Delivery services represent one of the most significant growth areas for the technology and restaurant industries. A recent National Restaurant Association (“NRA”) survey conducted during the COVID-19 pandemic reveals over 70% of consumers surveyed ordered meals for takeout or delivery from their favorite restaurants during the pandemic and over 40% used third party delivery services to obtain those meals. DoorDash currently has 47% of the food delivery market, followed by Uber and Grubhub, and with the continuing impact of COVID-19 on restaurant operations, there are no signs of decreased demand. Consistent with consumer demand for no-contact delivery, restaurants, and delivery companies are also implementing technological innovations to provide customers food in an efficient, fast and protective manner including testing and integration of delivery via drone (by Domino’s and Zomato, internationally) and via robot (by Doordash, Starship Technologies and Eat24, a subsidiary of Grubhub).
But there has been significant tension between restaurant companies and delivery companies. Primarily this tension exists because delivery companies charge delivery fees and commissions that eat into and can eliminate any restaurant profit on a delivery order. To combat the effect of delivery fees on restaurant profit, many restaurant companies have created internal delivery arrangements with outsourced couriers, charging customers a delivery fee or increasing menu prices in order to maintain at least their most loyal customers. Some state laws impose a cap on delivery fees that delivery companies can charge. Many restaurants are pushing the desirability of curbside pick-up services to combat the debilitating impact of delivery fees on restaurant profit. Other tensions arise out of restaurant companies’ insufficient insight into their customers’ experience with the delivery service, such as the inability to promptly deal with customer complaints and difficulties in monitoring the delivery company’s compliance with quality assurance standards for food products and services.
Recently the NRA took meaningful steps to lessen those tensions. As a result of a collaborative effort between the NRA and third-party delivery companies such as DoorDash, Grubhub, Postmates, and Uber, the NRA recently issued principles intended to guide relationships between restaurants and third-party delivery companies. These principles are summarized below.
· Restaurants have the right to know and determine when and if food is delivered. This means whether there is a contract or not between the restaurant and the delivery company, the delivery company should have the legal right to list the restaurant and accurately present its current menu and pricing.
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· Customers should expect to have the same degree of food safety from delivery companies as they do for dine-in restaurants. Delivery company drivers should have knowledge of basic food safety principles including personal hygiene, forms of contamination, time and temperature abuse, and cleaning and sanitizing.
· Restaurants should be able to offer customers alcohol through delivery companies in a safe and legal manner.
· Restaurants deserve transparency of fees (including commissions, delivery fees, and promotional fees) charged by delivery companies.
· Contracts between delivery companies and restaurants should be transparent and clear regarding issues surrounding fees, costs, terms, policies, marketing practices involving a restaurant and its likeness, insurance, and indemnification obligations.
· Sales tax responsibility should be clear in terms of who is responsible for collecting and remitting the specific sales tax to the appropriate tax authority.
· As a matter of best practice, the delivery companies should offer restaurants access to anonymized information about orders from their restaurants that originate on third-party platforms. At a high level, restaurants should be able to see orders, know when and where customers placed their orders, know the origination of the orders (e.g., third party app), know whether the order is tied to a promotion, average delivery time, and know whether the customer is new or a repeat customer. Importantly, restaurants should be able to see and respond to customer complaints, feedback, and reviews.
In an NRA survey, over 90% of survey takers supported these principles. Restaurant and delivery companies and their legal counsel will hopefully take note of these principles and use them as a baseline for future negotiations.