform and has also faced the most scrutiny from the city—opposed of the new rules. “Any arbitrary cap—regardless of the duration—will lower order volume to locally-owned restaurants, increase costs for small business owners, and raise costs on customers. Delivery workers would have fewer work opportunities and lower earnings,” a GrubHub spokesperson said according to Nation’s Restaurant News. “We also believe that any cap on fees represents an overstep by local officials and will not withstand a legal challenge.”