- The New York City Council introduced a series of bills Thursday aimed at regulating the food delivery industry.
- The bills would impact restaurant partnerships, with one proposal capping commissions at 10% while another would prohibit third-party delivery providers from charging restaurants for phone orders with customers that didn't occur. A third bill would prohibit third-party delivery services from limiting the menu prices restaurants can charge for food and beverage orders. A fourth bill would establish rules that would reduce the risk of food prepped by restaurants for delivery would be tampered with before arrival, such as requiring tamper-evident packaging. Violations would be punishable by a $100 fine for each infraction.
- A fifth bill would require providers to publicly disclose commission, fees and other mandatory payments imposed on restaurants to consumers, and a sixth bill would require third-party providers to obtain a license to provide their services in the city through the Department of Consumer Affairs.
In just a few years, delivery has proliferated across the country and is now used by most of the restaurant industry. The breakneck speed of this growth has made it challenging to keep up via regulation, but plenty of issues have surfaced to underscore the need for such regulation.
These proposed bills are likely welcomed by many restaurant companies and come on the heels of a number of delivery problems. Grubhub, for instance, has recently received a lot of complaints from restaurant partners and investors in the the New York City market regarding charges from phone calls that didn't result in an order. The delivery platform holds the greatest market share compared to its rivals in the Big Apple. Those complaints recently escalated into threats from the city council, which said it would consider legislation if the company didn't address the issue.
What happens in New York City could be significant for companies across the U.S. After the council's pushback on Grubhub's phone charges, the company changed its policy nationwide so that diners would have to press #1 or #2 depending on whether or not they had a question or wanted to place an order, and extended the look-back period for restaurants to review phone orders from 60 to 120 days.
Further, the NYC Council has already introduced legislation that would make delivery providers explain how much of customer tips actually go to drivers, likely targeting DoorDash's tipping practices. DoorDash revised its tipping late last year to compensate delivery couriers the entire value of any tip paid through its app following criticism of its policy.
New York City's proposed 10% commission cap could be a game-changer for restaurant operators who are used to paying 15% to 30%, but a Grubhub spokesperson told Restaurant Dive this cap could actually be detrimental.
"This arbitrary cap defies common sense — if you tell New York restaurants that they can only sell pizza for a quarter and coffee for a nickel, no one will serve pizza or coffee," a company spokesperson said. "Simply put, this bill will slash business to mom and pop restaurants and hurt consumers in the process."
The licensure piece should also create a new layer of accountability that hasn't existed yet in the foodservice delivery space. Through this licensing, the city would be able to discipline delivery companies if they violated rules like deceptive practices or engaging in misleading advertising.
Andrew Rigie, executive director of the New York City Hospitality Alliance, told the New York Times that such regulation is necessary, adding, "New Yorkers love delivery. It's great for restaurants and it does not need to be an adversarial relationship. Hopefully, this package of legislation will help level the playing field and give some basic rights to restaurants."
Discussions about foodservice delivery regulations have been taking place for at least four years, so plenty of eyes will be watching whether these pass. Considering New York City's market size, any such regulation could perhaps be replicated elsewhere.
Other jurisdictions have also proposed new regulations for foodservice, including a California bill that would require third-party delivery companies to share customer data with restaurants and a Rhode Island bill that would prohibit these companies from listing restaurants without their permission. There is also demand for clarity on third-party sales taxes in New York, Pennsylvania and Illinois, as Nation's Restaurant News reports. The three states found that many third-party delivery aggregators weren't charging sales tax on delivery fees.