Technology has opened new ways for people to order food from restaurants. Apps like UberEats, DoorDash, GrubHub and Seamless are a few of the many that act as the middle man between the restaurant and consumers looking for food delivery. Their growth has been amazing. For example, in 2018, GrubHub reported that it connected 95,000 takeout restaurants to its app service in more than 1,700 U.S. cities and London alone.
These tech companies typically enter into an agreement with each restaurant they serve. They earn revenue by taking a commission on orders after a hired driver delivers the food. In addition, some charge a delivery fee that the customer pays on top of the cost of the food. In some cases, restaurants use the app services in place of hiring a delivery person which can be a benefit for small businesses that sometimes struggle to fill these positions. While the app services are mostly available in cities, they are making inroads in smaller communities and are helping restaurants expand their customer base.
While the growth of this technology has been beneficial for both restaurants and consumers, as is too often the case, the state is inserting itself into the relationship. For reasons that are unclear, this summer, the State Liquor Authority introduced a draft rule that would require any delivery service that does not charge a flat fee on delivery or that charges more than a 10% commission to be listed on the restaurant’s liquor license as a partner. As anyone who has ever attempted to obtain a liquor license knows, the process is cumbersome and expensive, and in the end, the proposed change opens up more liability concerns for both the third party delivery service and the restaurant. Because of the onerous requirement to be added to the liquor license and increased liability concerns, it is unlikely that either kind of business would undertake the process.
Both restaurants and delivery services have petitioned the State Liquor Authority to reconsider their proposed rules. Restaurants in New York already struggle under the weight of regulation and all businesses are still adjusting to the increased state-mandated minimum wage. With government requiring the liquor license include the third-party delivery companies, we would force restaurants to choose between a liquor license and a delivery service. By so doing, we run the risk of destroying the expansion of the use of these apps and stifling innovation.
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