New York proposes cap on third-party delivery fees

Dive Brief:

The New York State Liquor Authority proposed an advisory that would add a 10% cap on commissions paid to third-party delivery providers by restaurants with liquor licenses. This issue could be discussed during a meeting on Aug. 20, according to Restaurant Business.
This cap is consistent with state law in which the NYSLA vets businesses that share in the profits of permitted restaurants and adds them to the permit.
The advisory would be applicable even if alcoholic beverage delivery is not allowed in New York at this time. Businesses without a liquor license and restaurants that pay flat per-fee for deliveries made by a third-party would not fall under this advisory.

Dive Insight:

Given the amount of scrutiny delivery providers have been under in New York, it is not surprising that regulators would want to issue some kind of authority over delivery providers. While this cap isn't applicable to all restaurants in New York, it still offers some guidance on the changing oversight that could be forthcoming within the delivery industry.

And there has been plenty of scrutiny of delivery providers in New York City, specifically. A city council member asked the state attorney general to look into antitrust violations of Grubhub, which holds 69% of market share in the city. This closer look at Grubhub came after reports that accused the delivery provider of charging restaurants for bogus phone order fees and using microsites. While Grubhub has disputed these claims, other delivery providers have come under the microscope as a result.

Fees have been particularly onerous for many restaurants, especially since the often high fees can eat into already thin margins. Following franchisee concerns, McDonald's renegotiated its contract with Uber Eats, which included a discussion over fees and ending the exclusive relationship by teaming with DoorDash as well. Waitr recently changed its fee structure in Louisiana, charging based on the volume of orders a restaurant processed, and faced swift backlash from local restaurants.

Following customer backlash over DoorDash's tipping policy, which adds to a guaranteed cost of delivery for drivers instead of just adding to the total, its CEO said the company will change its policy.

Fee changes, especially decreases, could be troublesome for delivery providers, which have been chasing profitability. DoorDash and Postmates are expected to go public soon, which will only put more pressure on the providers to increase profits. With delivery still in high demand, it likely won't go away anytime soon, but providers will soon have to make some tough decisions over how to maintain profitability — especially if they have to pay more to maintain their restaurant relationships. Waitr, for example, posted an increase in its losses during the first half of the year and has already entered into a strategic review of its options and could enter into a sale.