Bipartisan law limits service fees charged to restaurants by third-party food takeout and delivery applications during state of emergency.
OCEAN TOWNSHIP – This Friday, Governor Murphy signed bipartisan legislation introduced by Senator Vin Gopal aiming to protect New Jersey restaurants from rising takeout and delivery service fees charged by some third-party food delivery services similar to Grubhub, DoorDash, and UberEats. Under the new law (previously S2437), during the COVID-19 state of emergency, these service fees cannot exceed 10 percent of the price of the original order if the restaurant is using its own driver for the delivery, or 20 percent of the price of the original order otherwise.
“Delivery services require real investments in infrastructure that many restaurants don’t have prepared and, due to the shutdowns, currently can’t afford,” said Senator Gopal (D-Long Branch). “Restaurants are having enough trouble retaining normal staff right now, let alone hiring new delivery staff. During this crisis, many struggling restaurants have turned to third-party deliveries to make ends meet, but some bad actors have taken advantage of them with unaffordable fees. This new law will protect these restaurants as they work hard to feed our communities and families while weathering this pandemic.”
Any contracts established prior to New Jersey’s declaration of a state of emergency due to COVID-19 will remain unchanged, but any contract for services including a service fee exceeding the 20 percent or 10 percent cap must be reaffirmed by the restaurant in question if it was established after the state of emergency was declared.
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The new law also implements an overall cap of 25 percent for any additional services that restaurants wish to purchase from such a third-party app, such as advertising opportunities or other product features.
Penalties for violating this law will fall under the Consumer Fraud Act, punishable by a fine of not more than $10,000 for a first offense and not more than $20,000 for any subsequent offense. This fee cap will end 90 days after restaurants are permitted to operate indoors at 25 percent capacity, which is currently expected to begin on July 2.
“Grubhub has already reported that the number of daily average orders in April was up by 20 percent compared to a year ago, and third-party takeout/delivery apps have seen revenues soaring under our new stay-at-home paradigm,” Gopal added. “Washington, DC, Seattle, and San Francisco have already passed emergency orders limiting these service fees, and lawmakers in New York City, Chicago, Los Angeles, and Boston are moving quickly to do the same. Our mom-and-pop restaurants have been hit hard by COVID-19, and many can’t afford to operate under these overpriced contracts. I’m glad we’re putting this practice to an end and giving our restaurants the protection they need and deserve.”