04 Nov New Bill Forces 3rd Party Delivery Apps to Full Transparency. What’s Next?
On October 5 a new bill was approved by the governor of California requiring 3rd party delivery apps to be more transparent about charges and tips.
This important development aligns with the growing trend of conscious consumers demanding increased transparency, already apparent in flights, ridesharing like Uber and Lyft and mobile plans.
The question for restaurant operators now is: What’s next? Can restaurants reshape their relationships with 3rd-party delivery apps for the better, or will they be buried under incomprehensible charges and over-itemized bills?
New Law Demands Transparency from 3rd Party Delivery Apps
Top 3rd-party delivery apps on the market have repeatedly leveraged their power to squeeze mom-and-pop restaurants into high fees.
Assemblywoman Gonzales, who initiated the bill, said they received “reports of restaurant owners losing money on food delivery app orders because of hidden fees from companies like DoorDash, UberEats and GrubHub.”
The new bill will present 3 new requirement of 3rd party delivery apps:
- Delivery apps must notify diners about charging restaurants a commission. At the restaurant’s discretion, a full itemised fee breakdown may be shown. The apps must also give restaurants a full and transparent breakdown, including tips and taxes for each order.
- From now on, restaurants will be the ones setting the purchase price shown to customers on the app for each menu item (excluding tax and tips). This gives restaurants full power to compete and prevents the delivery apps from influencing the market.
- Apps must pay tips directly and in full to their delivery workers, or to the restaurant when orders are for pick-up.
This new law applies to all apps operating in California, including the special niche alternatives.
Why Itemized Bills Are Good for Restaurants
Restaurants are customers too. They receive services from distributors and 3rd-party apps, and like every other consumer they deserve to be treated fairly and with transparency.
Ensuring you get what they are rightfully entitled to from their 3rd-party delivery app will help restaurant operators price dishes better, forecast cash flow and manage supply stock levels.
Commissions are high and the competition pushes food prices and quality down. On the other hand, quick-access to a totally outsourced delivery system with millions of subscribers saved many food businesses during the pandemic.
Now that indoor dining is back, the power balance has re-adjusted and restaurant owners should demand more from their 3rd party app suppliers.
Using Itemized Bills to Improve Your Business
Staying vigilant about the information provided to you by your third party delivery app is the best way of knowing what it is exactly you are paying for.
Itemized bills should be used as a tool to help restaurant operators choose their services and features more wisely and in accordance with their particular business needs.
Take a close look at this itemized bill from Grubhub, for example. Can you identify areas where the restaurant in question could have made better financial decisions?
Two things stand out in this bill.
- The restaurant is spending $231 on promotions.
- Out of 46 orders, 7 had to be adjusted, costing the restaurant $131.19.
The promotion the restaurant was paying for certainly appears to be working. But is the business equipped to manage the incoming flow of customers?
A smarter course of action might be to hold off on marketing and spend the freed up cash on improving the business internal processes. For example, better employee training, an extra cook during the restaurant’s busiest times, or a reevaluation of the delivery operation to find out the point of failure.
The takeaway here is that itemized bills are a valuable source of data. Insisting on these is not just a question of transparency. It’s also about demanding all the data and tools you need to better manage your business.
Demand More from 3rd Party Delivery Apps
Now that indoor dining is back, the power balance has re-adjusted and restaurant owners can demand more from their 3rd party app suppliers. Demand to know how much you’re paying on things like:
- Features, like integrations to digital menus
- Fee structures that are more balanced
- Faster delivery times and care of your dishes
- Clarity on their employment ethics
Think we missed something? Join the discussion on LinkedIn and tell us what other areas you think need more transparency.
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