Only the courts can save them
App lawsuits in NYC highlight the "uniquely crappy" business of restaurant delivery.
In June, the New York City Council finally passed a delivery worker minimum wage requirement that had been in the works for years. It set the hourly rate at $17.96 with plans to increase it over time. The legislation was immediately heralded by advocates and supporters in the city, while the large delivery companies spoke out against it, even threatening legal action.
On Thursday, they made good on that promise. DoorDash and Grubhub filed a joint lawsuit in the city against the minimum, which would have gone into effect this week. Uber filed one of its own, and local delivery provider Relay, added a third. On Friday afternoon, a judge ordered the city to delay the new wage’s implementation, pending a hearing on July 31.
In a Thursday blog post titled “Why we’re filing a lawsuit on the NYC earnings standard,” DoorDash explained its reasoning. The new law is based on flawed assumptions and an incomplete sample of delivery workers surveyed, it said. Plus, the wage requirement applies only to companies delivering from restaurants, not to those providing only grocery delivery.
“Restaurant delivery is a uniquely crappy business,” Len Sherman, executive in residence & adjunct professor at Columbia Business School, reminded me during an interview last week. The per-order value is typically low, margins are slim all-around, and it’s easy (enough) for anyone to get in on the delivery action. This helps to create what Sherman called an “extremely inefficient and high-cost service.” Plus, he said, there’s a low and shrinking consumer willingness to pay more or even tip couriers for delivery orders.
Sherman and I last spoke nearly two years ago on a familiar topic: large third-party delivery services using their resources — and the courts — to influence a different policy decision, proposed permanent commission caps.
Now, the companies are back to litigating themselves out of what could be a true threat to their business.