California Introduces Law to Stop Delivery Apps Screwing Over Restaurants

On Tuesday, California State Assemblywoman Lorena Gonzalez (D-San Diego) introduced legislation to protect restaurants from being exploited by food delivery platforms that add restaurants without permission and withhold customer data.

“We need to level the playing field for mom-and-pop restaurants that are being taken advantage of by big tech,” Assemblywoman Gonzalez said in a statement. “Restaurants shouldn’t fear losing their customers when they don’t agree to the conditions of some multi-million dollar food delivery app.”

For years now, companies such as DoorDash, GrubHub, Postmates, and Uber Eats have engaged in shady practices to add more restaurants to their platforms, extract more fees from restaurants and customers, and defeat rival platforms. One consequence of this arrangement is that delivery apps do not share information with restaurants about where customers are located or how to get their feedback. According to a press release about the proposed legislation, this means restaurants have little control over the customer experience and the data may even be used by platforms to drive customers to so-called “ghost kitchens” that they operate.

Assembly Bill 2149 (the Fair Food Delivery Act) would require platforms to not only share customer information with restaurants but reach an agreement with restaurants before adding them onto the food delivery app.

“One-on-one engagement—hearing feedback from customers, being responsive to complaints, addressing the quality of service and delivery—it’s critical to ensuring a good experience,” one restaurant owner said in the press release. “It is hard to do that if we don’t know who our customers are—this bill will fix that.”

A recent report by the CBRE Group, a commercial real estate firm, estimated 58 percent of all restaurant delivery sales were through third-party platforms, a number expected to rise to 70 percent by 2022. There are a multitude of reasons for that growth, but the lion’s share comes from the billions of dollars venture capitalists have invested in rapidly growing these platforms and attracting loyal customers. Still, food delivery platforms remain unprofitable as the investor subsidies have failed to consolidate the market and improve razor-thin margins. This means that platforms have to extract more revenue from customers through higher prices, from restaurants through commission fees, and from workers through lower wages.

The hope with AB 2149 is that by giving restaurants the ability to opt-out of being added to the platforms (or get the customer data if they opt-in), there will be less of this exploitative extraction directed at restaurants. As for protecting workers from exploitation, Gonzalez also introduced bill AB 5, which went into effect this year and promises to reclassify gig workers (including delivery drivers) as employees owed a minimum wage, benefits, and dignity that these platforms deny them.

DoorDash and GrubHub did not immediately respond to Motherboard’s request for comment.