New York sets a price limit for food delivery from restaurants: what you need to know

Such restrictions will facilitate the operation of restaurants. Now Grubhub, Doordash, Postmates, UberEats and other food delivery applications will be able to earn at restaurants no more than 20% of the order value. This publication writes with the BBC.

About restriction

Each restaurant that cooperates with food delivery services pays them a commission, which may exceed 30% of the order value.

However, on May 13, New York limited the fee for restaurants to 20%. The order is valid during the emergency period, that is, quarantine in connection with the COVID-19 pandemic.

This was preceded by complaints from the restaurants themselves about the increase in fees amid rapidly growing orders for delivery during quarantine.

Other US cities, such as San Francisco, Washington, and Seattle, have also introduced stricter application rules.

Application owners are against

Grubhub, the owner of Seamless's online food ordering service and the largest player in the US market, warned that city officials would increase costs for customers and reduce opportunities for workers.

The company said that the law adopted by local officials “crossed the border” and could not stand the legal challenge.

“Any arbitrary limit, regardless of duration, will reduce ordering volumes at local restaurants, increase costs for small business owners and increase consumer spending,” Grubhub said in a posting. In addition, couriers delivering groceries will have fewer opportunities to work and earn money, the company added.

On the subject: Selected products that used to be sold only to restaurants are now available to New Yorkers.

The New York City Council has begun discussing ways to limit mobile app fees before the pandemic. But the restaurant crisis, caused by the suspension of their work, brought a new level of urgency to this business, as many restaurants began to use food delivery applications.

What percentage of restaurants are paying today

Currently, companies charge restaurants for various services, including marketing, receiving customer orders and delivery, the cost of which can exceed 30% of the total order. In an industry where profit margins are around 10%, levying such high fees can cause losses.

George Constantinou, restaurant manager in New York and New Jersey, said in April that he was trying to negotiate lower rates for his business.

Last month, three restaurants filed a class action lawsuit, accusing Grubhub, Doordash, Postmates and UberEats of a monopoly, which led to setting too high prices for their services.

Equal rules of the game

Earlier delivery apps announced emergency assistance to restaurants after the pandemic. In particular, it was a question of canceling, reducing or deferring certain payments. Despite this, restaurant owners and their lawyers allege that the companies did not do enough.

Before the May 12 vote, New York Mayor Bill de Blasio said he supported plans to limit fees, calling it "smart legislation."

City Councilor Mark Gjonaj, author of the bill, said he hoped the restrictions would ease restaurants.

“I'm proud to be fighting for a bill that would level the playing field and help restaurants overcome this crisis as restaurant owners are being held hostage by delivery apps,” he tweeted.

Andrew Rigie, Executive Director of the NYC Hospitality Alliance, called the measure "a critical first step."

“We look forward to working with legislators to implement these protections on an ongoing basis,” he said.