Since we’ve all been staying home for some time now, there’s no doubt that there has been an uptick in locals ordering delivery. Although restaurants are closed for physical business, many remain open for takeout and delivery to keep locals feed and keep the business running. Of course, with this comes a whole new set of challenges when third-party delivery apps such as Grubhub and UberEats are involved, charging restaurants a hefty fee when delivering food — as much as 30%, which is coming directly from restaurants’ pockets.
The Details
Back in May 2020, The Hoboken City Council was expected to introduce an ordinance Wednesday, May 13th, 2020 that would prevent third-party food delivery apps from charging restaurants and eateries more than 10% of a delivery order. Essentially, the City was looking to lend restaurants a helping hand during this challenging time, as many rely on these third-party services to stay in business and get orders out during the current global pandemic.
At the time, delivery apps are allowed to charge restaurants as much as 30% of an order. For financially vulnerable businesses, that’s a huge chunk of change.
Just that week, Jersey City Mayor Steven Fulop signed an executive order regarding the matter, saying via Twitter, “Nobody knows what the future holds for restaurants but we need to help them during this #coronavirus transition and not allow tech delivery services to exploit the restaurant industry’s vulnerabilities. Let’s find a fair balance until we have more clarity.”
The order allows the law to take effect immediately, rather than in 30 days after City Council approval.
“For all their hard work to stay afloat and achieve profitability, these third-party fees are hindering local restaurants’ chances of survival which is simply unfair and unethical amid this health and economic crisis,” Fulop said in a statement.
“Many of the restaurants have had to make a shift to relying solely on delivery and takeout under the circumstances, and this cap is our latest effort to identify any available options to provide relief to our local businesses.”
This order would only be in place during states of emergencies {local, state, and federal}.
The Hoboken Update, as of February 2021
On February 8th, Mayor Bhalla signed legislation into law adopting a cap on third-party food delivery fees, in an effort to support small businesses. The new regulations, approved by the City Council, place limits on the fees third party delivery services and websites can impose on restaurants during the current State of Emergency. Mayor Bhalla and the City Council adopted the new legislation due to the previous state-wide regulations on third-party food delivery fees have expired.
As of February 23, and throughout the duration of the current COVID-19 State of Emergency, any third-party food takeout and delivery service application or website will be prohibited from charging a fee to a restaurant for take-out or delivery service greater than:
- 15% of the cost of the individual order; or,
- 5% of the cost of the individual order when the order is delivered by an employee of the restaurant or an independent contractor with whom the restaurant has contracted directly
“Our business owners should have the peace of mind that they won’t be stuck with exorbitant delivery fees at a time when they’re struggling to make ends meet,” said Mayor Ravi S. Bhalla. “This legislation will help our businesses keep as much revenue as possible to pay employees, pay rent, and more. My administration has been in touch with GrubHub which has pledged to comply with our ordinance, and I thank them for their cooperation. I am confident all third-party delivery services will do so as well.”
“Restaurants and cafes have struggled to stay afloat since the onset of the pandemic, and now more than ever they need all available resources to keep their doors open,” said Councilman Mike DeFusco. “This is an important piece of legislation that the administration should have acted on when it was first proposed nine months ago instead of taking a backseat on an issue that would have benefited the very businesses that make our city so special. I’m glad the City Council finally adopted this law and that Mayor Bhalla is supportive of these fair regulations that give the hospitality industry a fighting chance, especially during these cold months.”
“Hoboken’s restaurants, cafes, and eateries contribute greatly to the overall charm of our city and their absence following the pandemic would greatly impact our community,” said Council Vice President Jen Giattino. “Regulating the commission fees app-based delivery companies can charge small businesses will help them generate additional revenue to pay their bills, their employees and continue serving the residents of Hoboken for years to come.”
The Response by 3rd Party Apps, Specifically Uber Eats to Jersey City’s Executive Order
Uber Eats spokesperson shared with NJ.com at the time of the Jersey City Executive Order that a 10% commission charge wouldn’t be enough to cover fair pay for delivery people.
“This was a tough decision, and we know it will impact customers and restaurants in Jersey City,” Hartfield said to the outlet. “The fee will only apply to Jersey City restaurants, so customers in Jersey City can still order from surrounding areas to avoid the additional cost.”
The Backstory in Hoboken
The Jersey City proposal came just a week after a similar proposal was introduced in Hoboken by two councilmembers.
Councilman Mike DeFusco and council president Jen Giattino proposed the new legislation at the time that would “lower the commission that third-party delivery companies can collect from local restaurants,”. “This will cap the commission collected by third party delivery companies, such as GrubHub and UberEats, at 10% during a declared State of Emergency. Currently, companies are able to charge small businesses anywhere from 15-30% of each order value. The legislation also prohibits the corporation from reducing the compensation of its delivery drivers,” Defusco’s team said in a press release.
In an email to Hoboken Girl back in May, the mayor’s Chief of Staff Vijay Chaudhuri responded to an inquiry about the situation, saying, “Mayor Bhalla is 100% supportive of any legislation that the City can legally enforce, that reduces unnecessary costs and overhead for our small businesses, which need our help more than ever,” noting that the mayor felt that this type of regulation on third party applications should not just be enacted at the local level.
“[It] should be a regional regulation that is adopted by the entire State of New Jersey. Ensuring that there is a state-wide, coordinated approach on third party applications will ensure that no community or small businesses are impacted with unintended consequences, and asks that our state legislators and Governor Murphy consider this as soon as possible to provide state-wide relief.”
