Today, New York City will hold its first-ever oversight hearing for third-party food delivery apps and the effect they have on local restaurants.
The hearing, set to take place this afternoon, will focus specifically on the fees Grubhub and other companies charge restaurants for use of their services. Perhaps even more significantly, as the NY Post reported recently, it could set the stage for potential government action that would impact third-party delivery operations in NYC.
Titled “The Changing Market for Food Delivery,” the hearing, held by the council’s Committee on Small Business and chaired by Bronx Councilman Mark Gjonaj, invites comments from all stakeholders in the business: restaurateurs, representatives from delivery services, and customers. Grubhub, who also owns Seamless, has already confirmed that a spokesperson will be present. There’s no word on whether people from Uber Eats, DoorDash, or Postmates will attend. The hearing starts at 1 p.m. at 250 W. Broadway in Manhattan.
Having a food delivery strategy is at this point table stakes for most restaurants. But not every business has the brand reach, money, and resources to go it alone à la national chains like Jimmy John’s or Olive Garden. For many, it makes more sense to pay Grubhub et al a fee and let them handle not only shuttling the food from restaurant to customer 24/7, but also the back-end logistics (like order processing and tracking) and even some marketing aspects.
Now, however, many are calling these fees into question. Depending on the terms of the deal and the specific delivery company (e.g., Grubhub versus Uber Eats), third-party services charge the restaurant anywhere between 12 and 30 percent of the final check on each order. It’s why you’ll sometimes see a restaurant charge a little more for an item to be delivered as opposed to eating in house. Third-party services often tout the uptick in orders as a way to offset these costs, which is fine if you’re McDonald’s but less effective if you’re the independently owned deli down the block.
Atop those fees and the concerns surrounding them come reports of late of third-party delivery services charging restaurants hidden fees, such as calls made through the dedicated phone numbers Grubhub and other service set up for restaurants. A class-action lawsuit filed in May of 2019 claimed that Grubhub has been charging for calls made to restaurants via Grubhub’s app, even when the calls didn’t result in an actual order being placed and fulfilled. While that lawsuit was filed in Pennsylvania, the NY Post reports that New York restauranteurs have made similar complaints, with some businesses being charged $9 and more for phone calls that didn’t result in orders. Calls for things like dinner reservations and general customer complaints are also being quietly charged, the Post said.
In turn, restaurants have been demanding refunds from delivery partners, only to be told said refunds are only good on orders going back 60 days (though one unnamed restaurant got a refund from Grubhub to the tune of $10,000 for charges dating back to 2014).
Will all these matters be discussed this afternoon at the hearing? Undoubtedly. Will they make a difference in how third-party delivery companies do business? It’s too soon to tell, but depending on how the discussion advances, the hearing could have serious effects on third-party delivery operations in NYC.
“There is always the potential that this hearing will lead to an investigative hearing from the public advocate, the city comptroller or the state attorney general,” Councilman Gjonaj told the Post in an exclusive interview.
Such action could result in legislation that limits the percentage third-party services can charge restaurants. Or, as the Post noted, it could require Grubhub and other companies to get “disclosed and fingerprinted” for the thousands of restaurants they work with, since NYC law requires anyone who shares revenues in a restaurant to be listed on the liquor license.
And there’s always the possibility of a ripple effect. The tone set by today’s gathering could influence whether other cities hold similar hearings, as well as what those hearings mean for the way third-party services will operate in the future across the country.
One thing is certain: the volume has been cranked up on this side of the delivery conversation, and it’s not going to soften any time soon as more stakeholders in the restaurant business call into question the line between a right and an abuse when it comes to doing business.
We’ll be keeping an eye on today’s events and updating our coverage accordingly. Stay tuned.