With sales in a free-fall, restaurants ask for government help

COVID-19 , Operations , Public Health ,

Source: Restaurant Business Online

With the incomes of restaurants and their employees already in a free-fall because of the coronavirus, industry leaders are pushing hard for economic assistance from government regulators and lawmakers.

High on their list of requests on the state and local level: mandated cuts in the commissions charged by third-party delivery services. They reason that an upswing in delivery could compensate for a sheer drop-off in dine-in business, and capping the commissions would enable restaurants to keep more of those sales. The rule of thumb is that 20% to 30% of a delivery sale goes to the third-party deliverer as their fee.

Grubhub announced today that it was voluntarily forgoing up to $100 million in commissions on delivery orders from independent restaurants. Postmates told Restaurant Business that it similarly stopped collecting commissions from new restaurant partners in San Francisco and is in conversations to expand the break to newly signed restaurants in New York.

Grubhub CEO Matt Maloney said the company agreed to suspend commissions after meeting with mayors from a number of large cities, including Chicago, San Francisco and Atlanta.

The industry noted that the concessions from Postmates and Grubhub were highly qualified. Postmates' decision, for instance, only applies to restaurants that newly partner with the service. 

Others aid they found Grubhub's concession to be unclear.

“Grubhub’s announcement that they will eliminate fees on 'qualified independent restaurants' is a positive step during this state of emergency and is what the NYC Hospitality Alliance [NYCHA]  has been advocating for," said Andrew Rigie, executive director of the association of restaurants and nightclubs.  "We need immediate details of how 'qualified independent restaurants' are defined and an explanation of why others that are struggling during this crisis will still pay high fees." 

New York, one of the states hardest hit by the coronavirus epidemic, has been particularly aggressive in seeking a cap on or suspension of delivery commissions.

“My office and I have already begun conversations with other third-party food delivery providers such as DoorDash, Postmates and Uber to ask them to reduce their fees and implement other relief measures as restaurants cope with an unprecedented loss in business,” said Mark Gjonaj, chairman of the small business committee of the New York City Council. “Based off of these initial conversations, I feel encouraged that they will do the right thing and put people over profits during this moment of crisis.”

Meanwhile, a vote in the U.S. House of Representatives is expected as early as later today on a comprehensive federal relief and stimulus package that was hammered out by Speaker Nancy Pelosi, D-Calif., and Department of the Treasury Secretary Steven Mnuchin. The Families First Coronavirus Response Act includes provisions providing as much as 14 days of paid sick leave for all workers, as well as three months of paid leave for anyone who needs to care for an ill family member. The outline released this afternoon did not specify how those relief efforts would be funded. 

The proposal is expected to be approved by the House, where Democrats are in the majority, but faces a delayed and uncertain vote in the Republican-controlled Senate despite the bill’s White House support. Several senators have declared that they would not be rushed into initiatives that could cost the nation billions of dollars.

Senate Majority Leader Mitch McConnell initially announced that the legislative body would recess and then come back in a week or 10 days to consider any relief measure. He later backtracked and set a three-day holiday for the Senate instead of a full recess.

Many of the demands for economic assistance aimed specifically at restaurants have come at the local and state levels.

The NYCHA and the New York State Restaurant Association (NYSRA), for instance, have both presented government officials with a list of relief measures they’d like to have considered.

The NYCHA called its request a 12-Point Mitigation and Support Plan. Included are recommendations such as providing a direct cash infusion so restaurants can continue to pay employees and pay their bills. It also calls on regulators to suspend fines and penalties and waive fees such as sidewalk-service permit charges.

In a letter to New York Gov. Andrew Cuomo, NYSRA CEO Melissa Fleischut asked the state to suspend sales taxes for 90 days and provide interest-free loans to keep businesses in operation.

Yesterday, Cuomo imposed a requirement that restaurants cut their customer capacity in half as of 5 p.m. today to lessen the chances of coronavirus contamination. Places with more than 500 seats would be required to further lower their capacities to no more than 250 customers.