NYC gives restaurants breaks on rents while capping delivery fees

Personal liability was waived for lease defaults, and sidewalk fees were suspended.
Photograph: Shutterstock

The fees charged to restaurants by third-party delivery services will be capped at 20% of an order’s total starting next Tuesday under a bill signed into law today by Mayor Bill de Blasio.

The mayor also OK'd fining the services $500 for every instance where a restaurant is charged for consumer information calls that do not result in a delivery order being placed.

The measures were simultaneously enacted by de Blasio to help restaurants survive the COVID-19 pandemic. The mayor also waived operators’ personal liability for rent their businesses were unable to pay after dine-in service was suspended, and temporarily dropped the fees for using public space for café-style sidewalk seating, enclosed or open.

All of the legislation had been passed weeks ago by the City Council after intense lobbying from the New York City Hospitality Alliance and other restaurant-industry groups. The city has been particularly hard hit by coronavirus, with among the highest infection rates and death totals in the nation. Because of the continuing health risks, local and state officials have indicated that dine-in service is not likely to be reinstated for weeks, leaving restaurants dependent on takeout and delivery.

“Today, New York City took a monumental step towards protecting locally owned restaurants struggling to stay afloat during the global COVID-19 pandemic,” Council Member and Small Business Committee Chairman Mark Gjonaj said in a statement. “There is no question that this package of third-party food delivery reform laws will save jobs and the locally owned businesses that make our city and neighborhoods special.”

Hospitality Alliance Executive Director Andrew Rigie called the actions “a glimmer of hope to thousands of restaurants across the five boroughs.”

The cap on commissions—a 15% limit on the actual commission, with a 5% ceiling on marketing or other charges—will extend for 90 days past the date de Blasio lifts New York’s state of emergency. The Hospitality Alliance said will seek legislation to make the cap permanent.

New York is one of several cities that have or are looking to cap the commission rates charged by third-party services. The fees typically range from 10% to 40%. Similar ceilings have already been set in Seattle and San Francisco.

The discontinuation of personal liability for lease defaults begins immediately.  The provision covers defaults that fall between March 7 and Sept. 30 of this year.

Charges for sidewalk seating, known locally as franchise fees, will be waived for open areas until March 1, 2021. The fees will apply to enclosed areas as soon as the city’s state of emergency is lifted.

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