2020 was a rough year. With restrictions on in-person dining, restaurants struggling to survive pivoted to takeaway via online ordering. Third-party delivery apps were quick to position themselves as a lifeline for restaurants, helping them by outsourcing delivery and facilitating off-premise business. Many restaurants have now signed on, many are questioning the long-term cost.
Growing Discontent with Delivery Apps
Pre-pandemic there was a growing discontent with the third parties. It was not only their service model but how they conducted their business. Whether it was for charging for phone calls that never translated into actual orders, or for signing restaurants up for services they never agreed to, the third parties put pressure on local restaurants. There has also been consistent coverage of their detrimental impact on their own workers. So, pushback against delivery apps and perceived predatory practices has been growing — in courtrooms, polling booths, and within restaurants and their customer base.
How state and city governments are responding
Over the past several months, restaurants, consumers, and politicians have been protesting the common practice of charging punitive commission rates for every order. What used to be a 5 percent per order fee for restaurants in the early 2000s rose to 15 percent by 2010 and now stands closer to 30 percent for many today. City legislators around the country are stepping up to ease the burden, with New York City, Los Angeles, and others temporarily capping fees at 15 percent per order during the pandemic. Some cities, like San Francisco, are considering making those caps permanent. In addition, other states, like in California, passed a law last year that sought to force ride-share and food-delivery companies to reclassify their drivers as employees, eligible for benefits such as minimum wage, paid sick leave and unemployment assistance. All these actions have been put in motion to encourage a more harmonious relationship between the third parties that they have agreements with. But alas, it seems third parties are happy with a more acrimonious marriage.
Power – Delivery Apps Hurt Restaurants & Employees Alike
When it came to the new employee rights law that was passed in California, third parties rallied together and dug deep – around $200 million deep. They put their support behind Proposition 22, a measure that allows them to bypass a state law intended to provide employee-like protections for their drivers – and won! The effort to win popular support did lead the third parties to guarantee new protections such as provide health insurance for drivers who work 15 hours or more a week, occupational-accident insurance coverage and 30 cents for every mile driven, among other protections. Not only do these new “benefits” fall way short of those awarded to full-time employees but the third parties are not about to pay these expenses out of their own pockets – instead they have passed the cost on to the consumer. For example, as of December 14, California Uber Eats itemized receipts include a “Driver Benefits” fee, which is explained in the app as a direct consequence of Proposition 22.
Other fees include a delivery charge, which depends on location, availability and priority; a service fee that can cost as much as 15% of an order’s subtotal; and, depending on the order size, a “small order fee.” Similarly, fees they so kindly “waved” for restaurants during the pandemic, were simply deferred. Third parties retain sole authority over when their waiver period ends, and imposed mandatory one-year contracts on those who did deferred fees.
In short, while it might seem from the outset that third-party delivery sites have helped many restaurants, the industry itself, with billions of dollars, is willing to step up and fight each and every legal challenge thrown its way, crafting legislation in its favor – and from ongoing incidences, it seems they will penalize its own customers and employees along the way. As a result, more and more restaurant owners and workers have begun urging customers to order and pick up from the restaurants directly, instead of going through third-party services. As Giuseppe Badalamenti of Chicago Pizza Boss said, it’s time to “stop believing you are supporting your community by ordering from a third-party delivery company.”