Barnhart Introduces Legislation to Cap Food Delivery App Fees

Monroe County Legislator Rachel Barnhart has introduced legislation to temporarily cap the commission fees charged to restaurants by third-party food delivery services, including GrubHub, DoorDash and UberEats. These fees can reach 30 percent or more of the purchase price.

The pandemic has placed an enormous financial strain on restaurants. Delivery and takeout options are critical to restaurants’ ability to earn revenue and remain open, as well as maintain the social distancing measures required to control Covid-19. 

“Customers would be shocked to learn how much money restaurants have to fork over to these powerful tech companies, especially at a time restaurants are struggling to survive,” said Legislator Barnhart. “This proposal is a win for small businesses, consumers, and public health.”

Legislator Barnhart’s legislation would do the following:

  • Cap the delivery fee from third-party food delivery services to restaurants at 15 percent of the purchase price for each online order.
  • Cap the third-party food delivery service’s fee for use of their service to 5 percent of the purchase price for an online takeout order or when the restaurant uses their own driver. 
  • Prohibit third-party food delivery services from reducing the compensation rate paid to a delivery service driver or garnish gratuities in order to comply with the fee caps. 

The proposed law would only apply during a declared emergency and for a period 90 days after the end of a declared emergency and only when there are restrictions on on-premises dining at restaurants.

“The delivery apps are taking advantage of the fact restaurants need their services more than ever during the pandemic. This is a sensible approach,” said Minority Leader Yversha Roman.

“The upcoming colder months will put restaurants in an even more difficult position. We anticipate delivery and curbside pickup to increase. If third-party food delivery companies were willing to work with our industry and limit commission fees, restaurant owners could supplement sales as outdoor dining decreases,” said Kelly Bush, president of the New York State Restaurant Association Rochester Chapter. 

“The apps are definitely a help for restaurants, but it’s cost prohibitive. I think it’s wonderful the legislature could help us,” said Don Verni, owner of the Northside Inn.

During the pandemic, the public has increasingly relied on third-party food delivery service platforms to facilitate online ordering of food from restaurants. Restaurants are faced with a difficult choice: participate in the platforms at a high price or lose out on business. Small independently-owned businesses have little negotiating power to lower onerous commission fees because few third-party food delivery companies exist in the market. 

Third-party food delivery services argue caps on commissions hurt their ability to market the restaurants on their platforms and will lead to reduced business for participating restaurants and higher costs for consumers. 

“I spoke with Grubhub, and they were unable to provide any independent study or credible data proving this is true in markets where similar caps are in place,” said Legislator Barnhart. “Furthermore, the caps have the support of restaurant industry associations.”