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Massachusetts Legislature Implements Fee Caps for Third-Party Delivery Apps Like Grubhub and DoorDash

Fee caps will be set at 15 percent and remain in place for the duration of the pandemic, pending Gov. Baker’s signature

A stock photograph of a bicycle holding two red Grubhub food delivery insulated bags
The state legislature just implemented fee caps for third-party delivery apps

The Massachusetts legislature struck a deal in the early hours of the morning on January 6 in the form of a $626 million economic development bill. The bill, which is a compromise between the House and the Senate and came together after five months of back and forth discussions between the two bodies, is meant to help stimulate the state’s flagging economy and has big implications for restaurants and third-party delivery apps.

Crucially, the bill sets up a $20 million fund to support struggling restaurants, which will be paid out in grants, though it is unclear at the moment if restaurant operators will be required to pay them back. Details surrounding the application process, including the amount of aid individual restaurants can apply for, are also unclear at the moment.

The bill states that grants can be used to pay for a variety of operating costs, including capital projects, equipment purchased to help enforce social distancing protocols (non-porous table dividers, PPE, etc.), employee payroll and benefits costs, mortgage interest, rent, utilities, and interest on other debts.

The grant program will be administered by the state’s Executive Office of Housing and Economic Development, and will prioritize “independently owned and operated restaurants, seasonal restaurants and geographic equity,” as well as “socially or economically disadvantaged businesses, which may include, but shall not be limited to, minority owned, women owned, veteran owned, and immigrant owned small businesses,” per the language of the bill.

Along with the grant program, the legislature also voted to approve a 15-percent fee cap for what third-party delivery companies like Grubhub, DoorDash, and Uber Eats can charge restaurants. Legislatures in Chicago, New York City, Portland (OR), San Francisco, and Seattle have all passed similar fee caps on third-party delivery companies. (Third-party delivery apps haven’t always been happy — or willing to comply — with the fee caps. See: here, here, and here, etc., etc., etc.)

Restaurant advocacy groups like Massachusetts Restaurants United (MRU) have been calling for these kind of fee caps since the pandemic began, but the City of Boston and the state legislature have been gridlocked until now, costing the state’s restaurants untold amounts of cash — cash that could have been used to buttress against the difficult economic realities presented by the pandemic.

The fee caps will remain in place for as long as the pandemic persists and will not apply to restaurants with more than 20 locations — chains like Applebee’s or the Ninety Nine, for example.

“These unprecedented wins for local restaurants were only possible because of unwavering support from legislative leaders and a broad coalition of restaurants, customers, mayors and local leaders from every part of Massachusetts,” said a spokesperson for MRU in a statement. “This is a heartbreaking time for so many cherished local restaurants and the chefs, suppliers, workers, and families that continue to struggle. We know that this bill carries new hope and opportunity. We thank all those who came together to secure this unprecedented support in our hour of need. MRU will keep fighting until our businesses and our workforce are back on their feet.”

Representatives from third-party delivery apps were less thrilled about the news.

“DoorDash has always supported restaurants,” said a spokesperson with the delivery company via email. “Unfortunately, pricing regulations such as those proposed by the Massachusetts Legislature could cause us to increase costs for customers, which could lead to fewer orders for local restaurants and fewer earning opportunities for Dashers. We hope that Governor [Charlie] Baker will take a closer look at the bill to fully understand the harmful impact of pricing regulations on the services we provide for our community, and are eager to continue working together towards a solution that better supports local businesses. We remain committed to supporting our restaurant partners and delivery workers during this critical time.”

A spokesperson for Grubhub told Eater via email that fee caps are “well-intended” but “counterproductive at a time when restaurants need more support, visibility and order volume than ever. The caps impact how many orders restaurants receive, which drives down pay for drivers by reducing the number of deliveries available. Caps also increase costs for diners and disrupt an essential supply chain of meals.” The spokesperson said that Grubhub believes fee caps will “do the opposite of what this bill is intended to [do], costing Massachusetts valuable jobs, tax revenues and important economic activity.”

(These statements come just months after third-party delivery apps such as Uber and DoorDash poured nearly a quarter-billion dollars into a ballot measure in last year’s California election to deny those same drivers vital employment protections, and to instead continue to classify them as independent contractors. Grubhub was not a part of the cohort that funded the ballot measure, though its drivers say consequences of the legislation have negatively impacted their tips.)

Bessie King, who owns Villa Mexico Cafe with her mother Julie, said in a statement provided by MRU that they were never able to offer delivery via third-party apps because of the “exorbitant margins they took from our business. Now, with a fair and truly competitive fee, there is a glimmer of hope after an excruciatingly long, dark time. Now, my mom and I won’t have to make deliveries ourselves. This really gives businesses like ours and other minority-owned restaurants a shot at survival.”

Massachusetts Restaurant Association president and CEO Bob Luz told Eater via email that “it appears the legislature has clearly understood the extreme severity that the pandemic has wreaked upon the restaurant industry in particular.”

The bill will now move to Gov. Baker’s desk. If he signs, the $20 million grant fund will be established, and fee caps on third-party delivery apps will be official. The state’s restaurants have never needed the Governor’s signature more than they do now.

Update, January 6, 3:15 p.m.: This story has been updated to clarify that Grubhub did not fund California ballot measure Proposition 22.

Legislature Agrees To $626 Million Economic Development Bill [SHNS]
Chicago Finally Implements Fee Caps for Grubhub and DoorDash [ECHI]
City Council Extends Emergency Food Delivery Fee Cap Until Full Indoor Dining Returns [ENY]
Portland City Council Approves a 10 Percent Cap on Fees Delivery Apps Charge Restaurants [EPDX]
San Francisco Emergency Order Says Delivery Apps Must Cap Restaurant Fees at 15 Percent [ESF]
Seattle Issues Emergency Order to Cap Delivery App Fees for Restaurants at 15 Percent [ESEA]
Delivery Apps Refuse to Temporarily Decrease the Fees They Charge Restaurants [ESF]
Grubhub and Postmates Are Actively Defying Portland’s New Delivery Fee Law [EPDX]
Grubhub Slams DoorDash’s Chicago Fee and Temporarily Drops Customer Charges [ECHI]
Beacon Hill Must Cap Food Delivery Fees Imposed by DoorDash, UberEats, GrubHub [BG]
The Boston City Council Will Consider Temporary Caps on Delivery Commission Fees for Apps [EBOS]
The Massachusetts Senate Continues to Ignore the Restaurant Relief Act [EBOS]
That Price Hike Delivery Apps Threatened If Prop 22 Failed? It’s Happening Anyway [ESF]
Despite Massive Ad Spending by Tech Companies, California’s Prop 22 Might Not Win [ESF]
Grubhub Drivers Aay App Change Eats Into Tips, Jeopardizing a Usually Generous Season [LAT]