Gig Economy Regulation Under Biden

This week, Joe Biden and Kamala Harris began their terms as president and vice president. Both Biden and Harris have expressed views on a range of technology policy issues that are bound to be discussed in Congress as well as state legislatures over the next few years. In the coming days, we will analyze Biden’s and Harris’ comments on three technology policy issues (the gig economy, online speech, and algorithmic bias). Below is the first entry of the series.

The “Gig Economy”

Gig economy workers have become an increasingly visible segment of the labor market. Amid the COVID-19 pandemic, gig workers have performed essential tasks, such as providing an alternative to public transportation and delivering groceries and other household goods. When unemployment skyrocketed last year, alternative work arrangements provided a source of income for many Americans without steady employment.

Since there is no universal definition for gig work, this entry uses the same definition as the United States Bureau of Labor Statistics’ Contingent Worker Supplement. Gig work, also referred to as “electronically mediated work” and “online platform work,” describes an employment structure where workers:

  • Use a company’s website or mobile application to connect with customers and source short, temporary jobs (“gigs”);
  • Receive compensation from the company that owns the website or mobile application; and
  • Have autonomy to decide when they complete gigs.

Examples of such workers include ride-hail drivers, delivery drivers, and housekeepers who use mobile applications and websites to find customers and receive payment.

Gig work differs from the traditional employment model in both functional and legal terms. Workers are not considered employees of the company that runs the website or mobile application. Rather, they are classified as independent contractors under federal and state laws and consequently do not follow conventional employment constraints, such as a set salary, work schedule, and structured tasks.

The rise of gig work has raised questions about employment classifications, civil rights protections, and benefits. As policymakers move forward to create a safer and more secure workplace, they must equally consider the qualities that make gig work appealing to millions of Americans.

Biden-Harris Administration

President Joe Biden and Vice President Kamala Harris have supported workers’ rights throughout their campaign and advocated for greater gig economy regulations. Their proposals are listed on the Biden-Harris campaign website. The “Biden Plan For Strengthening Worker Organizing, Collective Bargaining, and Unions” has called for labor law reform, including: legal benefits and protections for gig workers, changes to confusing legal tests enabling gig workers to receive independent contractor status, and the adoption of stricter classification schemes such as California’s ABC test.

Last year, President Biden expressed his approval for the ABC test codified by the California Supreme Court.

The ABC test presumes that a worker is an employee. The burden lies with the employer to prove that a worker is an independent contractor by demonstrating:

  • Worker has full control of work performance;
  • Work is completed outside of usual course of business for the company; and
  • Worker has an independent business or occupation that usually performs the contracted work.

In January 2021, the California Supreme Court ruled that the ABC test applies retroactively. Consequently, app-based companies may be liable for classification violations since 2018.

Vice President Harris supported California Assembly Bill 5, which implemented the ABC test. Twenty-seven states have adopted the ABC test with minor variations. Eight states use a different version of the ABC test that does not consider where the work is conducted.

During the 2020 general election, California voters approved Proposition 22 by a fifty-eight percent majority vote. Proposition 22 provided an exemption to AB 5 for app-based transportation and delivery companies, enabling them to continue classifying their workers as independent contractors. It also promised better compensation, health benefits, and civil rights protections. The ballot measure was financially supported by the Yes on Prop 22 coalition, which spent over $200 million during the campaign and was funded by companies such as Uber, Lyft, and DoorDash.

AB 5 has been challenged in multiple lawsuits by a diverse range of affected parties, including the California Trucking Association, American Society of Journalists and Authors, National Press Photographers Association, Uber, and Postmates.

Cecilia Rouse, President Biden’s choice as chair of the Council of Economic Advisers, stated that her focus would be on the future of labor. She voiced her concerns for short-term COVID-19 issues in employment, in addition to the long-term changes in the gig economy.

Current State of Regulation

Under federal and state law, app-based companies must designate their workers as employees or independent contractors. To determine which status suitably describes the work arrangement, federal agencies, lawmakers, and courts have developed and utilized multiple employment classification tests. These tests vary from one another and can often be inaccurate when applied to gig workers.

Economic Reality Test

In September 2020, the United States Department of Labor (DOL) announced a proposed rule for determining independent contractor status under the Fair Labor Standards Act (FLSA). The Notice of Proposed Rulemaking was published in the Federal Register and comments were accepted for a thirty-day period.

The DOL proposed a new section in Title 29 of the Code of Federal Regulations that would sharpen the long-standing “economic reality” test. This test was first established in the 1947 Supreme Court case United States v. Silk, which held that “’employees’ included workers who were such as a matter of economic reality.” The Court identified five factors to determine employee versus independent contractor status: “degrees of control, opportunities for profit or loss, investment in facilities, permanency of relation[,] and skill required in the claimed independent operation.” According to the Court, no single factor was dispositive nor was the list complete. In the 1970s and 1980s, federal courts of appeals began to use the economic reality test without considerable consistency.

Currently, the economic reality test plays a pivotal role in determining worker status under the FLSA. In the Notice of Proposed Rulemaking, the DOL noted that it has used different variations of the test since 1954 and finds that its current application is “unclear and unwieldy.” Among many other flaws, the DOL and court’s emphasis on investment and permanency yielded inaccurate results. These shortcomings have become increasingly apparent as technological and social change transforms the modern economy.

In January 2021, the DOL finalized its rule for determining independent contractor status under the FLSA. Many legal experts view the new rule as employer-friendly, making it easier to classify workers as independent contractors.

The final rule reaffirmed the economic reality test to determine worker status under the FLSA. The DOL asserted that distinguishing between an independent contractor and an employee required an assessment of economic dependence. Although no single factor is dispositive, the rule identified two “core factors” that are more influential than the others:

  • Nature and degree of control over the work; and
  • Worker’s opportunity for profit or loss based on initiative and/or investment.

Three other factors were identified as guideposts in worker classification:

  • Amount of skill required for the work;
  • Degree of permanence of the working relationship between a worker and employer; and
  • Whether the work is part of an integrated unit of production.

The rule was published on January 7, 2021 and was set to take effect 60 days after publication. On January 20th, President Biden paused all pending regulations until further review.

IRS Three-Pronged Test

The Internal Revenue Service’s (IRS) worker classification methodology can impose significant costs on companies. Employers are legally required to withhold federal income taxes and pay into Social Security, Medicare, and unemployment for workers designated as “employees.” Such obligations do not exist for companies that hire independent contractors.

The IRS assesses the working arrangement using a three-factor assessment, which the American Bar Association refers to as a “three-pronged” test. The factors are used to understand the degree of control and independence within the working arrangement. This test consists of the following: behavioral control, financial control, and type of relationship.

Behavioral control refers to the company’s right to direct how the worker does an assignment. Instructions and training that the worker receives are used to determine the degree of behavioral control. In contrast, financial control is an analysis of the pay structure, investment, and freedom for the worker to pursue other business opportunities. The last factor, type of relationship, describes the permanency and importance of the working arrangement for the company.

Prior to the three-pronged test, the IRS used a twenty-factor common law test to determine worker classification.

The Future of the Gig Economy

The gig economy is functionally dependent upon its temporary workforce. For example, in Uber’s early days, the company’s business model was considered innovative because it was a ride-hailing company without cars. Uber was and continues to be a platform that facilitates safe and effective communication between drivers and riders. This working arrangement bears no resemblance to taxis and the medallion system, which are inherently restrictive and prohibitive to market entry.

Uber is not a taxi company, and nor is Airbnb a hotel chain. Uber, Airbnb, and other gig economy companies are not selling car rides or temporary accommodation; they’re selling reductions in transaction costs. This model has proven popular, and it is not feasible using traditional employer designations.

The independent contractor status enables app-based companies like Uber to offer flexibility, autonomy, and choice to their workers. Drivers can accept other gigs from different companies— even competing companies such as Lyft— and define their own work schedule. In contrast, traditional employment models define wages and hours for the employee. Gig work is an alternative to the traditional employment model and ought to be seen as an entirely separate, distinct working arrangement.

In a 2020 poll commissioned by Lyft, eight-two percent of independent contractors surveyed did not want to be employees, preferring their current worker classification instead. Ninety percent stated that their worker classification is a “good arrangement” in their current lifestyle.

Gig workers do not necessarily need to be considered independent contractors, but the employee designation is inappropriate. Employment classification systems developed in the previous century are ripe for change. Foremost, the gig economy suffers from a lack of clarity. There is no universal definition for gig work and unclear classification methodologies vary on the state and federal levels. These inconsistencies need to be resolved to clarify gig work within the law. However, such change should not conflate disparate working arrangements, affect the nature of gig work, or impede the gig economy business model. Regulation that results in inaccurate or inconsistent classification will inevitably limit opportunities for millions of Americans working in the gig economy. In addition, poorly crafted regulations could stifle competition in the gig economy, with powerful market incumbents being better placed than start-ups to comply with a new and complicated regulatory regime.

AB 5 and the ABC test fundamentally disrupted the gig economy’s employment model and introduced extremely prohibitive, if not insurmountable, barriers for operation. The narrow view that gig workers should be employees by default, or that they are misclassified or exploited, leads to counterintuitive policy proposals. There will be no more gig workers to protect if policymakers continue to pursue greater compensation, benefits, and other employee standards without due consideration for economic and social costs.

MATTHEW FEENEY AND RACHEL CHIU, CATO INSTITUTE

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DoorDash Accused Of Steering Customers Away From Nonparticipating Restaurants

Does DoorDash set up fake landing pages for restaurants in an effort to steer customers to preferred restaurants? That is the basis of a potential class action lawsuit filed by Lona’s Lil Eats, a St. Louis Asian fusion restaurant.

The suit, originally filed in September in the United States District Court for the Northern District of California, where DoorDash is based, alleges DoorDash posted a Lona’s landing page on its app, even though the restaurant had no existing relationship with the delivery service. Lona’s further alleges that when a customer clicked the landing page, the customer was able to see a complete menu and proceed as if an order could be placed. In the end, though, the customer was shown one of two messages: that Lona’s was closed or that it was “too far away” for delivery, even when the customer was standing within 200 feet of the location, the suit alleges.

Lona’s lawyers argue that DoorDash, which takes up to a 30% commission on each order, is impacting Lona’s business and other potential members of the class.

“Accordingly, DoorDash is publishing false and deceptive information about the ability to get food from Lona’s as a means of punishing it for not partnering with it, and/or pressuring it to partner with it and to redirect would-be Lona’s business to its partner restaurants,” the suit alleges. “Defendant’s conduct has an obvious, significant and unfair impact upon the competitive landscape within the restaurant industry and results in damage to plaintiff and members of the class.”

On Monday, U.S. Magistrate Judge Thomas Hixson for the San Francisco-based District Court denied DoorDash’s motion to dismiss, allowing the suit to move forward. The judge has ordered DoorDash to file its answer to the amended complaint within 14 days.

In the original complaint, Lona’s attorneys said that DoorDash engaged in “unfair, deceptive and anticompetitive practice regarding the manner in which it displays information about businesses with whom it does not have an agreement to provide service.” It further alleged that DoorDash “has engaged in a pattern of behavior whereby customers are deceptively steered away from restaurants with whom DoorDash does not have a relationship by DoorDash’s practice of affirmatively representing to consumers that those restaurants are closed, cannot deliver to them or are not accepting orders at the time.”

The attorneys – led by Francis J. Flynn Jr. of the Law Office of Francis J. Flynn Jr. – are asking for a jury trial with class action status for similarly impacted businesses, seeking damages and injunctive relief for false advertising in violation of the Lanham Act, of California’s False Advertising law (FAL) and of California’s unfair competition law (UCL).

“DoorDash takes advantage of the existing market demand for Lona’s and other restaurants to drive traffic to its site, at which time it will redirect customers to other partner restaurants by suggesting that Lona’s is not an option,” the suit alleges.

DoorDash argued that Lona’s lacked standing and failed to offer “specificity as required by Rule 9(b)” and that its Lanham Act claim is false.

The court rejected each of these arguments.

“We’re proud of the role DoorDash plays in helping restaurants connect with new customers and generate additional revenue, and remain committed to demonstrating the value of the DoorDash platform and the variety of options available to support the merchant community,” a DoorDash spokesperson said in an emailed statement to FreightWaves.

A request for comment from Flynn’s law office had not been returned as of publishing time.

In arguing that Lona’s did not have standing, DoorDash said that “to have standing under the FAL, [Lona’s] must allege that it suffered an injury due to its own actual and reasonable reliance on the purported misleading statements.”

The additional claims were similarly dismissed by the court. The court also acknowledged that while one part of Lona’s allegations have been remedied – the removal of the listing saying the restaurant was closed – the notice that the restaurant was out of delivery range persisted for more than a month after the original complaint was made.

The food delivery app went public in early December, raising $3.37 billion on the offering of 33 million shares at $102 per share. It spiked 78% in its first day of trading, closing at a market value of $68 billion. In midmorning trading Thursday, the stock was at $186.09.

In its IPO filing, DoorDash reported revenue of $1.92 billion for the first nine months of 2020, more than triple that of the same period a year earlier, and a profit of $23 million in the second quarter of 2020.

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DoorDash Has All The Makings Of The “Next Amazon”

Amazon’s future looked bleak after the tech bubble burst earlier that year. The online shopping pioneer was hemorrhaging cash, forcing it to cut 15% of its workforce. Top fund managers cut Amazon from their portfolios. And over the following year, its stock price sank from $105 to $5.

In 2000, Amazon was a small online store selling books and CDs. It soon branched out to other categories like electronics. But folks remained skeptical. That same year, Wharton business school quipped, “The attempt to be more than a bookstore smacks of desperation.”

Do you know what all these analysts got wrong? They failed to see that Amazon’s goal was never to create an online bookstore. It was building an entire delivery system for internet shopping!

It figured out how to put books into boxes and ship them to your front door, fast. Then Amazon used the same system to deliver shoes, screwdrivers, and thousands of other items.

Ever wonder why internet shopping is so popular?

The “killer feature” is being able to click a button and have the items arrive on your doorstep a few days later. Imagine having to wait two weeks to get your online order? It just wouldn’t work. In fact, 7 out of 10 Americans think three-day shipping is too slow.

In short, Amazon’s empire is built on fast shipping. It’s slashed delivery times from two weeks to two days and changed shopping forever.

And, of course, investors who ignored that BusinessWeek article—and bought Amazon for under $10 a share—are living the high life and deserve a round of applause. It currently trades for more than $3,000 per share and is the front-runner for “stock of the century.” But I’m not writing you today to think about “what could have been.”

Today, we can buy a disruptor ready to beat Amazon at its own game…

You likely know food delivery apps have surged in popularity over the past few years. Click a few buttons and Postmates, Uber Eats, Grub Hub, or Caviar will pick up your burrito from Chipotle and bring it to your front door.

In fact, these firms raked in over $45 billion in sales last year. The thing is, food delivery is a cutthroat business. Restaurants already have notoriously razor thin margins. Throw a delivery “middleman” into the mix and there’s even less profit to divvy up. Even after 17 years in business, Grubhub (GRUB) still bleeds red ink each quarter.

Most folks lump DoorDash (DASH) in with this pile of money-losing food delivery upstarts. DoorDash launched almost a decade after Grubhub. But today, it’s America’s most popular food delivery app, twice as large as Uber Eats.

If you want a Big Mac delivered to your house, you don’t open a McDonald’s app. You open the DoorDash app, order it, and it’ll be delivered right to your front doorstep. Just like there are Uber drivers waiting to pick you up, DoorDash has food drivers waiting to pick up and drop off your Chipotle burrito. And DoorDash’s opportunity is far bigger than late-night takeout.

Food delivery is to DoorDash what books were to Amazon.

In 2000, top business school analysts thought Amazon was just an online bookstore. They didn’t see the big picture. Once Amazon could ship books across America, it could delivery almost anything. Today, most analysts see DoorDash as just another food delivery app. But pizzas and burgers are only the beginning.

Getting fresh food into consumers’ hands is a hard job to get right. If DoorDash can deliver ice cream before it melts, or pizza before it goes soggy, it can deliver anything. In other words, it’s “stress testing” the system in the toughest arena of all. But DoorDash’s goal is to build “the local, on-demand FedEx.”

In other words, a near-instant delivery system for mom-and-pop stores that will ship everything from flowers to coffee to gas.

DoorDash is pioneering the “delivery of everything.”

Last year, DoorDash announced it was teaming up with Sam’s Club. Folks who get medication from one of its stores can opt for same-day delivery. You order medicine from Sam’s Club, and DoorDash will bring it to you that very day.

The disruptor also partnered with retail giants Walgreens and CVS. Now you can get thousands of everyday items through its app, delivered right to your door. It’s even joined forces with grocery chains like Walmart. And get this: DoorDash promises to deliver “more than 10,000 grocery items in less than one hour.”

The disruptor is following Amazon’s playbook to a T. Become an expert in one area, and expand into new markets. And DoorDash’s multibillion-dollar opportunity is to become the on-demand FedEx for small businesses.

As I mentioned a few months back, mom-and-pop stores are moving online for the first time ever. COVID has forced your local florist or butcher to start delivering. DoorDash is helping entrepreneurs thrive in this new economy.

This is great for businesses that need delivery but don’t want all the hassle that comes with it. Now they can reach new customers through DoorDash’s app, and have them ship the item. Millions of Americans already order food through DoorDash’s app. Soon, we’ll be doing the same for all kinds of items.

Why wait a day or two for bleach to arrive from Amazon when you can order it from a local store and have DoorDash drop it off on your front porch in an hour?

This is how DoorDash disrupts Amazon

Remember, Amazon built its empire on fast two-day shipping. DoorDash is taking us to two-hour shipping. And not even Amazon can compete with its armies of local drivers, ready to deliver parcels at a customer’s beck and call.

In fact, during the holiday rush, Shopify found almost one-third of consumers received items through local delivery. In other words, DoorDash made the drop instead of UPS or FedEx.

Five million Americans have already signed up for DashPass, a $9.99 monthly subscription that gives you unlimited free deliveries. Today, most of these deliveries are from restaurants. As DoorDash pushes ahead with “the delivery of everything,” DashPass could become a better, faster Amazon Prime.

If Jeff Bezos founded Amazon in 2020, I bet it would look like DoorDash. Consider adding DoorDash to your portfolio today.

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DoorDash’s Restaurant Advisory Council Gives Honest Feedback

DoorDash, the largest U.S.-based delivery platform, publicly announced the launch of its Restaurant Advisory Council, which is an ongoing program to gather feedback from restaurant operators on platform functionality, policy matters, future products and even the hot-button topics of delivery fees and customer data.

The Restaurant Advisory Council, which was first assembled last summer, included 12 small business owners, chefs and operators across the United States and Canada, all of whom are current partners of DoorDash. Council members served a six-month term via monthly group calls and an ongoing Slack channel. DoorDash is currently finalizing its second six-month term with an entirely new set of restaurant operators.

Katie Witman, DoorDash’s senior policy advisor, took the lead on the council and said her finance and operations background was ideal preparation to build more formal lines of communication between a diverse set of operators on the company’s expanding platform of offerings and services.

“It’s very critical to me to maintain that line of communication and get into that level of detail with our partnership and customers in order to actually build a solid product that’s going to be around for generations,” Witman said. “We know how we have to evolve our business to be good for our customers, but then there’s also the political angle of what regulators are doing that’s forcing us into change.”

Witman said involvement in the council reached the highest levels of the company, with DoorDash CEO Tony Xu participating in the first meeting. That involvement also included the company’s chief operating officer, head of marketing and chief revenue officer, among many others.

The group discussed ways of improving the DoorDash merchant portal, beta testing of a new customer feedback feature, delivery packaging best practices and suggestions from operators that led to an expansion of the company’s Winter Grant Program from $2 million of seasonal merchant support up to $10 million.

Witman said the group also contributed to the exploration of real-time COVID testing for Dashers, which Witman clarified is “something we’re exploring, and that feedback was very helpful and interesting to hear.”

“The advisory council has been something I’ve been working on, and it means a lot to me,” she added. “We really care about our merchants, I care about our merchant partners, and I want to make sure their voice is heard and without these partnerships we’re not a business, so this is critical to us.”

Charisse McGill of Lokal French Toast Bites in Philadelphia said her involvement in the Restaurant Advisory Council meant more than just having a voice in the future of DoorDash. As a relatively new restaurant operator with a focus on outdoor events rather than a brick-and-mortar restaurant, it was also helpful to help her learn more about the delivery business and plan the future of her company.

“Pre-pandemic, I’ll be honest, I had dreams of becoming the Auntie Anne’s of French toast in malls and high-traffic areas, but now I don’t think I want to be,” McGill said. “Now, I’m cool with being the Charisse of French Toast Bites.”

Staying afloat after recently leaving her previous “day job,” McGill said her experience has been one crash course after another in recent months including dealing with social unrest over the summer that also impacted her business.

Being part of a diverse group “challenged me in so many ways,” and she said she was pleased to bring her unique perspective as a black-owned, woman-owned, mobile-based business to the group of operators. Her tenure also included an on-stage interview with Tony Xu as part of the Main Street Strong Conference where he told her “don’t hold back, this isn’t a commercial for DoorDash.”

“I had to challenge myself to get out of thinking, just because it isn’t an issue for me doesn’t mean it’s not an issue for the greater good,” McGill said. “It helped me have a bird’s eye view of the industry as a whole and how I can contribute to make it better.”

Mark Lewis, of San Francisco’s Plant Cafe Organic, said he’s a “visual guy,” so meeting with DoorDash and other operators over Zoom was an ideal format that led to him learning about some of the solutions other restaurateurs were employing to survive this extended crisis.

Lewis enjoyed sharing his feedback on new tipping policies, and said it also helped him learn the difference between the various different products, from Drive to Convenience, and ways restaurants can utilize the expanding DoorDash feature set.

“I don’t think there was ever a moment when things got heated—there were times when frustrations were intelligently conveyed,” he added. “Frustrations got heard and got met with, and I think the council is really effective.”

Looking ahead as the second group prepares to get started, Witman said she is focused on speeding the pipeline between restaurant feedback and DoorDash’s product planning team.

“We’ve learned a lot in this first session, we’ve built restaurant relationships, we’re learning and we’ll evolve this program through the future,” she said. “It’s been an amazing experience and the best is yet to come.”

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Los Angeles restaurant owner reveals the crippling effect of using delivery services like Postmates and DoorDash after he had to fork out $35,000 for the sites’ service fees in 2020 alone

  • Los Angeles restaurant Ronan shared on Instagram that they spent a whopping $35,000 on app delivery fees last year 
  • The post said that Postmates, Caviar, and DoorDash charge them 20% of each order made through their apps
  • The loss was on top of pandemic income losses
  • Only the ordering platform ChowNow was affordable to Ronan with a flat rate of $1,500 for two years 
  • Restaurants have long complained about sky-high commissions for delivery services, which often charge 20-30%

By CARLY STERN FOR DAILYMAIL.COM

An LA restaurant is begging customers not to order from Postmates, Caviar, or DoorDash, saying that those delivery apps charge eateries 20 per cent of each order and are crippling them financially in an already difficult time.

Ronan, a restaurant on Melrose Avenue in Los Angeles, shared on Instagram on Tuesday that they spent a whopping $35,000 on app delivery fees last year.

Highway robbery: The LA restaurant Ronan is slamming delivery service apps Postmates, Caviar, and DoorDash for their sky-high commissions 

Pricey: Ronan spent a whopping $35,000 on app delivery fees in 2020, even as the pandemic put a dent in their business

Pricey: Ronan spent a whopping $35,000 on app delivery fees in 2020, even as the pandemic put a dent in their business

‘We just got our year-end financials back… Not only did we lose money (a given, pandemic and all), but to add insult to injury, we spent $35,000 on delivery service fees this year,’ reads Ronan’s Instagram post. Read More

‘Yes, we get charged 20% of your order anytime you order from us via @postmates @caviar or @doordash,’ he went on.

There is one ordering platform, though, that Ronan applauded: ChowNow.

They said that ChowNow charges restaurants a flat fee of $1,500 for two years of service with no hidden costs.

‘Please order via @chownow … for pickup or delivery whenever possible and help us get that number WAY down in 2021,’ the post concluded.

For what? According to Eater, most delivery apps charge restaurants 15 to 30 per cent of each order, meaning they earn significantly less than customers are paying

Restaurants have complained about delivery services for years, accusing apps like Postmates and Seamless of charging too-high fees on orders.

According to Eater, most delivery apps charge restaurants 15 to 30 per cent of each order, meaning they earn significantly less than customers are paying.

Food & Wine reported in March 2020 that Brooklyn, New York restaurant Samesa has a contract with Seamless that gives the app a 25 per cent commission fee.  

Reem’s in Oakland, California pays over 20 per cent after the owner partnered with Seamless exclusively and negotiated a slightly lower rate. 

Bhuna, an Indian restaurant in Portland, Oregon, pays 27 per cent commission to Caviar, 30 per cent to Grubhub, and 30 percent to Postmates. 

In February of 2019, when a San Francisco restaurant called Gaslamp Cafe closed down, they hung a sign in their window that read: ‘Ordering online does more damage to businesses than it helps. Any profit from sale is stripped away by the fees they charge the restaurant, which leaves only enough to cover the cost of food.’Read it and weep: In April of 2020, Chicago Pizza Boss owner Giuseppe Badalamenti demonstrated on Facebook just how much business lose to apps like Grubhub+4

Read it and weep: In April of 2020, Chicago Pizza Boss owner Giuseppe Badalamenti demonstrated on Facebook just how much business lose to apps like Grubhub

And in April of 2020, Chicago Pizza Boss owner Giuseppe Badalamenti demonstrated on Facebook just how much business lose to apps like Grubhub.

‘Stop believing you are supporting your community by ordering from a 3rd party delivery company,’ he wrote. ‘Out of almost $1,100 of orders, [the] restaurant you are trying to support receives not even $400. It is almost enough to pay for the food.’ 

He included an image of his restaurant’s March statement from Grubhub, which showed $1,042.63 in orders made through the app.

Then there were the fees: commission, delivery commission, processing fee, and promotions, all of which left Chicago Pizza Boss with just $375.54.

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Not UberEats site lists Toronto restaurants doing their own delivery

You might think you’re supporting local when you order from your favourite restaurant for delivery, but if you’re getting food from a third-party delivery app like Uber Eats, Skip The Dishes or DoorDash, there’s a good chance the tech companies are taking a big cut of the sale

To get around those fees, which can top out at 30 per cent for Uber Eats (possibly soon to be capped at 20 per cent), some Toronto restaurants have set up their own in-house delivery. And now a new website has launched to collect them all – not-ubereats.com.

Not UberEats is a catalogue of local restaurants doing their own delivery.

Randy Singh, a software developer and team lead at Scotiabank, decided to build the site over the Christmas holidays, a time when many local businesses were struggling. He quickly brought on his colleague Gamaliel Obinyan and sent it out to his friends just after Christmas. 

It’s been spreading from there, quickly going viral as an alternative to Uber Eats similar to the groundswell of support that met the site’s inspiration, Not-Amazon

There are now 60 restaurants in the database and more submissions than they can keep up with. People have also been reaching out to show appreciation. 

“There’s been a lot of traction, which made me realize we’re really onto something,” says Singh. “People want to support restaurants during this critical time.”

Neither Singh nor Obinyan are in the restaurant business, they just both like to eat from Toronto’s many excellent restaurants. Singh says he was ordering food about once a month, often from Uber Eats, when he came across an article about local restaurants’ frustration with the large commissions on sales through delivery apps

“When Randy first reached out to ask if I wanted to work on Not UberEats, I didn’t know the whole context either,” says Obinyan. “There’s so much publicity from Uber, Skip The Dishes and DoorDash telling you to support local by ordering from local restaurants, but you don’t know the reality of what it costs them to be on those platforms.”

Not every spot is equipped to do their own delivery, in which case ordering directly for pick-up is the best way to support them. Some are only on the apps, so they shouldn’t be avoided entirely. But there are at least 60 that do their own, and you can find them on Not UberEats. They also include a link to localeats.to – the delivery collective launched by Avelo restaurateur Roger Yang – for restaurants looking to set up their own delivery

Singh and Obinyan did the initial research to find out who to include, but now they’re open for submissions from either restaurants themselves or people who order from them. They say they’ve discovered a lot of restaurants they didn’t even know existed through their own database. (Singh says he just ordered Ramen Isshin, while Obinyan tried Tokyo Hot Fried Chicken – “one of the best sandwiches I’ve ever had.”)

No one is making any money off the site. Instead, they want to increase the profits for local restaurants. It’s a side project for both men, both of whom work full-time day jobs.

Not UberEats’ code is open source and Singh put it up on Git Hub for anyone to take or contribute to. People have reached out from Quebec and California, and he says he hopes they just grab his code and set up something similar in other cities.

And if Uber decides to come at them about the name?

“We’re not making any money off this anyway, but if they did have an issue with the domain then we could always just rebrand,” Singh says.

“We’re hoping Uber would be supportive of us supporting local restaurants,” Obinyan adds. “That is their motto. I hope they follow through with it.”

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DoorDash Is Hiking Customer Fees to Pay for a Law It Helped Write

In the months since a coalition of app-based gig companies successfully passed Prop 22 in California, exempting themselves from reclassifying their workers as employees, DoorDash has been silently passing costs onto consumers.

The company-funded Yes on Prop 22 campaign claimed that not passing the ballot initiative would result in higher prices for consumers, and in early December, news first broke that gig companies would be charging more anyway to cover the cost of benefits promised in Prop 22 such as a healthcare stipend and a minimum pay guarantee. It’s also not clear whether these new benefits warrant price hikes as an October 2019 study by the Berkeley Labor Center of Proposition 22 found that driver pay would come out to $5.64 an hour. Nonetheless, companies in the coalition signaled they’d have to pass costs onto consumers instead of absorbing them into their already unprofitable enterprises. 

Now, DoorDash is raising its service fee to 15 percent in California, which according to an in-app description “helps us operate DoorDash & provide a minimum pay guarantee to California Dashers. Service fees are, according to DoorDash, also calibrated by market demand and Motherboard has seen receipts where the service fee jumped as high as 21 percent.

A DoorDash spokesperson told Motherboard that the company is raising fee percentages for orders in California to cover Prop 22 and is keeping a close eye on the impact of these various price hikes and fee increases, adjusting them when necessary. It’s important to remember, however, that for DoorDash and other companies, that usually means when a policy is affecting the gig economy’s schemes to realize previously illegal profits.

Recently, DoorDash has been experimenting with how to respond to the wave of governments nationwide placing caps on the fees that third-party delivery services charge restaurants. DoorDash has already introduced additional fees for customers in Denver and Chicago and abandoned plans to hike fees for Washington D.C. restaurants using DashPass, but has silently introduced new fees in California to offset commission caps introduced by regulators. 

DoorDash also has a history of passing the costs of regulation on to customers. In November, San Mateo County introduced a 15 percent commission cap, which DoorDash responded to with a $2 “San Mateo County Fee.” In September, Fresno’s City Council introduced a 15 percent cap to help restaurants struggling during the pandemic, leading to DoorDash adding a $1 “Fresno Fee” on orders in the city. A more general $1.50 surcharge titled “Regulatory Response Fee” appears elsewhere, both in California cities like San Jose and Mountain View, but also cities in Oregon and Washington (the latter of which is home to the only statewide cap). Each of these fees offer largely identical in-app descriptions, explaining they allow DoorDash to “continue to offer you convenient delivery while ensuring that Dashers are active and earning.”

The fees, however, don’t ensure food delivery remains convenient so much as they ensure DoorDash can subsidize the prices. DoorDash’s enterprise is an unprofitable and unsustainable one—it offered “convenient delivery” before going public because it was flush in venture capital and will offer “convenient delivery” now because its IPO raised billions more in investor capital despite never turning a profit.

Now that it is facing the possibility of more caps and regulatory action, it appears DoorDash was right when it warned investors that its business model—specifically, its pay model—were investment risks. If regulators reduce its ability to minimize labor costs and raise revenues from restaurants and delivery drivers, DoorDash (and other affected gig companies) will be forced to increasingly hike fees on consumers and risk losing them to competitors or traditional restaurant delivery options. 

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Denver-based ‘virtual kitchen’ concept enters Memphis market

Geoff Madding, CEO of Nextbite, defines the concept as a “virtual kitchen.”

Madding has a background in restaurants and startups. He combined the two to start Nextbite, which recently entered the Memphis market.

The company began as an outgrowth of the tech company Ordermark, which consolidates the ordering process for restaurants using third-party delivery companies such as GrubHub and UberEats. Those companies give the restaurants individual tablets for processing orders. With Ordermark, one tool is used.

“The same technology cannot just aggregate orders, but it can also allow you to spin up a virtualized restaurant,” he said.

Nextbite partners with restaurateurs who fulfill orders based around the concepts and recipes provided by Nextbite.

Among the 12 Nextbite concepts are The Big Melt (patty melts); Monster Mac (mac and cheese); Toss It Up (salads); and Mother Clucker (Chicken).

In the Memphis area, Grilled Cheese Society, Outlaw Burger, and Mother Clucker — all Nextbite concepts — are run out of a kitchen at 1525 Airways Blvd., the former home of Smackers. The Smackers owners are not involved. The Memphis partner in Nextbite is unknown.

Nextbite is based out of Denver, Colorado, and was formed about four years ago.

“We create all the recipes and we provide all the training,” Madding said. “We let you use your existing supplier. We spec out all those different suppliers so that you can continue to order through your existing supply chain.”

It’s designed so that restaurateurs can continue to operate their own restaurants while making extra money by working with Nextbrand.

But, Madding is careful to say that Nextbite is not a franchise.

“I want to be really careful with that, because we do not franchise,” he said. “We have what we call fulfillment partners. There’s a lot that goes into franchising. It’s long-term contracts; it’s long-term commitments; there’s usually a lot of capital involved. That is not the way we are. We have partners who have signed a contract with us and within 16 days have been fulfilling orders out of their restaurants. Our contracts are all month to month. There’s no long-term commitment. There’s no upfront or ongoing fees that you pay us.”

Nextbite is currently in 40 states. Madding said that, ultimately, it’s pro-restaurant.

“This has kept them alive now, which is great,” he said. “It’s doing what it’s intended to do. Our intention was always to design the solution to be flexible, to be lightweight, to be an add on to their existing business. The smart restaurateurs out there going forward, the ones that make it through this tough time, are going to be the ones who have figured out how to really maximize their space, have figured out how to maximize their different delivery, and to maximize the relationship with their customers.”

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Bringg, Uber team up for same day retail delivery

Delivery and fulfilment cloud platform provider Bringg has partnered globally with Uber to facilitate the retail delivery experience for customers across the world. 

This partnership covers retail and B2B sectors and allows Bringg’s customers to have access to drivers through Uber Direct, which enables them to provide same-day and next-day delivery. There is no need to sacrifice key delivery elements like branding, measurement, visibility, or quality.

The collaboration with Uber provides retailers with flexibility in the delivery cycle, ensuring that customers get their orders when and where they want and enabling them to do so without compromising quality or profitability in the delivery cycle.

The global partnership expands Bringg’s customers’ delivery networks while offering them the ability to measure and manage every fleet of drivers through a single platform. Key capabilities include driver tracking for visibility and synchronised driver arrival and order prep, which ensure just-in-time preparation and handoff, for optimal speed and efficiency. 

For Uber Direct, the partnership enables them to launch its services to retailers and accelerate time to market. Leveraging the Uber Direct platform will allow Bringg’s customers to handle on-demand delivery orders placed via an app or website, as well as enable them to own the customer experience end-to-end.

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New California Law Raptures Thousands of Restaurants From Postmates, DoorDash, and Grubhub

A California law that took effect on January 1 has prompted the removal of tens of thousands of restaurants from food delivery apps like SF-based Uber Eats, DoorDash, Postmates, and Caviar. The law, which was approved last fall, requires apps to offer delivery only from restaurants with which they have a direct partnership and to pull listings from any restaurants with which they do not have a current contract.

The legislation was born out of a scandal that began in the Bay Area: In January 2020, Pim Techamuanvivit, the owner of San Francisco’s Michelin-starred Thai restaurant Kin Khao, was stunned to discover that delivery services including GrubHub, Seamless, DoorDash. and Yelp’s delivery platform (also GrubHub, as it purchased Yelp’s Eat 24, then shut it down) were offering food purportedly from her menu for delivery without her permission.

Her angry tweets on the issue shed new light on a common practice for most delivery apps, by which the companies admittedly added restaurants without their permission, an effort to attract customers by seeming to offer deliveries from more restaurants than their competitors. The policy has been a thorn in the side for many restauranteurs, who say that the apps often publish inaccurate or out-of-date menus … and when the restaurant refuses to serve food from a long-stale menu, the apps place the blame on the restaurants instead of shouldering it themselves.

“As far as the customer knows, the fault is mine,” Eli’s Mile High Club owner Billy Joe Agan told Eater SF when his Oakland bar was unexpectedly descended upon by delivery drivers seeking orders from a menu last used in 2016. “A customer makes an order, they assume it’s made as part of a partnership between Eli’s and an app, and then I’m saying no. Then the delivery app tells the customer ‘They refused your order’ and I’m the asshole, even though I’ve never agreed to be on any of these apps.”

By February 2020, the issue had attracted the attention of San Diego-based California State Assemblywoman Lorena Gonzalez, who proposed Assembly Bill 2149, a law that would block non-consensual app listings. The legislation sailed through the approval process and was signed into law by Gov. Gavin Newsom in September. Its final language states that to list a restaurant on its platform, food delivery apps online company must have a contract with the restaurant “expressly authorizing the food delivery platform to take orders and deliver meals prepared by the food facility.”

The law, which took effect on the first day of 2021, could have a huge impact on the options available to diners who use these apps — as well as the apps, themselves. According to the Wall Street Journal, as of September, Uber-owned Postmates, for example, boasted 700,000 restaurants on its app. Of those, only 115,000 had a partnership agreement with the app. In California alone, Postmates said in September, 40,000 of the restaurants they list would have to either be converted into paid partnerships or removed.

Other delivery apps, like Doordash, find themselves better prepared for the new law. According to the WSJ, over 95 percent of its Q3 business came from restaurants with which it already had partnerships. Even so, the news of the California law prompted a drop in its stock price, which saw an all-time low of $135.38 after a high of $195.50.

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