New York City Council votes to lift cap on delivery fees

Delivery apps applauded the new policy. | Photo: Shutterstock

The New York City Council on Thursday approved a bill that will ease the city’s cap on third-party delivery fees, allowing apps like DoorDash to take a cut of up to 43% of each order.

The legislation, Int 762-B, maintains the city’s existing delivery fee limits of 15% for delivery service, 3% for credit card processing and 5% for any other services. But it will enable restaurants to pay an additional 20% for “enhanced services” if they want. These services will allow restaurants to generate more orders and sales, according to the apps.

Restaurants can still opt to stick with the basic service package, which provides delivery service and a listing on the apps’ marketplaces. 

The bill also includes some new protections for restaurants, such as allowing them to include marketing materials in delivery orders and to charge higher prices on delivery apps.

The decision drew praise from delivery apps, which said the bill will make it easier for restaurants to grow their business on their marketplaces.

“We applaud the City Council for passing Intro 762-B, a meaningful step forward that gives restaurant owners greater ability to reach customers while preserving important safeguards for their business,” Grubhub said in a statement. 

DoorDash and Uber Eats shared similar statements.

The reaction from restaurants, however, was more mixed. 

“Lifting the cap isn’t our first choice,” said Andrew Rigie, director of the New York City Hospitality Alliance, in a statement. “But when circumstances required it, we fought to ensure the changes came with strong new protections for restaurants.” 

He added that the group would monitor the new policy closely, and that it would use this as an opportunity to “reset the relationship with delivery companies.” 

Melissa Fleischut, CEO of the New York State Restaurant Association, was more critical of the new policy. In a statement, she said the additional 20% fee “will result in restaurants being bullied into paying this extortionate rate or being buried on the platforms. Restaurants are suffering, and this legislation will push many to the brink.”

But other restaurant groups praised the bill, agreeing that it would give them more freedom to promote themselves on delivery apps.

“Intro 762 establishes a permanent, balanced framework that gives restaurants the ability to choose the services they want from delivery platforms–without being burdened by excessive fees,” said Sandra Jaquez, president of the New York State Latino Restaurant Bar & Lounge Association, in a statement.

The bill now goes to Mayor Eric Adams for final approval.

If he signs it, it will end years of back-and-forth between the city and delivery apps over the fee cap, which was put in place during the pandemic to help support struggling restaurants. 

The cap was later made permanent, drawing a lawsuit from the apps in 2021. They claimed the cap was unconstitutional and driven by animosity toward third-party services. They also warned that it would ultimately hurt restaurants by forcing the apps to raise prices for consumers. 

In 2023, a judge denied the city’s efforts to dismiss the lawsuit, indicating the apps had a valid argument. The two sides settled the lawsuit this week.

Delivery commissions make up a significant portion of the apps’ revenue. New York’s cap has made it difficult for them to operate in the city, the nation’s top restaurant market.

Delivery fee caps were common during the pandemic, when the service became a key lifeline for restaurants. As of now, New York City is the only jurisdiction to still have one in place.

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