NY Liquor Authority adopts new rules on food delivery fees

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Two years after threatening to crack down on food delivery companies like Grubhub and Uber Eats, the New York Liquor Authority has delivered a ruling that has both restauranteurs and delivery companies hopping mad.

The on Wednesday adopted new rules that will require New York restaurants with a liquor license to add up all the fees a delivery company charges them each year to ensure the they don’t exceed 10 percent of the restaurant’s annual revenue. 

If the fees exceed 10 percent of the restaurant’s annual revenues, the delivery company will need to be added to the restaurant’s liquor license.

The SLA adopted the new rules to address concerns that food delivery apps like Grubhub, Uber Eats and Doordash may be violating long-standing rules prohibiting businesses with a liquor license from sharing their profits or revenues with anyone not already on that license.

The only exception to this rule has been for landlords, who are allowed to take up to 10 percent of a restaurant’s or bar’s profits.

The issue came to a head in 2019 when the regulatory agency held hearings on food delivery app fees that ranged from 15 percent to 30 percent of each order, raising questions about whether these companies are violating the SLA’s rules.

Many restaurateurs expected the agency to resolve the issue by capping fees at 10 percent of each order, akin to the exception made for landlords. Alternatively, the SLA might have ordered food delivery apps to adapt a flat fee for NY restaurants with a liquor licence.

“Under our view of the law, they shouldn’t be charging anything, percentage-wise,” SLA chairman Vincent Bradley said in Oct. 2019. “They can charge a flat fee, whatever they want, whatever the market will bear. But they shouldn’t be taking a percentage of profits, revenues, whatever the case may be.”

Neither the delivery companies or the restaurants are happy now.

Restaurateurs are concerned that the new rules just creates more work for them by forcing them to calculate the sometimes inscrutable fees they pay food delivery companies for everything from delivery to marketing to assistance with orders.

At least one restaurateur said he would drop his liquor license if he had to choose between it and maintaining his relationship with his principal delivery company, GrubHub.

“Why would they want to go on my license and assume that liability,” said Andrew Schnipper, co-owner of burger joint Schnipper’s. “I’m not even sure I’d want that.”

The delivery companies are also objecting to the change, saying small businesses will now “be forced to decide between forgoing their liquor license or not partnering with delivery apps that provide a valuable service by helping to reach a much broader customer base,” according to a letter from Amy Healy, head of government relations for GrubHub, who also claimed the SLA is overstepping it’s authority.

The SLA, for its part, pointed to its existing rule allowing landlords to share in a restaurant’s revenues — without being listed on its liquor license — as long as the landlord’s take does not exceed 10 percent of the restaurant’s revenues.

But restaurants wanted more, said Andrew Rigie, executive director of the NYC Hospitality Alliance. “We believe third party delivery companies should not be able to take more than 10 percent of a single order.”

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