As a longtime civil rights leader in New York City, I’m familiar with so many equity issues in our underrepresented neighborhoods. I recently learned of one issue, however, that is affecting our brothers and sisters in the restaurant industry at this very moment and that the City Council has the power to fix—quickly.
The restaurant delivery service fee cap is hurting our smallest restaurants and should be fixed.
The pandemic mercilessly hurt all our vulnerable communities, but small restaurants and their low-wage workers may have been hurt the most. Both owners and workers suffered when restaurants were shuttered. Things improved when restaurants re-opened for outdoor dining and delivery, and now the city is finally open for indoor dining—but many places have fewer tables and are still struggling.
When times were most challenging, restaurants hastily embraced delivery by partnering with services like Grubhub, DoorDash, and Uber Eats. Many were concerned that delivery giants would overcharge desperate, community-based businesses, so the City Council acted quickly to protect them. As in many cities nationwide, the council passed an emergency law limiting delivery charges. It was intended to help small restaurants and their workers, but now we know that the fee cap backfired and actually hurt our community restaurants and their workers.
In many cities, the delivery fee cap was tiered to help small restaurants the most and ensure large, expensive, and chain restaurants did not benefit disproportionately as big companies always do. In contrast, New York City’s fee cap applied equally to all restaurants, so it didn’t boost small restaurants as it should have.
Another problem with the fee cap is that it didn’t affect only delivery fees—it also limited the amount of marketing services and support that small restaurants can buy from delivery apps. Most of us don’t realize that delivery services do much more than deliver meals. They also help small restaurants with affordable email marketing, website design, ordering software, and in-app promotions. These are most important to the smallest restaurants that cannot afford expensive advertising and agencies like chain restaurants can, and that need the pay-per-order marketing options that delivery companies offer.
Let me repeat that: Unlike other forms of marketing, restaurants don’t have to pay apps in advance or for marketing campaigns that don’t work. They only pay an app when it brings the restaurant orders and revenue.
When small restaurants’ marketing fees exceed the so-called delivery fee cap set by the council, the “delivery fee cap” becomes a “marketing fee cap” that prevents independent restaurants from reaching new customers and growing their businesses. Large restaurants don’t get hurt because they market in traditional ways through traditional agencies. I’m sure that the council did not intend to stop only our community-based businesses from spending their own money to grow their business, but that’s what happened and why the law has to be fixed.
During the pandemic, many lower-income workers were laid off or had their hours cut, so they started delivering for restaurants to make extra money, pay a few bills, and feed their families. But when delivery firms were prohibited from charging restaurants for services provided, they created “order fees” and “delivery fees” charged to consumers. Basic economics tell us that the new fees undoubtedly cause consumers to purchase less from the restaurants and reduce their tips. Here again, it’s the most vulnerable restaurants—and the delivery workers—that lose.
So often, our government works for the wealthy instead of the needy, and our laws exacerbate inequality. That makes it doubly painful when the government tries to help vulnerable communities and instead, unintentionally helps corporate-owned steakhouses and chain restaurants, some of which are the wealthiest restaurants in the country.
Local restaurants looking to grow their businesses should be able to pay for marketing services offered by third-party delivery services or anyone they choose. The council should restore small restaurants’ choices by amending the fee cap law today, and thereby help restore some equity for small restaurants and their workers.
Bertha Lewis is the founder and president of The Black Institute (TBI).