Tips for Restaurant Business Owners: How to Implement Changes Set Out in the Third-Party Food Delivery Service Legislation Package

August 4, 2021

Photo courtesy of Longitude

Last week, the New York City Council passed the most far-reaching legislative regulation of third-party food delivery services in the U.S. Here is what restaurant owners and businesses need to remember, and implement, in light of these new laws. 

1. Data on Orders Placed Through Third-Party Food Delivery Services

Recall: This law requires third-party food delivery services to share monthly information on customers who have placed an order with an establishment if that establishment requests the information; this information includes the customer’s name, phone number, e-mail address, delivery address and the contents of their orders. The information must be provided in a machine-readable format, which the establishment can retain. Although services can not limit the establishments’ use of the information, establishments are not allowed to sell, rent, or disclose the information without express consent from the customer under this law. As for the customer, the service must provide a clear disclosure to the customer regarding what information will be shared with the establishment. The customer is able to opt out of this information sharing completely, and can withdraw their consent to using their information after-the-fact. Additionally, customers can request that establishments delete their information.

What to do now: 

1. “Share monthly information on customers….if that establishment requests the information” 

Business owners must remember to request this information from the third-party food delivery companies every month. Failure to request will result in a lack of access to customer data and will impede the establishment’s ability to effectively market to customers. 

2. The information must be provided in a machine-readable format, which the establishment can retain. 

Business owners must keep an eye out for proper information formatting. These companies must provide customer information in a machine-readable format, which must be disaggregated by customer. If the company reconfigures the information, do not accept it – ask for the proper formatting and content.

3. Although services can not limit the establishments’ use of the information, establishments are not allowed to sell, rent, or disclose the information without express consent from the customer under this law. 

Establishments are free to retain the information they have been provided by companies, however they are prohibited from selling, renting, or disclosing said information without the consent of the customer. If establishments want to do something with the information, they must remember to receive express consent from the customer before taking any action.  

4. The customer is able to opt out of this information sharing completely, and can withdraw their consent to using their information after-the-fact. Additionally, customers can request that establishments delete their information.

Establishments must remember that customers have bargaining power in this partnership. Although the information sharing will be happening between companies and establishments, customer consent and requests must be obtained and honored. If the customer decides to opt out of sharing their information, or withdraws their consent after their information has been shared, establishments will no longer be able to utilize this data. If customers request that the establishment delete the information that they have already acquired, the establishment cannot hold on to the information, and must delete it promptly

2. Extending the Prohibition of Certain Telephone Order Charges by Third-Party Food Delivery Services

Recall: This law prohibits third-party food delivery services from charging establishments for telephone orders that do not result in a transaction during the call. This law will extend until February 17th, 2022.

What to do now:

1. Services are prohibited from charging establishments for telephone orders that do not result in a transaction during the call. 

Establishments must keep an eye out for suspicious charges from companies. Establishments should carefully look through their statements and ensure that they are not being charged for any phone calls that do not produce a transaction

2. Extends until February 17th, 2022

Although this will be the law for a considerable amount of time, it is evidently not a limitless time frame. Establishments should enjoy this new development, however they may need to rethink their delivery operations if charges from these phone orders pose a substantial financial burden, because they could return once this law expires.   

3. Extending the Limitation on Fees Charged to Food Service Establishments by Third-Party Food Delivery Services.

Recall: This law extends the current fee cap on third-party food delivery services. At present, these services may only charge restaurants 5% for listing and marketing a restaurant on their platform and 15% for food delivery. These caps will extend until February 17th, 2022. In addition to this extension, the law also stipulates that the amount of the credit card fee may be passed through to the restaurant. 

What to do now:

1. Services may only charge restaurants 5% for listing and marketing a restaurant on their platform and 15% for food delivery.

Establishments should keep an eye out that they are being charged the correct fees by companies – 5% for listing and marketing and 15% for food delivery. If companies do not adhere to these fee caps, restaurants should contact the company and/or seek legal action

2. Extends until February 17th, 2022

Same as above. Although this will be the law for a considerable amount of time, it is evidently not a limitless time frame. Establishments should enjoy this new development, however they may need to rethink their delivery operations if the “normal” fees (i.e. sometimes reaching 25-30% for listing and marketing) pose a substantial financial burden, because they could return once this law expires.

3. The amount of the credit card fee may be passed through to the restaurant

4. Requiring Third-Party Food Delivery Services to Provide a Description of the Telephone Numbers Listed in Connection with Food Service Establishments.

Recall: This law requires third-party food delivery services to list an establishment’s direct telephone number whenever they list an establishment’s telephone number. If the service also lists a “unique,” or secondary, telephone number, it must then disclose what type of telephone number each listing is, provide a description of the telephone numbers, and disclose any fees associated with using the “unique,” or secondary, number for both establishments and customers.  

What to do now: 

1.  Services must list an establishment’s direct telephone number whenever they list an establishment’s telephone number. 

Establishments must make sure that the number associated with their establishment on the platform is, indeed, their direct number. If it is not, the establishment should contact the company and rectify this mistake.  

2. If the service also lists a “unique,” or secondary, telephone number, it must then disclose what type of telephone number each listing is, provide a descriptionof the telephone numbers, and disclose any fees associated with using the “unique,” or secondary, number for both establishments and customers

Establishments must verify that, if two numbers are listed, all of the above mentioned information is included in the description of each number – label each number, describe each number, and disclose any fees for each number. 

5. Prohibiting the Inclusion of a Food Service Establishment’s Products on a Third-Party Food Delivery Platform Without a Written Agreement Authorizing Such Inclusion, and to Provide Penalties.

Recall: This law requires third-party food delivery services to obtain a written agreement from an establishment before it lists the establishment on its application or website. It also prohibits third-party food delivery services from requiring the establishments to indemnify the service, and/or their independent contractors or agents, for damage occurring after the delivery leaves the establishment. Any violation of this law will be subject to a civil penalty of $500 or less, per day, per establishment. 

What to do now: 

1. Services must obtain a written agreement from an establishment before it lists the establishment on its application or website. 

Establishments must keep a very close eye out for dishonest listings on company applications or websites. If establishments do not have a direct partnershipwith such companies, their listing will confuse customers who are unsuccessfully trying to order and will allow the companies to exploit the establishment’s brand without their consent. The timing of such listings is key if they do have a partnership – as they must follow a written agreement, not precede it

2. Services are prohibited from requiring the establishments to indemnify the service, and/or their independent contractors or agents, for damage occurring after the delivery leaves the establishment

Establishments must not compensate the company, its contractors, or its agents if any damage happens to an order once it has left their business. This is not the responsibility of the establishment, it is the responsibility of the aforementioned parties and must be dealt with by them. 

Founded by attorneys Andreas Koutsoudakis and Michael Iakovou, KI Legal focuses on guiding companies and businesses throughout the entire legal spectrum as it relates to their business including day-to-day operations and compliance, litigation and transactional matters.

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