A restaurant technology supplier is lobbying government officials to do more to regulate the practices of third-party delivery companies, and proposed a new solution for how they might do it.
In a letter Thursday to mayors of the 50 largest U.S. cities, Zach Goldstein, CEO of Thanx, urges the leaders to consider permanent caps on third-party delivery fees—with an exception for companies that give restaurants access to customer data.
Thanx provides customer engagement, mobile app and online ordering services for restaurants.
The letter adds to growing calls from restaurants and government officials to limit the power of third-party delivery companies, which have seen business boom during the pandemic while many restaurants have struggled. Last month, three members of the U.S. House of Representatives asked the Federal Trade Commission to investigate delivery companies for noncompetitive and deceptive practices. Days later, California banned delivery companies from adding restaurants to their platforms without their consent.
In his letter, which also addresses the U.S. representatives, Goldstein says third-party delivery companies are a “threat” to restaurants, which must pay delivery commissions that can run as high as 30% per order. He says restaurants face the “impossible choice” between avoiding third-party marketplaces and the revenue they provide, or participating and paying high fees without access to customer data.
He asks the mayors to permanently cap the fees charged by delivery services at 15%. But he proposes that delivery services willing to share customer data with restaurants be exempt from the cap.
About a dozen cities have capped delivery commissions, including New York, Los Angeles, San Francisco and Philadelphia. While restaurants support the limits, typically ranging from 15% to 20%, delivery companies have warned they will lead to higher prices for consumers and reduced services for restaurants.
Allowing delivery companies to avoid the caps by sharing data would level the playing field for restaurants to drive those customers to their own ordering channels, Goldstein wrote in a blog post.
“With access to the contact information (e.g. email) of every consumer who places an order (just as Amazon and Doordash gets from every digital purchase), restaurants will be able to build long-term relationships with their customers, regardless of the channel through which a purchase was made,” he wrote.
“Many will still fail and lose customers to the [third-party delivery companies] because they are ineffective in building long-term customer loyalty. But it will no longer be due to structurally-unbalanced dynamics; the free markets will be working again.”
Andrew Rigie, executive director of the NYC Hospitality Alliance, which represents restaurants in the city, said that data-sharing should be required.
“Zach is spot on that we need to permanently cap third-party delivery fees, and I’d add that we need to require that restaurants also retain ownership of their customer data,” he said in an email.
DoorDash, Grubhub and other delivery companies do offer online ordering services that give restaurants access to that data.
“DoorDash is focused on supporting restaurants by offering a range of products and services to meet their unique needs, including Storefront, which enables restaurants to control the customer experience and manage customer information with 0% commission,” a spokeswoman said in an email.
Grubhub had not responded to a request for comment as of publication time; a representative from Uber Eats said the company was reviewing Goldstein’s letter.
Members help make our journalism possible. Become a Restaurant Business member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.