Cities Battle Food Apps Over Delivery Fees

May 14, 2020
Originally published on May 14, 2020 7:07 pm
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During this pandemic, many people have turned to apps like Grubhub and Uber Eats for meals from favorite spots. But restaurants say these apps take a big bite out of their sales. So New York City passed a bill yesterday limiting the fees these food delivery apps are charging restaurants. New York is following the lead of other cities, from Seattle to Washington, D.C. NPR's tech reporter Bobby Allyn reports.

BOBBY ALLYN, BYLINE: If you want to know why so many restaurants complain about food delivery apps, talk to Anil Bathwal. He runs the Kati Roll kitchen in New York. Say you pulled up one of the apps and ordered two kati rolls, and the total came to $12.

ANIL BATHWAL: We pay about 17%, so that would be about - close to $2. So for a $12 order, $10 is what you see.

ALLYN: But Bathwal says that's not the only cut food delivery apps take.

BATHWAL: Out of that, you have to pay your share of delivery. So by the time that happens, you're probably seeing about $7, $8.

ALLYN: When food app orders were just a slice of a restaurant's revenue, the app commissions were more manageable. But the pandemic has changed that.

BATHWAL: That's the only game right now. There's no other way for people to get business because of the lockdown.

ALLYN: In a bid to help restaurants, cities are passing caps on how much the food apps can charge to deliver food. New York City Council this week passed a 20% cap. Councilman Mark Gjonaj sponsored the bill. He says the food apps have allowed restaurants to stay on life support, but it's not sustainable.

MARK GJONAJ: Without them, it's an instant death. With them, it's a slow death.

ALLYN: Grubhub, Uber Eats, DoorDash and Postmates all say they oppose commission caps. They say it's expensive to pay drivers, invest in technology, process credit card payments and promote restaurants on the app. And Grubhub says the best marketing plans cost more and make it really easy for customers to find the restaurants.

GREGORY FRANK: This perception that Grubhub is offering a marketing service and bringing new consumers to the restaurant is a little bit deceptive.

ALLYN: That's lawyer Gregory Frank. He's accusing food delivery apps of ripping off both customers and restaurants. He's filed a lawsuit against the apps. He says the apps don't allow restaurants to charge delivery customers more than people who dine in, even though delivery cost more. That means restaurants' already thin margins have gotten even thinner.

FRANK: It used to be only a very small percentage of the restaurant's business was in delivery. But now that all the restaurant's business is in delivery, we're learning that it just - they lose money on every sale because it's not enough to cover their overhead.

ALLYN: Even with their fees, none of the major food apps are turning a profit. They say that shows they're connecting restaurants with customers as cheaply as they can. With or without food delivery apps, some restaurants will never come back after the pandemic. The National Restaurant Association says 4 in 10 have already closed their doors, some for good.

Bobby Allyn, NPR News, San Francisco.

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