D.C. is the latest jurisdiction to propose legislation that would curtail the problematic practice of third-party delivery apps like Postmates, DoorDash, and Grubhub listing restaurants on their platforms without expressed permission. California already has such a law in place, and New York is currently debating one that was introduced last month.
Ward 5 Councilmember Kenyan McDuffie introduced the “Fair Meals Delivery Emergency Declaration Resolution of 2021” last week that would require a formal agreement to be in place between delivery services and local restaurants before they can be included on their apps.
The bill, which is on the Council’s agenda for tomorrow, is both emergency and temporary legislation. That means it could take effect immediately and remain in place for at least 225 days. McDuffie tells City Paper he hasn’t ruled out pushing for it to become permanent legislation based on feedback from local restaurants.
“We’re still in a public health emergency and restaurants are still hurting and fighting to stay afloat during this pandemic and they need every possible support to continue operating, employing D.C. residents, and serving their local communities,” McDuffie says.
While regulating third-party delivery services has become more common across the country during the pandemic, restaurant owners have long complained about this particular issue. “The problems with restaurants being listed without permission has been a problem that’s plagued our industry since the start of these apps,” says Baan Siam managing partner Tom Healy. “These apps do not care about us.”
Delivery services make their money off of commission fees. It doesn’t seem advantageous, then, for a company like Grubhub to add restaurants for free. But every delivery company wants to have the largest selection of restaurants because they believe that’s what keeps diners coming back instead of straying to their competitors. They also hope that restaurants will become accustomed to the bump in sales and exposure being listed on third-party apps can bring, making them easier to convert into partners down the line.
“They do it to make sure none of their competitors have something that they don’t,” Healy says. “And they do it to absorb your market footprint.” Grubhub listed his restaurant without an agreement in place, copying both the logo and menu. Soon, Healy noticed his restaurant’s website was not the top search result—Grubhub’s listing was.
“Google is going to index Grubhub higher than our website,” Healy continues. “They start absorbing our market footprint. Once they’ve absorbed everybody, they’ve got you under their thumb. If you don’t want to partner up, they threaten to delist you from a platform that ‘everyone is used to using.’”
Grubhub tells City Paper they add restaurants to their platform so they can receive more orders and revenue from deliveries completed by their drivers. Any restaurant that wishes to be removed can email [email protected] The company asserts the practice of adding non-partnered restaurants had been used by other food delivery businesses “for years” before Grubhub followed suit about a year ago. Grubhub says 245,000 of the 300,000 restaurants on its marketplace nationwide are partnered.
The company has also told Eater , “The non-partnered model is no doubt a bad experience for diners, drivers, and restaurants. But our peers have shown growth—although not profits—using the tactic, and we believe there is a benefit to having a larger restaurant network: from finding new diners and not giving diners any reason to go elsewhere.”
“Don’t think about the short term losses that platforms will take from dealing with non-partners,” Healy says. “Think about it like Walmart. Walmart comes into a local community and starts selling all the products that locally owned stores sell. The small stores fold and go out of business and Walmart is the only thing left. These companies are thinking about long-term market absorption.”
Being listed on delivery platforms without an agreement in place comes with a whole host of problems. Restaurants lose control over how far their food travels before it reaches diners, the ability to turn delivery ordering on and off to control the volume of sales the kitchen can handle, and what menu items are available. The latter is frustrating because when a customer places an order from an outdated or incorrect menu and later learns their dish is unavailable, they may become frustrated with the restaurant, not the delivery platform.
Back in 2016, Buttercream Bakeshop co-owner Tiffany MacIsaac told City Paper Washingtonians were ordering $45 “Funfetti Celebration Cakes” via Postmates and expecting delivery within an hour when, in reality, these cakes take days of advanced notice to create.
“Of all of the things they pulled from our online store, they pulled the things we don’t have on hand,” MacIsaac said. She called the move a disservice to both her customers and Postmates customers, not to mention Postmates delivery drivers who show up hoping to pick up a cake.
The strategy may be becoming more pervasive as interest in food delivery continues to grow. The Wall Street Journal reported that as recently as September, Postmates—which is now owned by Uber—listed 700,000 restaurants on its app when only 115,000 had contracts in place at the time.
Typically, the way it works is delivery companies will pull a restaurant’s menu from the internet and post it on their online marketplace. Customers select food items through the app and then couriers place orders on their behalf. To the restaurant, it’s unclear whether the order is coming from a customer or a delivery service.
A statement from DoorDash backs this up. While the company says the majority of the restaurants on its platforms are partnered, they’ve listed restaurants on their app as “a trial test” in the past at no cost. A representative explains that orders are paid for in the same way that any other customer would. DoorDash also says it hasn’t been adding new restaurants without permission since Nov. 1.
Uber, which now owns Uber Eats and Postmates following a merger, also shared a statement reacting to McDuffie’s bill. “Expanding options on our platform is one way we have worked to ensure that restaurants are able to get additional business during this time,” it reads. “That’s because adding restaurants to [Uber] Eats gives restaurants more exposure to the wide network of Uber users—and they can opt out of the program quickly and easily, or become Uber Eats partners.” The company says it will work with McDuffie, the Restaurant Association of Metropolitan Washington, and businesses to “find the best way to serve local D.C. restaurants.”
Stripping platforms of non-partnered restaurants could be seen as a disservice to diners who appreciate variety. But if restaurants aren’t prepared to meet the demand third party apps bring and the apps aren’t listing the correct menus, who wins?
McDuffie’s bill is short and sweet. “As a matter of principle, a restaurant should know who or what platform is providing meal-delivery services for consumers who order meals from its restaurant,” it reads. “The underlying emergency would ensure that a third-party meal delivery platform must first obtain an express agreement from a restaurant to collect meal orders and deliver meals prepared by the restaurant to consumers.”
The bill does not detail how the law would be enforced if it makes it through the legislative process. McDuffie says he will work with the Department of Consumer and Regulatory Affairs to make sure there are “vigorous” enforcement measures in place.
New York’s version of the bill, for example, proposes giving delivery apps five days to remove a restaurant from their platform if they put in a request. After the five-day grace period, the state could penalize delivery services $500 per day until the restaurant disappears. This puts the onus on restaurants to make a move.
California’s bill, which became law on Jan 1., includes a retroactive component that asks delivery apps to remove non-partnered restaurants without restaurants having to take additional steps. Delivery companies must, of their own volition, remove any restaurants that they added without a contract in place. This stipulation resulted in thousands of restaurants disappearing from the platform. McDuffie says he “has not included a retroactivity component at this point.”
“Adding both components would be incredibly helpful,” Healy says. “The existing bill is a wonderful start but it needs teeth … If we do not have enforcement on this, these companies will do everything they can to subvert the rules. They’ve already done so with the fee caps. They’re not friends to restaurants.”
This story has been updated to include responses from DoorDash and Uber.