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A New California Law Removes Thousands of Restaurants From Food Delivery Apps

There's a good reason why your favorite spot may not want to be listed on a particular platform.

uber eats Photo: courtesy Zhuo Cheng you/Unsplash

While many restaurants have depended on takeout to stay afloat during the pandemic, there’s long been an unease between these dining establishments and Silicon Valley food delivery apps. One of the most common bones of contention are the fees that many municipalities have capped during the pandemic. Yet, even before Covid-19, restaurants were irked by delivery app practice: listing their businesses without permission. A new California law that went into effect on January 1 has now barred Uber Eats, Seamless and more from putting a restaurant on their platform in the Golden State if it doesn’t have a stated agreement in place.

On first glance, it may seem strange that restaurants would fight to not be listed on one or all of these platforms, as that could put a dent in sales. The problem is that being on the apps without permission means giving up control. In some cases, the delivery menu for a restaurant is different because it includes food more suited to traveling over a distance. So someone could order a menu through the app only to get a message back that the restaurant won’t fulfill the order. Also, restaurants don’t have control over a spike in orders to the restaurant during busy times (a problem online reservation company Tock solves by having restaurants open up time slots to sell, so it isn’t overrun with orders it can’t fulfill in a timely manner). Customers won’t necessarily direct their anger at the app for missing items or long wait times; instead they may blame the restaurant—even though it’s not the restaurant’s fault.

And, in an extreme case that helped spur the push for a new law in California, Seamless listed and took orders for a restaurant that didn’t even offer takeout. Pim Techamuanvivit, who owns Kin Khao in San Francisco, received a customer complaint about a delivery order that they never received. That surprised the Michelin-starred chef, who didn’t make her food available for takeout. She found that Seamless and Grubhub had scraped her information and listed the restaurant name and address as available for delivery. She searched and found the same to be true of Yelp, then shared her findings on Twitter.

Grubhub said it was an error and removed the listing. However, it shed more light on the company’s practices. Like many Silicon Valley startups, the delivery apps follow the ethos of “move fast and break things” and “disruption.” In this instance, these business practices came at the expense of restaurants they claimed to be helping. Grubhub wanted aggressive growth, so it had a strategy of listing restaurants on its platform, regardless of their consent. And then these tech companies put the onus on the restaurants to play the game of Whack-a-Mole to find their businesses on platforms and petition to get them removed.

Now, those practices won’t be allowed in the Golden State, as the Fair Food Delivery Act that Gov. Gavin Newsom signed into law in the fall has taken effect. The act could put a significant dent in Postmates (owned by Uber), which has a big presence in Los Angeles and, as a of September, only had 115,000 of the 700,000 merchants across the country signed up as partners, reports the Wall Street Journal. Others may be less affected, as the platforms have been working since September to get more of the restaurants on their service signed up to prevent a drop off in listings. Still, the law is a win for the beleaguered restaurant industry.

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