After an impossible year, New York City bars and restaurants are booming again. Finnegan’s Wake is full. Pastis is packed. The Mayor’s Office reports that the return of New York City’s nightlife is fully underway.
So why is the City Council planning to keep in place pandemic-era restrictions that raise the cost of food delivery?
During the pandemic it made sense. To help the city’s restaurants last year, New York put a food delivery commission cap in place, passing on some of the cost of delivery to consumers rather than the struggling restaurant industry. Delivery services like Seamless, Grubhub and DoorDash could charge no more than 20% per order, and no more than an additional 5% for marketing and other costs.
The lifeline helped save New York City’s restaurant scene. Despite even more dire predictions, only about 1,000 of the city’s 20,000 restaurants were forced to close permanently.
Meanwhile, customers, delivery drivers and food delivery companies picked up the tab. On a typical food order of $24, it costs an additional $13 to pay for drivers, management of driver networks, background checks, and credit card processing fees.
With commission caps that limit the ability of delivery apps to share these costs with restaurants, much of the additional expense is passed on to consumers. Those higher prices then create a domino effect, lowering demand from diners and hurting the same restaurants that commission caps were meant to protect. And fewer orders mean lower wages for drivers and lower taxes collected for the city.
The war on delivery services has obscured the lifesaving role those services provided to restaurants and families during the worst of the pandemic. Altogether, some 80,000 food delivery drivers, many of whom are Black and Latino and immigrants, delivered food in 2020 in New York City last year. And, according to research by Uber, more than 80% of restaurant managers reported that delivery services kept them from having to lay off staff members or cut hours. For customers with underlying health conditions or those in at-risk groups, food delivery services weren’t so much an option as a necessity.
Yet despite the damage done by delivery commission caps, the New York City Council is considering whether to permanently extend the policy. While it makes sense to continue supporting restaurants during the first phase of reopening, permanently extending these caps is the wrong approach, ignoring the consequences of the fee cap so far.
There are better options for supporting New York City’s restaurant industry. Lawmakers in Albany should once again allow to-go drinks and alcohol delivery in New York, a policy that benefited restaurants and customers alike. And while the city and state recently extended New York’s outdoor dining program, al fresco restaurant spaces continue to face some political uncertainty going forward. New York’s next mayor should throw their support behind the Open Restaurants program.
Restaurants, customers and delivery workers are each trying to find their balance after the pandemic, and New York has a chance to reimagine how it can support both the restaurant industry and families that rely on delivery. Rather than keeping the hospitality industry on crutches, it’s time for diners, drivers and restaurants to take their first steps together in a newly reopened city.
Kovacevich is CEO and founder of the Chamber of Progress (progresschamber.org), a center-left tech industry policy coalition.
