Delivery fees, commissions cut as Americans stop dining out

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By Hilary Russ

NEW YORK (Reuters) – As Americans hole up at home to wait out the coronavirus pandemic, fewer people are going out to eat, leading some fast food chains to cut delivery fees and meal delivery platforms to suspend commissions.

Third-party delivery provider Grubhub Inc (N:) said on Thursday that it will suspend the collection of commission fees it normally charges to restaurants nationwide to be on its app, up to $100 million.

Restaurants need the financial relief. They face an expected drop in diners as states and cities postpone major events – from the Boston Marathon to Broadway shows – and crack down on dining establishments and other gathering places themselves.

In New York state, restaurants must cut their seating capacity in half by 5 p.m. on Friday or else possibly be forced to close.

Some chains are offering free delivery as a way to help offset in-store declines.

Fast-casual restaurant Chipotle Mexican Grill Inc (N:) will provide free delivery from Sunday through the end of March on orders over $10 placed through its app.

Fried chicken chain KFC, owned by Yum! Brands (N:), will offer free delivery in the United States starting on Saturday through April 26. A service fee will still apply, as will a small order fee for deliveries under $12.

Grubhub is KFC’s exclusive national delivery partner, after Yum bought a 3% stake in the company for $200 million in 2018.

Third-party delivery platforms were already under pressure from some smaller restaurants – and from lawmakers – to cap fees and be more transparent.

Some restaurants pay commission rates of 25% or more in exchange for prime placement in search results and other marketing and services.

Late last month, the New York City Council introduced legislation to limit commission fees to third-party platforms at 10% and require the platforms to obtain operating licenses.

New York City Councilman Mark Gjonaj, who chairs the council’s small business committee, applauded Grubhub’s suspension of restaurant fees and said he was in talks with other platforms including DoorDash Inc, Postmates and Uber Technologies Inc’s (N:) Uber Eats to ask them also to reduce their fees.

Not everyone thought the move went far enough. The NYC Hospitality Alliance said Grubhub’s announcement created confusion because it lacked details on who was a “qualified independent restaurant” and would be able to delay commission payments.

Instead, the alliance said, Grubhub should permanently lower its fees as they try to survive the coronavirus crisis.

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