Local Restaurants Say No to Bill Proposing Bigger Delivery Fees

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New York restaurateurs are protesting a new bill that would allow platforms like GrubHub and DoorDash to potentially charge independent eateries more — a financial hit many proprietors say leaves an especially bad taste as they try to recover from pandemic challenges. 

Bill Int 0813, sponsored by City Council Member Robert Holden of Queens and signed by 26 other city council members, would “exempt a third-party food delivery service from the cap on fees it charges to a food service establishment” if the delivery service offers the restaurant charges “consistent” with previous fee caps, giving platforms flexibility in how they bill restaurants to use their service. District 3 City Council Member Erik Bottcher is not listed as one of the bill’s co-sponsors and told W42ST: “Capping these fees kept countless beloved local eateries open and saved thousands of jobs during the pandemic. I can’t see a way to support legislation that will allow third-party delivery apps to charge our local restaurants more in fees.”

The move to increase fees for restaurants already struggling with record inflation, labor shortages and pandemic revenue deficits would be disastrous, argued NYC Hospitality Alliance Chair Andrew Rigie in a letter opposing the legislation from the alliance and 900 New York eateries. “Countless restaurants across NYC, especially small, minority and immigrant-owned businesses are still struggling to recover from the damage caused to the industry by the pandemic,” he wrote. “We cannot afford to go back to the days of exploitative, so called, shady ‘marketing fees’ from delivery companies.” 

GrubHub has countered that the new legislation makes additional fees entirely voluntary, representatives told W42ST. They emphasized that even under the potential legislation businesses would retain the option to keep their current fee structure if they chose the “Basic” marketing package. A spokesperson for the company told W42ST that “over 500 independent restaurants and community groups in New York support this common sense change to choose their own marketing decisions and better compete with big brands — while keeping the delivery fee cap firmly in place. It is encouraging that more than half of the City Council has now co-sponsored this amendment, which will empower small and locally-owned businesses – just like every other major city in the country that has modified pandemic-era restrictions.”

In Hell’s Kitchen, proprietors described the potential legislation as predatory, citing the still-fresh wounds of the early pandemic. When COVID-19 shutdowns obliterated in-person dining in March 2020, restaurants found themselves reliant on third-party delivery platforms and the fees that came with them. Fighting to stay afloat, restaurant owners raised alarm at the significant fees and frequent refunds imposed by delivery apps. In May 2020, there was respite when the City Council imposed fee caps for third-party delivery apps. But as restaurants slogged through multiple years of pandemic challenges, many owners said that platforms like GrubHub continued to act in service of their own interests without consideration for indie operations. And now, as the same fees once capped are called into question, Hell’s Kitchen restaurateurs are determined to fight back.

“I signed the letter,” said Mike Bergemann of Corner Slice, adding, “an increase in third party delivery fees would be disastrous for my restaurant.” The team at Ikebana Zen said “uncapped delivery fees are making delivery unprofitable,” warning that to survive, restaurants will have to increase their prices and customers will be “punished.” 

“The delivery companies try to hide the fee structure from people ordering online, but I think it is important that foodies understand how their delivery order cost is being divvied up,” said Corey Samuels of Kashkaval Garden. “With the current law in place, delivery companies are already skimming almost 25 percent of your order total for various fees. GrubHub pretty much has a monopoly on the app delivery market in NYC, so it’s critical this law be maintained to ensure they aren’t able to abuse their position and cripple restaurants further with higher fees. Keep in mind that restaurants would have to pass any new, higher fees on to customers in the form of higher menu prices for everyone (GrubHub forces restaurants to match online prices to in-restaurant prices).”

Jeff LaPadula from PS Kitchen argued that national delivery platforms have no allegiance to New York restaurants or the local economy. “DoorDash and Uber Eats are headquartered in San Francisco and Grubhub in Chicago, all three are publicly traded companies with shareholders all over the country and the world,” said LaPadula. “Simply put, the larger these fees are allowed to get, the more money is funneled out of NYC’s economy and away from our struggling small businesses and into the hands or large corporations that are based outside of NYC and supporting shareholders all over the world. The larger these fees are allowed to get, the more anti-New York City it is!! Period.” 

Sabrina Gao of Sesamo agreed, adding, “If these delivery services were actually bringing customers who would never otherwise have ordered from restaurants, I would have been happy to pay a marketing fee. But they use deceiving digital tactics to hijack customers who were coming to the restaurants anyway and charging a hefty fee for every single order. I am not okay with that as a small business.” Many business owners argue that third-party delivery apps keep independent restaurants on the hook by making it harder to find them online. 

And while Hell’s Kitchen has largely rebuffed the proposed bill, third-party apps have seen some support from other New York proprietors. A recent study from analysts Precision Network showed a surprisingly positive embrace of higher marketing fees from delivery platforms — 86 percent of the 334 restaurants surveyed supported the measure. Delivery platforms like GrubHub have also donated a significant share of funds to some restaurants and hosted food distributions in the wake of the COVID-19 pandemic, though some financial contributions, like the $13,000 donated by GrubHub to Eric Adams’s mayoral reelection campaign, have been viewed as shrewd strategic moves to keep third-party apps in the city’s good graces. Back in May 2022, GrubHub tried to generate goodwill with New Yorkers by offering a free lunch — which backfired when eateries and delivery workers could not keep up with demand and left customers hangry.

For some Hell’s Kitchen business owners, like Daniele Kucera from Etcetera Etcetera, the increasing delivery difficulty has stopped him from offering it altogether. “I only have pick up, [delivery] is way too expensive,” he said. “Those companies are sharks — food prices are already sky-high. I really don’t understand how all those charges are even allowed. It’s getting harder and harder to run a restaurant business in this City. Everyone, from the City agencies to the delivery companies, wants a piece of our hard-earned money.” 

Others still were optimistic that the latest legislation wouldn’t pass and eateries would live to see another day with capped fees. Said Chef Charlie Marshall from The Marshal: “I can’t imagine the City Council passing this —  and Mayor Adams, whatever one may think of him, certainly can’t be bought for a paltry $13k in campaign donations,” he said. “I imagine the lower fees will remain the status quo unless overturned by the courts, as politically it would be absolute hara-kiri for a council member to vote against local small businesses in such a transparent manner. I know I’d be personally knocking on doors for their next opponent.” 

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NOTE: This story was updated on 2/13/2023 at 5:04pm to include responses from City Council Member Erik Bottcher and GrubHub.