Much like many restaurants amid the pandemic, Kainos Restaurant owner Jeff Scott has been taking a beating. For months, dine-in service wasn’t an option but he was able to offer take-out through third-party delivery services like Grubhub and Uber Eats.
But the fees those services charged him were so steep — sometimes as high as 30 percent of the bill — that delivery sales ended up costing him money. Faced with what he saw as an overwhelming burden, Scott severed ties with Grubhub and Uber Eats, bought a van, and began making deliveries himself.
“I cut it out because my food costs were already high,” Scott said. “I had enough.”
Monroe County Legislator Rachel Barnhart on Friday announced legislation that would cap how much third-party vendors, like Grubhub and Uber Eats and DoorDash, can charge businesses. Under the measure, delivery fees would be limited to 15 percent and fees associated with customers using their apps for takeout services to 5 percent. The companies would also be prohibited from garnishing driver’s wages to make up any difference in profit.
If passed, the legislation would last through the duration of the state-declared pandemic emergency, plus an additional 90 days after.
“The cost of doing business with these powerful apps is 30 percent for each order,” Barnhart said. “That means the restaurants are not making a lot of money per order, if any at all.”
Nearly two-thirds of restaurants across the state reported in September that they are likely to shutter by 2021 if a government relief package were not made available, according to a survey by the New York Restaurant Association.
Legislator Yversha Roman, the Democratic minority leader, said Barnhart’s proposal would help restaurants retain more of their profits.
“We decided to propose this cap so we can support small businesses, support the employees in those businesses and the business owner, so that the money is going back into the community and staying here locally,” Roman said.
Rochester would not be the first city to implement a cap on food delivery apps. New York City implemented a 20 percent cap on commission fees in May, and subsequently extended it in August to 90 days after restaurants reopen at full capacity.
San Francisco, Seattle, and Portland, Oregon, have also implemented similar caps.
Whether a cap could stem a wave of restaurant closures is unclear. But Kelly Bush, owner of the Union Tavern and Marshall Street Bar and Grill, called it a step in the right direction.
“Profits in the restaurant industry are slim to begin with,” Bush said. “When you start taking money away, it really becomes kind of pointless to be using these third-party apps. Now that we are looking at colder months ahead, people are going to be utilizing delivery and curbside pickup more, so this is a great time to have this come into play.”
When the proposal in New York City was put before the City Council, Grubhub began an online petition to end the cap. The petition referred to the capping as a “delivery tax."
“This new food delivery tax will make things worse: New Yorkers will pay more, local restaurants will receive fewer orders, and delivery workers will earn less,” the petition reads. “It’s wrong – any way you tax it.”
Barnhart said she would like to see proof of the potential harm, but has yet to see it.
“I’m looking for data, and they simply weren’t able to provide it,” Barnhart said. “Give us the evidence this legislation will somehow hurt residents and consumers.”
The legislation will be presented on Nov. 10, and requires a public hearing period. Barnhart hopes the cap could be adopted as early as December.
Gino Fanelli is a CITY staff writer. He can be reached (585) 775-9692 or gino@rochester-citynews.com.