Regulation

NYC Wants to Make It Harder to Get a Milkshake and an Egg Roll Without Taking Off Your Jammies

Local regulators want to put a cap on Grubhub's commissions.

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Food delivery apps are bad for Manhattan's restaurant business. That's the sentiment behind a recent New York City Council push to rein in Grubhub, which some lawmakers say is taking advantage of the small dining establishments it serves.

"I would love for Grubhub to do the right thing and do more," Mark Gjonaj, chairman of the Council's small business committee, told The New York Times. "If they don't, we're going to be looking at serious legislation as we move forward that will make this a much more fair playing field."

Gjonaj is concerned about commission rates charged by delivery apps—Grubhub, Uber Eats, DoorDash, Postmates, and others—which range from 15 to 30 percent. (While some services charge a flat rate, Grubhub employs a sliding scale based on how much visibility a restaurant wants to receive.) With restaurant profit margins topping out somewhere between 3 and 6 percent, a growing chorus says those apps should charge restaurants less to connect them with customers.

Yet Grubhub, which is the largest restaurant ordering app in the country, argues that it is the lucrative bridge between restaurants and customers who wouldn't eat out if they couldn't get their food on Grubhub. A recent survey found that 67 percent of people using food delivery apps did so instead of cooking, which suggests those restaurants may not have received their business otherwise. Only 19 percent said a delivery app supplanted a restaurant visit.

Gjonaj rebuffed claims that delivery behemoths help restaurants develop loyal customers, who then come and eat in person. "As a matter of fact, many restaurant owners have said that the delivery services' orders are cannibalizing their existing customer base," he said in a letter to the New York State Liquor Authority (SLA), referencing the creeping suspicion that restaurant-goers who once enjoyed a meal out now retreat to the comfort of their own home, food in tow.

There is not enough consumer survey data to settle the question. But even if Gjonaj is right and delivery services are slowly chipping away at restaurant profit margins, is that the government's job to fix?

According to the SLA, the answer is yes. In a recent meeting agenda, it proposed making it illegal for those apps to charge more than 10 percent commission. There's one glaring problem with the plan: It would only apply to restaurants with liquor licenses, meaning that liquor-less establishments would need to apply—and pay for—a license in order to reap the benefits.

The policy is protectionist in another way, in that it sends the message that some businesses matter more than others. The New York Hospitality Alliance, for instance, threw their full weight behind the idea, writing that "the current retail environment is difficult enough without behemoth companies demanding ever-increasing percentages of small businesses' revenue in an unregulated manner." While the stance isn't surprising —the group advocates for the restaurant and bar industry—it is slightly hypocritical: the alliance previously and correctly fought against excessive wage regulation in the city.

Commission rates aren't the only scandal plaguing Grubhub. Unlike the other food delivery services, it has also come under fire for charging restaurants for phone calls made through the app that never yielded an order. The company has extended the window available for reviewing unfair charges to 120 days and is working to hone its algorithm around phone transactions, according to the Times. Restauranteurs are rightly upset about years of fees for nonexistent sales, and perhaps the issue should be litigated.

But when it comes to pricing, the New York City Council and State Liquor Authority should remember that it is not their job to determine which businesses win the long-game.

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  1. All GrubHub has to do is gin up a study by some grade school student claiming that there is a significant carbon reduction from using the app. Since one GH trip can replace many individual trips to the restaurant, there is enough savings to justify a subsidy, not a cap on commissions.
    Hell, maybe this post is proof enough – – – – –

    1. It would only be proof if you cited anonymous sources and second hand knowledge.

      1. Done.
        I don’t know the grade school kid, so he is anonymous.
        I don’t know the grade school kid, so he is a second hand source.
        Do I get a book deal now?

  2. If restaurants don’t like GrubHub’s commission rates they are free to stop allowing orders from the app, and/or employ their own delivery drivers

    1. Or to insist that their patrons drive to them and eat-in.

      I agree. The fatal flaw to this legislation is the complete absence of guns to the heads of the restaurant owners who choose to participate in GrubHub.

  3. Grub Hub’s already doing the “right thing” — delivering food to people who want it, at a price they’re willing to pay.

    Restaurants can choose not to work with Grub Hub, or start their own delivery service.

  4. “Food delivery apps are bad for Manhattan’s restaurant business”

    Someone should ask them where the fuck they think the food comes from.

  5. “As a matter of fact, many restaurant owners have said that the delivery services’ orders are cannibalizing their existing customer base,”

    So is this dumbass, and by extension the dumbasses he claims to be speaking for, saying that if customers won’t go to a restaurant to eat then the restaurant doesn’t want the customers at all? Because that’s really stupid.

    1. I guess the assumption is that they can “twiddle the knobs” like various prices with no effect on the demand or supply. Statist “experts” and the special interest groups that hire them tend to think in these sorts of primitive, static ways.

  6. “”As a matter of fact, many restaurant owners have said that the delivery services’ orders are cannibalizing their existing customer base,”

    They’re “cannibalizing their existing customer base” by… being customers?

    1. Dine in probably offers much higher profitability, if you are already paying for the square footage of the dining room.

      You have upsell opportunities.. appetizer, desert…. and most of all, alcoholic beverages. That stuff probably makes up half of the profit.

      1. Exactly. That’s why the bill is limited to restaurants with liquor licenses.

        1. Actually, it’s limited to restaurants with liquor licenses because that’s the only regulatory mechanism they have to be able to slip a provision like this one in.

    2. By being customers paying 70% of the normal price

    3. Grub Hub is the product of white supremacy. It enables racism. Since segregation white consumers have struggled with eating at their favorite restaurants due to the haunting knowledge that they may have to be seated next to Negroes. Grub Hub comes along and they can once again enjoy the favorable tastes of such establishments while keeping their distance from minorities, but at the cost of the eating establishment.

      If I was the restaurant industry I’d be pushing that from fake accounts on tumblr and twitter.

      1. Sounds like a research paper just waiting to rack up citations to me.

  7. Why is Michael Moore driving for GrubHub?

  8. Granite City? A Midwest chain on a New York story.. tsk tsk

    1. What struck me about that photo was the driver doesn’t look like a New Yorker. Then I remembered Grubhub is Chicago based and it all made sense. (da Bears)

  9. i don’t want that guy bringing my food

    1. He will only taste test some of it, the deep-fried things that you shouldn’t be eating anyway

  10. Too successful for their own good, aren’t they now?

    As a lifelong resident of New York City, I submit that there is scarcely a thriving industry in these illustrious boroughs that is not eventually (perhaps, inevitably) targeted for punitive taxation and/or regulation once it starts making what the Organs determine to be “too much” money – well, that is, too much without paying a sufficient enough cut.

    Due to the overwhelming body of regulations governing virtually every detail of every business enterprise imaginable, every industry participant has a lobbying firm, and a plethora of “concerned citizens groups” on retainer (oftentimes little more than creations of the lobbying firm itself) to drum up a political controversy when required. If somebody steps out of bounds, outside of the scope of existing regulations – well, the City puts them back in bounds, and creates new regulations, all in the name of “fairness,” of course.

    Ultimately, the goal is to keep the industry participants fighting against one another, striving to wipe each other out so as to maintain their meager shares among a saturated market, while the City and its unimpeachable guardians skim from the top.

    Everybody pays for their protection, even if it means taking out someone else. Like a prison where the warden redirects the simmering discontent among the inmate population upon the inmates themselves – by creating black markets and leveraging internal power struggles – the Organs hover overhead, smiling from the gangway, laughing at the slaughters taking place below. Their pockets are always full; everyone is happy.

  11. “NYC Wants to Make It Harder to Get a Milkshake and an Egg Roll Without Taking Off Your Jammies.”

    1. What the fuck…?
    2. I’d like to buy some of the stuff these regulators were smoking when they made this rule.
    3. Isn’t living in the Big Apple wonderful? It’s just chock full of nanny state assholes micromanaging your meaningless life.

    1. new york’s alright if you like saxophones.

    2. They just want you to take off your jammies when you get a grubhub delivery.

  12. bunch of whiners — don’t use if you don’t like.. stupid

  13. If food apps are “cannibalizing” the restaurant business, why on Earth would you want to force them to lower their prices? Basic economics teaches that a lower price increases demand for a product.

    Perhaps the goal is to drive the food delivery apps out of business by destroying their profit margins. But if that is the goal, why limit the law to restaurants with liquor licenses?

    Not only is this law blatant protectionism, but it also makes no sense.

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