New Jersey residents have turned to takeout during the COVID-19 pandemic to not only get good food, but to help support the local businesses in their town. What they may not have realized: Using third-party delivery services did more to help the delivery company than the actual restaurant.
Gov. Phil Murphy, in an effort to change this, signed legislation Friday that places limits on service fees charged to restaurants by third-party delivery applications and websites during a state of emergency.
The legislation prohibits third-party food takeout and delivery service applications and websites from charging service fees greater than 20% of the cost of the individual order, or greater than 10% of the cost of the individual order when the order is delivered by an employee of the restaurant or an independent contractor with whom the restaurant has contracted directly.
The limits are in effect during a state of emergency and until the first day of the third month following any state of emergency declared by the governor in response to COVID-19 that restricts restaurant dine-in service to less than 25% of the maximum capacity allowed by law.
Primary sponsors of this legislation include state Sens. Vin Gopal (D-Ocean Twp.) and Joseph Cryan (D-Union) and Assemblywomen Annette Quijano (D-Elizabeth), Serena DiMaso (R-Holmdel) and Aura Dunn (R-Randolph).
Quijano said the bill address transparency.
“Customers have been turning to food takeout and delivery apps to simplify the process of ordering food from their favorite restaurant,” she said. “It’s likely many don’t know that the restaurant they are trying to support is actually paying an enormous fee to the app they’re ordering from.
“There’s no reason for apps to be charging outlandish fees to restaurants during the middle of a global public health emergency. Apps can be a vital tool in helping restaurants stay in business, but that won’t be the case if they are charging unreasonable fees. It’s time we put a stop to this unfair practice and ensure restaurants will only be responsible for a fair fee per order.”
“Some of these so-called service fees for food delivery are just way out of line,” he said. “Restaurants have been some of the hardest-hit businesses in the shutdown and they face an uphill struggle as we gradually reopen. For now, they are relying on takeout to try to keep their businesses alive. It is unconscionable to take advantage of this crisis by charging them inflated fees for delivery service. We need to support local businesses and work together to get through these hard times.”
DiMaso said it’s just a matter of dollars and cents in an already-strapped industry.
“It’s a margin killer for many of our Main Street businesses,” she said. “They’re keeping 32% of the order payment in a restaurant business where margins are maybe 15 or 20%.”