Since March, policymakers have implemented new rules and regulations to help stop the spread of COVID-19, especially among at-risk populations.
Policies like mask mandates, limiting the number of people in restaurants and encouraging social distancing have likely helped mitigate the severity of the pandemic in the United States.
However, as infections and hospitalizations continue, policymakers who believe that they still need to “do something” are now considering policies that have no bearing on improving public health, and would be harmful to local economies. One specific bad policy that is starting to pop up across the country is to limit pay for food delivery services.
Food delivery has become critically important as many individuals and families are turning to touchless options to limit interpersonal contact and manage childcare during this ‘stay at home’ period. As a result, these delivery services have become the lifeblood of many community mom and pop restaurants and community staples.
However, new proposed policies would limit what restaurants are required to pay to deliver food to customers, despite existing contracts. This is a service restaurants have the ability to perform themselves, they have just opted against the investment.
While, on its face, this would seem like a practical application, the unintended consequence would be fewer drivers serving the delivery needs of the community, condensed delivery territories and, ultimately, less access to goods and services for customers and fewer customers for restaurants.
The so-called “gig economy” has provided unemployed and underemployed individuals with flexible work options to help them support their families during these uncertain economic times. By limiting their pay per delivery, many of these frontline workers will likely choose to leave the industry — leaving customers and restaurants unconnected.
Restaurant owners run their business and services as they choose. And while some larger chains — primarily in the pizza industry — incorporate delivery services into their business model, many smaller, local restaurants, have come to rely on contracting with third-party food delivery platforms like Uber Eats, DoorDash, and GrubHub for this service. That way the service is covered on a per transaction basis instead of taking on additional long-term costs.
Typically, delivery costs are negotiated between the third party delivery companies and their restaurant partners. The rates vary from restaurant to restaurant depending on a number of factors, but most importantly, they are agreed to by both the delivery service and the restaurant. Now, policymakers are looking to get involved and use their power to break up the agreed upon terms in these contracts.
With restaurant capacity still restricted in most places or indoor seating banned altogether, restaurants will continue to need these delivery services to survive. But some policymakers are considering price control policies that would result in delivery platforms being required to provide the same service, but without the ability to cover costs. Of course, this simply isn’t sustainable and could hasten the end of the delivery service in affected areas.
As we start a new year, lawmakers in Massachusetts, Baltimore, and some parts of New York and Colorado are considering legislation that would limit delivery compensation.
While people stay home, delivery services have become a proverbial hand that feeds both families and restaurants, so limiting their ability to function would have severe consequences throughout the restaurant sector.
Instead, policymakers continue to have other, more effective tools to help restaurants survive. Recently, the federal government provided an additional $300 million through the PPP loan program intended for small businesses like restaurants.
Local and state politicians have a number of options available to them through tax holidays, tax deferrals, waiving permitting fees, and increasing sidewalk access for expanded outdoor dining, where allowed. They could also develop public/private partnerships to create grant programs intended for direct relief to restaurants or even subsidize delivery costs incurred by local restaurants.
There is no doubt that the restaurant industry is hurting right now. While some actions in response to the pandemic might have been necessary, recent moves to institute price controls on food delivery have nothing to do with counteracting the spread of COVID-19, but will instead harm restaurants and families who rely on them.