NYC could ease its 20% delivery fee cap

A new bill would allow restaurants to pay more than the current limit for things like marketing and promotions. Grubhub has aired its support for the proposal.
Grubhub bike
Grubhub said a more flexible fee cap is better for restaurants. / Photograph: Shutterstock

New York City could loosen its limits on the fees third-party delivery companies charge restaurants.

Under a bill sponsored by 17 New York City Council members, providers would be able to charge restaurants more than they’re currently allowed to for things like marketing and promotions. Restaurants could opt in to the additional fees.

The existing law caps delivery fees at 15% and all other non-transaction fees at 5%. The 15% cap would remain in place in the new proposal, but restaurants would be able to pay up to an extra 15% for better visibility in the app.

Grubhub has thrown its support behind the bill and said it has backing from independent restaurants and community groups as well.

“The City Council legislation would preserve protections on delivery fees for restaurants while also allowing them to choose expanded marketing options,” Grubhub said in a statement. “This bill will especially benefit small businesses owned by immigrants and families, which do not have access to the same marketing resources as major brands.”

Dawn Kelly, CEO of the Nourish Spot in Queens, said the ability to boost marketing will help small restaurants like hers reach more customers.

“It's not as simple as taking out an ad in the community paper anymore, and we don't have the big budgets and expert staff to run sophisticated campaigns to put our brand in front of new audiences,” she said in a statement. “That's why delivery app platforms have been such a strong business partner for my restaurant.”

But not all restaurants are on board with the idea.

“I don’t buy Grubhub’s lobbying pitch, which is essentially, ‘Let us charge small, immigrant-owned restaurants a lot more money so we can help them compete against the big chain restaurants that can afford to pay us the higher fees,’” said Andrew Rigie, executive director of the NYC Hospitality Alliance, in an email. 

New York, like many cities, put a limit on third-party delivery fees during the pandemic to help restaurants that had come to depend heavily on the service. Last August, it became one of the few jurisdictions to make the emergency measure permanent.

Grubhub and fellow providers DoorDash and Uber Eats responded with a lawsuit arguing that the cap was unconstitutional. The city’s motion to dismiss the complaint has yet to be decided. 

Now, at least a third of the city's 51-member City Council supports scaling back the law. A similar effort succeeded in San Francisco in July.

“Providing small businesses more options is good for business and good for all consumers who use third-party delivery apps like Grubhub and Uber Eats,” said bill sponsor Robert Holden during a hearing last month, according to a transcript.

New York City has some of the strictest delivery regulations in the U.S. Last year, it passed a first-of-its kind law that would force delivery providers to share more customer data with restaurants. And last month, it proposed a $23.82 hourly minimum wage for delivery drivers by 2025. 

News of the latest bill was first reported by the New York Post.

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