Restaurants and Third-Party Delivery Companies Come to Terms

    The National Restaurant Association brought both sides together on seven "Principles."

    Ordering | December 2020 | Danny Klein
    Uber Eats/Chipotle.
    Uber Eats/Chipotle
    Naturally, given the COVID-19 pandemic, timing is critical.

    To say the relationship between restaurants and third-party delivery companies was contentious ahead of COVID-19 isn’t doing it justice. And trends of the past nine-plus months haven’t exactly helped at times. Adoption is way up, DoorDash just went public, and some aggregators lessened the burden to help operators navigate dine-in drops. Yet certain major markets felt compelled to cap fees as the cost-benefit relationship fell short in survival times. Generally, the reality is restaurants expanded coverage during the crisis, through multiple services at times, and jumped into the delivery game whether they wanted to before or not.

    This has created more urgency than ever to align goals. The National Restaurant Association on Wednesday released what it’s calling, “Public Policy Principles for Third-Party Delivery” to define best practices for third-party delivery to guide lawmakers in developing public policy.

    The Association spent the past year working on this, with both sides, in hopes of ironing out national guidelines based on the experiences of restaurant operators of all sizes. The “Principles” represent the first time the restaurant industry and third-party delivery companies came together and agreed on a framework for their relationship.

    Naturally, the timing is critical as restrictions surface once again in the face of COVID-19 case surges. But it’s equally invaluable looking ahead. Even when dine-in returns en masse, third-party delivery’s gains during COVID-19 will stick, and likely mount.

    Incisiv recently released a report that predicted digital sales will comprise 54 percent of limited-service business within the next five years. What’s notable about that is it’s a 70 percent increase over pre-virus projections when digital was already coming on strong.

    An October study from Raydiant said nearly 40 percent of operators believed they would not have stayed in business during the pandemic without third-party delivery. Roughly 77 percent said they offered the service through third-party apps pre-COVID-19. Now, close to 30 percent said those apps make between 21–30 percent of current sales, while about 23 percent said third-party delivery mixes 11–20 percent of the business.

    To the earlier point, however, restaurants expressed distrust over high fees and strategies, like non-partner restaurants.

    The Association conducted a consumer study of 1,000 adults in December and found 70 percent ordered delivery from a restaurant and 40 percent used a third-party company to do so.

    “Even before the pandemic, delivery—and decisions related to delivery—had major impacts on restaurant operations,” said Mike Whatley, vice president for State and Local Affairs for the National Restaurant Association, in a statement. “Until now, the relationship between restaurants and third-party delivery companies lacked a national framework to protect restaurants. These new Principles, which center around permission and transparency, add consistency and structure that will benefit all restaurants. This agreement represents an important first step in an ongoing dialogue between restaurants and third-party delivery companies about ways to improve our relationship going forward.”

    Here are the seven Principles:

    • Restaurants have a right to know and determine when and if their food is delivered.
    • Customers should expect the same degree of food safety from delivery as they do when dining in a restaurant.
    • Restaurants should be able to offer alcohol to customers through third-party delivery in a safe and legal manner.
    • Restaurants deserve transparency on fees (including commissions, delivery fees, and promotional fees) charged by third-party delivery companies.
    • Third-party food delivery contracts need contractual transparency, and issues surrounding fees, costs, terms, policies, marketing practices involving the restaurant or its likeness, and insurance/indemnity should be clear.
    • Sales tax collection responsibility must be clear in terms of which party is collecting and remitting the specific sales tax to the appropriate authority.
    • As a best practice, third-party delivery companies should offer restaurants access to anonymized information regarding orders from their restaurant that originate on third-party platforms.

     

    “We are grateful for the opportunity to have partnered with the National Restaurant Association in developing these principles, which will help platforms like DoorDash continue to empower restaurants to reach new customers and grow their revenue,” said Max Rettig, global head of Public Policy at DoorDash. “We are proud to support these principles through the range of products and services we’ve developed for restaurants, and we look forward to continually improving our offerings to best serve our restaurant partners.” 

    Added Stephane Ficaja, head of Uber Delivery for the U.S. & Canada: “The teams at Uber Eats and Postmates are committed to the restaurant community. As one company, we’ve recently made commitments to listening to and learning from merchants and have worked together to support the National Restaurant Association’s development of these new principles that are designed to address the most pressing interests of the industry.”

    In the Association’s survey, about 90 percent of customers who ordered delivery in the last six months favored each of the seven Principles.

    Let’s look a little deeper at some of them.

    With having a right to know and determine when and if their food is delivered, the Association, said, prior to listing a restaurant on its platform or offering a restaurant’s food to its customers, a third-party delivery company should obtain written consent of the specific restaurant where the restaurant authorizes the third-party delivery company to list the restaurant on the platform, use its name, menu, symbols, and images, and offer its food to customers.

    Whether in a contractual relationship or not, third-party companies should work with the restaurant to ensure an up-to-date menu, correct menu descriptions, and accurate menu prices.

    Also, if there is no contract, the third-party delivery company should not misrepresent its relationship with the restaurant to consumers and should offer the restaurant an easy way to be removed from the platform if desired, the Association said.

    When drafting legislation on this principle, lawmakers should allow a reasonable transition period for third-party companies to come into compliance.

    On the topic of food safety, the Principles call for third-party delivery drivers to never touch customer food, but still play a critical role in ensuring customers receive safe food.

    Third-party delivery drivers should have knowledge of basic food safety principles including personal hygiene, forms of contamination, time and temperature abuse, and cleaning and sanitizing, the guidelines noted.

    Some other points:

    At the macro level, restaurants should have the ability to see orders, know when orders were placed, understand where orders originated (third-party app or website), know whether orders are organic or tied to promotions, see average delivery time once orders leave the restaurant, and know whether orders were from new customers or repeat customers.

    At the micro level, restaurants should have the ability to see and respond to customer feedback and reviews.

    If desired by the restaurant, third-party delivery companies should allow customers to opt-in to communications from the restaurant as they place an order.