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State Liquor Authority eyes hefty fees charged by GrubHub, DoorDash and others

Signage for food delivery services GrubHub and Seamless

Signage for food delivery services GrubHub and Seamless displayed on the door of a restaurant in New York, April 4, 2014. Credit: AP/Mark Lennihan

 ALBANY — The New York State Liquor Authority on Monday weighed new rules that could significantly curb fees that food-delivery companies such as GrubHub, Uber Eats and DoorDash can charge.

The fees can add 30% or more to an order.

The proposed rules, which the authority could adopt as soon as this fall, could shake up the growing internet app-based food and alcohol delivery business.

The SLA says food-delivery businesses should adhere to a rule that caps their fees at 10% of the cost of a takeout order.

If profit exceeds that, deliverers would have to be listed as partners of establishments holding liquor licenses, according to the plan. Alternatively, the companies could opt to charge a flat fee per delivery.

“Under our view of the law, they should not charge anything percentage-wise,” SLA Chairman Vincent Bradley said during a 90-minute hearing Monday. He noted the SLA allows restaurant landlords to collect up to 10% of an establishment's liquor revenue but anything more than that is considered "profiting" from a liquor license and, therefore, would require registering as a liquor license partner.

“Based on what I’ve witnessed with these tech companies, should anyone go out of business because of this, I imagine there will be another 20 people willing to step in,” Bradley said.

The proposal has different sectors of the economy at odds.

Tech companies say becoming partners on liquor licenses would expose them to unacceptable new legal liabilities and responsibilities. For instance, they could be included in a lawsuit targeting the liquor license holder.

The tech companies also say a 10% cap would kill some delivery businesses — and that SLA has not demonstrated there’s a problem that needs fixing or that the proposal will fix any problem.

“On both counts, today [SLA] came up short,” Julie Samuels, executive director of Tech: NYC, an umbrella group for tech companies, said in written testimony.

A cap on fees and licensing requirements would, “cripple platforms and hassle restaurants, creating several problems that didn’t previously exist,” Samuels said.

But the New York City Hospitality Alliance, a restaurant group, says delivery companies’ are taking a bite out of their business.

Robert Bookman, outside counsel for the group, told the authority the current law is clear: “You get a percentage, you’re on the license,” Bookman said. "It's not that complicated."

In the middle are industry groups such as the Empire State Restaurant and Tavern Association, which said the SLA's plan could open a “Pandora’s box” for tavern owners. 

If the bar hires a band and collects a cover charge, and the band splits the cover charge 50-50 with the bar owner, would the band have to be listed on the liquor license, the group asked.

If the authority wants to apply the 10 % limit, the charge should be calculated from the tavern's gross sales or gross revenues, not each transaction, the restaurant and tavern owners said.

The SLA's next step is to consider any changes to its proposal. A vote on the proposal could occur later this fall.

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