Third-Party Delivery Regulation

The NYC Hospitality Alliance led the fight for to regulate third-party delivery companies and create a fairer and more equitable marketplace for our city’s restaurants with the most supportive reform in industry anywhere in the country. These reforms include:

Permanent Fee Cap

This now permanent law caps third-party delivery company fees at 5% for listing and marketing a restaurant on their platform, and an additional 15% for conducting the physical delivery of food and beverage. Additionally, the amount of the credit card fee may be passed through to the restaurant. This leg

islation is so important because third-party platforms were using their immense leverage and their market share over local restaurants to extract fees sometimes exceeding 30% of each order processed, while using other sophisticated techniques to keep restaurants on their platforms, increase fees and engage in other exploitative practices. 

Extended Prohibition of Bogus Phone Fees

This law extends the prohibition and penalties on third-party delivery companies if they charge restaurants bogus fees for phone call orders from customer that do not result in an order placed. This law is important because some third party companies have a well-documented history of charging restaurants bogus fees when customers call one of the secondary phone numbers they create for them but do not place an order.

Phone Number Listing Transparency

This law requires third-party delivery companies to list a restaurant’s direct phone number wherever they list a restaurant’s phone number. If they create a secondary phone number for the restaurant, they must disclose that it’s not a direct number to the restaurant and explain any fees associated with using the secondary number and if they are imposed on the restaurant or caller. This legislation is important because third-party delivery companies create secondary phone numbers they control for restaurants and then they will collect a fee for the orders placed via that number. Then they use their vast financial resources and technical expertise to promote those secondary numbers ahead of the restaurants own phone number for which the restaurant would not pay a fee for the order. Even customers that aim to call direct to save a restaurant a fee get confused and call the wrong number. Secondary numbers also result in bogus fees being charged to restaurants. This bill provides transparency to the customer to help them order direct when they want, while making them aware of any associated fees incurred to them or the restaurant.

Prohibit Listing Restaurants Without Approval

This law requires third-party delivery companies from listing restaurants on their platforms without their approval. It will require third-party delivery companies to obtain a written agreement with a restaurant before listing them on their platform. This legislation is important because some third-party platforms list restaurants on their sites without permission, which results in them posting out-of-date menus with items no longer offered by the restaurants, list the incorrect price, out of stoc. k items, items offered for in-restaurant dining only and not delivery, and in cases have listed menus from the wrong restaurants or those that don’t even offer delivery. This misleads and hurts consumers and is hugely problematic because when an order is incorrect, the customer inevitably blames the restaurant, which inadvertently tarnishes their reputation and can cause bad reviews and loss of future customers.

Customer Data

This law requires third-party delivery companies to provide restaurants, upon request, with all customer data of people who order from their restaurants through such platforms. Data includes email address and order history. The customer data must be provided in a machine-readable format, disaggregated by customer, on an at least monthly basis. Restaurants may use this data for their own marketing outside the third-party website, however, they may not the sell data to another party. The customer will have the option to opt out of the data share and request and receive deletion of their data from a restaurant. This legislation will allow restaurants to better own and manage their customer relationships while driving profitable direct delivery and on-premises dining business. Importantly, it will reduce the leverage huge third-party delivery companies have over restaurants when they do not share with restaurants their own customer data. This allows them to be gatekeepers and ensure orders are driven through their channels where they extract hefty fees, especially when it’s not incremental business the third-party delivery company is generating. By not sharing data, it makes it difficult for restaurants to leave third-party delivery platforms because then they lose access to their customers, and then the platforms continue to use their customer data to promote competitor restaurants that stay on their platform. The legislation empowers restaurants to leave exploitative platforms if they choose because they will now have access to their customer data and can market to them directly.

Due to a lawsuit filed by Grubhub, DoorDash and Uber to overturn this law, the Customer Data law has not yet taken effect.