DoorDash's suit on data privacy in NYC

What is meant to help restaurants actually puts them in a sticky situation and also hurts consumers' right to privacy

I am back!

I took another month off from writing this newsletter and spent time in Yellowstone and Grand Tetons to do a lot of thinking. There isn’t much else to do when you are left alone with just your mind and miles of trails in areas with no cell service.

Since mid-September, we’ve seen DoorDash file a lawsuit against New York for its ordinance compelling third-party delivery platforms to share customer data with food service establishments. For simplicity, I’ll just refer to these food service establishments—which also encompass bars, food hall kiosks, quick-serve concepts, and more—as restaurants.

And while the suit is active, the city agreed early last month to hold off on enforcing the law for the time being. As the suit drags on, I wanted to take a look at it to figure out what it entails and articulate some of the issues that I have with it, as consider some of DoorDash’s arguments against the law.

Breakdown of the ordinance

According to NYC Int. No. 2311-A and NYC Int. No. 2311, the following are the main points of the local law:

  • Customer data includes the following:

    • Customer’s name

    • Customer’s telephone number

    • Customer’s email address

    • Delivery address of the online order

    • Contents of the online order

  • Food service establishments can request “all applicable customer data” to be furnished on a monthly basis (or on a quicker cadence if requested)

  • All customers are presumed to consent to this data sharing, unless they actively opt out each time they order through a third-party food delivery service

  • Data can be used for “marketing or other purposes” outside the third-party food delivery service’s ecosystem

  • Data is not to be sold, rented out, or disclosed by restaurants to any other party in exchange for financial benefit unless express consent from the individuals has been given

  • Customers can request deletion of their data from restaurants at any time

As we will see below, the ordinance’s vast scope creates issues on behalf of consumers’ privacy and also makes assumptions that in spite of trying to be be in the interest of the restaurant, are actually harmful to all parties involved.

Restaurants aren’t winning here, despite what the ordinance wants us to think

The public company ($DASH) makes several valid points in its filing (which of course is done so with a self-serving purpose). I want to take the opportunity to explore three of them: consumable data; consent and privacy; and data protection.

Give us all the data

It does not appear that anyone remotely familiar with data privacy or ethics was consulted in the development of this bill. One of the first questions that should be asked is what purpose does each field of data serve? For me, I limit the data I process to names and email addresses only, since that is what I strictly use for my customer satisfaction surveys and promotional emails. I have no immediate use for mailing addresses or phone numbers, so I readily discard those data sets, as opposed to house them and carry the burden of data protection.

The approach that is apparent here in the drafting of the ordinance was one that casted an oversized net, necessitating third-party delivery platform to give restaurants everything from the customer’s full name to address to what they ordered follows a “do it now, ask questions later” approach.

The argument could be made that the all-encompassing information gathered can help small businesses in driving hyper local marketing and advertising campaigns what with having the actual delivered-to addresses. But is a faulty premise.

In addition to the issues with data safety, I’d point out that not a lot of these small businesses have the knowledge to make use of such data or the funds to implement such campaigns. In a more likely scenario, businesses may want to have addresses and phone numbers to create additional points of contact to re-engage with customers, but the question of how to do so effectively and ethically is one that remains.

Consent

The ordinance is fixated on this relationship between third-party delivery platform and the restaurant, but forgets that the consumer is very much involved as well. With a lot of our online purchases, we’ve become accustomed to buying something once and receiving a never-ending deluge of promotional emails thereafter. This practice is known as “implied consent”, and it is way to grow email lists, but they are not necessarily the most engaged lists, since it includes a wide gamut of gift, one-off, and sometimes, frequent purchases.

But have you ever received mail from somewhere that you never shopped from, but seems kind of similar to what you would’ve bought? Think about those Broadway shows or those pre-approved credit card applications. That’s what the ordinance is trying to get at here with this sharing of data from delivery platform to restaurant where you can receive marketing from a multitude of sources.

At the high level, I don’t mind that idea. I’m ordering from a specific restaurant, and would like to know a little more about them. A lot of what we see now, though, especially as we move toward a more mindful approach in how customer information is acquired is the active opt-in, whereby you have to actually click a box stating you want to receive promotional emails from said company.

But what the ordinance wants to do here, though, is something that is antithetical to moving forward in data privacy and protection. Instead, by stating that the consumer will always be presumed to consent to data sharing unless they actively opt out every single time they order from a place, the onus of privacy—as opposed to that of active participation—is put on the consumer. It is also a more positive marketing and relationship-building tactic to have a customer say they want to hear from someone once, as opposed to having the customer reinforce with every purchase that they do not want to hear from a business.

Ownership of data and best practices

Considerably glaring is the lack of consideration of what it takes to house data in terms of monetary expense and knowledge. If we look to Mailchimp as an example (which is what I use) as a CRM (customer relationship management platform), there is a free tier, but if you are a small business that relies on delivery, you are bound to exceed the 2000 contacts at some point during business operations. And after those 2000 contacts, the monthly fees can add up.

The better question to ask, though, is whether or not restaurants see a CRM as a necessary and beneficial expense. Some businesses may very well just use an Excel sheet under the guise of it being a free service, but not realize that there are potential liabilities at stake here. In the event of a breach or theft, how are small businesses expected to cope with any potential fallout? They are most likely far from proficient in the area—their area of expertise is hospitality, not data security.

The ordinance’s clauses about not selling data unless express consent is given or to delete customer information upon request again shift the burden of data handling onto the restaurant. Again, these nuances are not their expertise. I have seen such types businesses share customer lists, not realizing there is anything wrong with it, and not know how to delete customer data that they weren’t sure they even imported in the first place. With that said, there is no mention of a specific body anywhere in the bill that will oversee compliance of these rules.

To back up this concern of availability of data and inability to handle it properly, both Tech:NYC and the Electronic Frontier Foundation cite concerns that this bill leaves the consumer’s right to privacy out of the equation. DoorDash, of course, it believes it is the responsible party here, given that it is able to hire those that specialize in data protection and pay for the services that house the information safely, but I believe we can empower small businesses as well if given the opportunity. If we are going to make consumer data readily available—which again, I believe should be opt-in, as opposed to opt-out—small businesses should be given the resources and tools as companion pieces to the customer information that is being solicited.

DoorDash is indeed looking out for DoorDash

Where there are the valid points that contest the ordinance’s current reach, there are also the arguments that are more self-serving than anything else. Specifically, when citing that the ordinance would impact DoorDash’s trade secrets, provide a pathway to the development of new and competing products, and a violation of the equal protections clause, the case makes itself clear that the lawsuit here is about protecting DoorDash’s interests first, and maybe the consumer second.

Trade secrets

One of the most aggressive assertions that DoorDash makes is that the ordinance will “allow restaurants to free-ride on DoorDash’s confidential, commercially valuable data.” The amount of first-party consumer data that the company possesses is what they regard as their trade secret—it is going to be their moneymaker, they believe. After all, this statement comes on the heels of the public company making a play to court advertisers with its advertising offerings. But to say that the restaurants are benefiting from the platform for free feels reckless.

Even though DoorDash provides the platform for restaurants to sell in an expanded ecosystem with delivery, these small businesses are doing the work and heavy lifting that has created such a large database of consumer data. Granted, the contractual agreement allows for DoorDash to own the customer information that passes through the system by their playing the middleman between restaurant and new customer.

And DoorDash tries to make this distinction clear: its contractual dealings with the restaurant have been fulfilled (a marketplace to sell on where they take a % cut). Providing consumer information is another transaction, albeit one where DoorDash does not gain anything outright. However, contractual law aside, it is hard not to associate the two transactions with one another. Sure, I get that we are talking about a second dealing or contract, but how about we not bite the many hands that have made you so plump?

Development of new and competing products

In perhaps is a way to lay the groundwork for the argument for equal protections, this lawsuit posits that by providing the trade secrets (i.e. customer information) that businesses can “aggregate [the data] with other restaurants to create a competing delivery platform. Yes, there are co-op delivery services, but if we are talking about something that can take on a public company with a current market cap of $65.83B, we’d need a lot more than customer names, emails, phone numbers, and addresses.

If the market cap number doesn’t faze you, let’s look at market share. DoorDash commands a 57% share of sales across the US as of this past September. Customers may not be loyal to a single service in particular, but a ragtag band of restaurants isn’t going to upend the public company with this ordinance.

Corporate personhood and the fourteenth amendment

As a reminder, I am not a lawyer. I am just interpreting what I read, learning as I go, and piecing everything together in attempts to make sense of what I observe.

Among DoorDash’s causes of action for such a suit, the company cites violation of the Equal Protection Clause of the United States Constitution (42 U.S.C. § 1983). Usually, we’ve seen this clause used in cases for individuals, as the clause itself states:

All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside. No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.

However, we have seen cases—Citizens United v. FEC and Burwell v. Hobby Lobby Stores, for instance—in which corporations have adopted personhood in order to leverage an equal protections argument. It’s not to say that “we the people” as corporation has always been widely accepted. There has been opposition to the treatment of corporations as “we the people”, citing corporations as artificial vs. natural persons (Justice Rehnquists’s dissent in Bellotti) and a stretching of the Constitution’s definition of personhood (Justice Steven’s dissent to Citizens United).

For two or more groups to be treated differently than one another, the court must determine if the favoured party falls under a suspect classification (a class or group or persons meeting a series of criteria that suggests they are the likely subject of discrimination; think Board v. Brown).

Some of the criteria cited in previous equal protections cases have included:

  • Having been historically been discriminated against or been subject to prejudice, hostility, or stigma

  • Possess an immutable or highly visible trait

  • Having been historically unable to protect themselves via political process (“discrete” and “insular minority”)

In DoorDash’s case, the delivery platform says that it is being unfairly discriminated against. While third-party delivery platforms contracted with 20+ food businesses are legally bound to the ordinance (and to the fee cap law), delivery platforms that work with fewer than 20 businesses are exempt. This number of 20 businesses strikes a chord with DoorDash, who claims the number to be arbitrary. And I agree with them. There isn’t any proof that this specific number is a tipping point of a small vs. large business. But this argument is a red herring, distracting us from who needs the actual protection.

Another example that DoorDash cites as a violation of their equal protections is that other third-party platforms, such as reservation systems, are not obligated to disclose customer data. As a quick counter, such data is often available to restaurants; it might have to be requested, but it is seldom withheld from my personal experience. In any, this argument is yet another distraction from the actual discussion.

The real question for the courts is who is the actual other group—is it the emergent delivery platforms, other types of third-party platforms, or is it the restaurants? If DoorDash positions itself against the first two, they are much more on equal footing with one another. However, if we position it as a case of DoorDash vs. small businesses, we can see where the argument for equal protections may fall. Given that these small businesses often do not have the resources to protect themselves against unfair the legislation that has allowed big tech to flourish, being able to regain a part of the ecosystem that has made delivery platforms succeed may actually be leveling the field, as opposed to making it disadvantageous.

Again, not a lawyer, so I may very well be wrong here, but I figured I’d share my interpretation of suspect classification and how this particular argument could go.

What do restaurants really need when it comes to data?

Being able to craft a full sales funnel digital relationship with customers is what restaurants need now more than ever. With so many of the interactions taking place online, these small businesses cannot just rely on their social accounts, which are only a part of the equation. Especially when you don’t have the ad dollars to put behind a spend on social, these marketing tools become more about the brand, as opposed to performance, and more about generating awareness than conversions.

Third-party delivery platforms, for better or worse, are a source to piggyback off their large sums of ad dollars on TV, digital, and out-of-home ads for a chance at growing an audience while generating sales. This revenue benefits both the restaurant (minus the commission) and the third-party delivery platform, but we unwittingly, as restaurants, sell ourselves short in not knowing that we should be getting more for having helped propel these platforms into giants.

Yes, DoorDash does have a product (and GrubHub too) that lets the restaurant own first-party data, but it’s not enough to create a product that generates CSVs of customer information. And it’s also not enough to create bills that tell platforms to give us a fairer exchange for our work. None of this information is helpful if it isn’t used and if the consumer isn’t a willing active participant.

What we need are actual local laws that give the consumer the right to protect their details and the opportunity to share their information if they would like. And for restaurants and other food establishments, they need to be equipped with at least the basic tools and skills to actually use this data so that they have a chance to succeed and grow their business. I would love to see these third-party platforms create a best practices guide and walk restaurants through the do’s and don’ts of housing first-party data. If at the very least, I hope that the small businesses who might read this newsletter consider asking their delivery platform account managers for resources, and to start researching CRM best practices on their own.

Further reading

Thoughts on value

Just because you can get away with paying only $1 for dumplings, should you?

I wish I could say I intentionally took most of August off, but unfortunately, the time away from this newsletter had more to do with episodic depression, which happened to be exacerbated by a few things, including this gem.

Anyway, coming back to what I wanted to talk about. Recalling my discussion of authenticity in food in which Goffman’s actors and their roles are ones that have been established by a mutually agreed upon set of conventions. These agreed upon norms happen to incorporate the ideas of mainstream culture—and one of these ideas that I want to touch upon is that of perceived value.

Apply the concept of value to food, and I can only begin to tell you the number of statements that I read where a dish’s value is tied to a culturally accepted sentiment. And it is these deeply rooted notions that inadvertently result in gatekeeping cultures and their respective dishes from a going beyond a certain price threshold. Or more simply: the expectation that certain foods are always meant to be “cheap”, and that for them to command more than a certain price tag is impossible to fathom.

Here are a few examples from Yelp and Google Reviews that I pulled up from July:

“There are so many cheaper options around.”

“You can easily get ten dumplings for a dollar.”

“The food is so overpriced”

These comments come from everyone, including fellow second-generation folks, who have accepted that dumplings, in particular, have a price ceiling that they cannot pass. The base line is so often referred to, especially with quotes of specific price points, because it has become a presumed authority.

If dumplings are such a “cheap” item in the food hierarchy, are they also really that inexpensive to make?

Math time

Given that it takes an experienced worker to fold 200 dumplings per hour, let’s assume that four hours in a day is spent hand-pleating dumplings.

The food costs for these hourly churned 200 pieces come to a total of $24.84. If we were to take the stance that there is no food waste—an ideal but extremely unlikely scenario—the cost breakdown is as follows for chicken and cabbage dumplings:

  • Pre-made dumpling wrappers: $9.33

  • Ground chicken: $9.82

  • Ginger, cabbage, and scallions: $3.16

  • Seasoning: $2.53

If pre-made dumpling wrappers aren’t used, then we’d have to factor in additional time for dough prep and rest—which gets to my later question of the value of labour.

For this simplistic calculation, when we take the equation of (200 pieces) / ($24.84 food cost), we end up with a food cost of 12¢ apiece for chicken and cabbage dumplings.

These costs presume that certain ingredients, such as seasonings, are bought in bulk and through purveyors, and that the ingredients are sourced from purveyors and vendors, which offer more economical pricing due to scale.

At a base cost of 12¢ apiece, I can see how many are quick to surmise that dumplings are a “cheap” food item. However, not only are we leaving out the fixed costs of operating a business, but also the value of skilled labour.

Value of expertise and time

Sometimes I hear from second- and third-generation folks that dumplings should not be priced “so high” because their parents and grandparents can make them for less than the posted price.

Sure, you can make any food at home by paying only for raw goods, but are you expensing your time? Do you value the time you spent looking up the recipe, fumbling at attempt after attempt, or the inconsistent batch you ended up making?

And when you refer to your experienced family members, do you value the time they spent learning how to make each fold consistent? Do you value the time they spent honing this skill? Do you value the expertise that makes their finished products look so much better than yours?

Personally, in the hour that a skilled worker can fold two hundred dumplings, I end up with about three dozen misshapen inconsistent morsels.

This argument that I hear of how family can fold dumplings at home for so much less strikes a nerve with me because it so aptly reminds me of how devalued housework and home labour is. Just because you can do something at home doesn’t meant that expenses should go out the window. Value your time; value your parents’ time; and value your grandparents’ time. Not to mention, add value to the practice that it has taken to perfect this skill.

To evaluate how much each dumpling costs when labour is factored in at a business, let’s assume the minimum wage for what the lowest cost per unit is, then the $15/hour brings up the average cost per unit to 20¢.

= [(Cost of Goods for 200 pieces) + (Hourly Labour for 200 Dumplings)] / (Total Number of Pieces)

= [($24.84) + ($15.00)] / (200 pieces)

= ($39.97) / (200 pieces)

= 20¢

Even if you were to contend that some dumplings are folded at shops that are family-owned, and therefore there’s no labour expenditure, I’d ask you to reconsider. Why would you insist on devaluing expertise and skill just because someone is willing to suppress their salary from the equation to make prices work economically in your favour?

Then there are the other things to consider

So far, I’ve covered only the raw cost of goods and the hourly labour needed to wrap the dumplings. I’ve left out the math of operating a business: the fixed costs of rent, insurance, unemployment, licensing, garbage pickup, electricity, and more. And to be fair, I’m not as great at calculating this one out since I’d have to spread the costs across varied projects.

But what I can include in our consideration is the labour of preparing the ingredients and work space, and breaking down and cleaning the station after use. Even if the employees are prepping and cleaning for other work projects, we can still attribute a number to the cost.

For the purposes of this exercise, let’s assume that it takes two hours to prep the filling and clean the station thereafter, and that we are folding 800 dumpling pieces for the day.

= [(Cost of Goods) + (Folding Labour) + (Prep and cleanup labour)] / (Total Pieces)

= [($99.38) + ($15 * 4 hours) + ($15 * 2 hours)] / (800 pieces)

= ($189.50) / (800 pieces)

= 24¢

Without even considering fixed costs, we are almost at a quarter per dumpling in food and labour costs. The way that you find that most of Chinatown makes money is by selling through volume, as opposed to margin—and this illustration is indicative of how this is the case.

And if we want to get into the discussion of machine-made dumplings, I can tell you that in order to be able to operate the machine, you still need to know the fundamentals. How can you know what the output is supposed to be like if you don’t know any of the basics? Never mind that, let’s also consider that there is still a lot of manual labour involved in terms of preparing the filling and dough, pacing production, and ensuring quality assurance. The machine is a tool—it is not a replacement. As such, it merely increases the output, and does not depreciate the knowledge needed.

In short: yes, you should be paying more

We should be paying more for what we consume. Stop subscribing to the misinformed notion that certain cuisines—particularly Chinese food—should be cheap.

So, as a first step, how about you consider the price to cost ratio when you are grabbing a to-go order of dumplings, and add a few dollars to the tip bucket to help even out what you should be paying in 2021?

And as a second step, can we stop talking about how certain foods are “cheap”? Such a word has become synonymous with casting a barrier that never never allows certain foods to move at the same pace as economic inflation or to evolve in the cultural landscape. Let’s start with changing how we talk about food; if anything, food can be affordable.

Further reading

Thoughts on authenticity in food

And some snippet updates

Unfortunately, I read all the Yelp and Google reviews we receive across all our restaurants. I often see folks cite the food as not being “authentic” enough as the reason for their disdain, which seems to imply one universal truth for how food should be. This assertiveness between right and wrong in taste feels rather strict for something that is, in reality, subjective, and cannot be commanded by a single arbiter.

What forms this purported authority on authenticity? It seems, to me, that it is based on a set of stringent beliefs—ones that are, more often than not, informed solely by personal experiences. This strong and rigid commitment that some people have to authenticity is due to, what I surmise as, a strong commitment to the personal as truth. In turn, objecting against what constitutes as authentic is akin to confronting the idea that the individual’s past does not serve as universal fact.

Drawing on a recent example, there was a Yelp review that I read a few weeks ago where the reviewer cited having lived in southern China for years and therefore perceived themself as an authority on what was authentic dim sum. Their point of reference situated themselves not only in a specific geographic setting, but also within a certain period, which precisely echoes what Clarissa mentioned in her tweet above of this very notion of authenticity tying itself to an arbitrary time and place.

To get at these ideas of what I’ve found people have come to expect out of certain culinary experiences vs. what we are seeing now, I’d like for us to consider sociologist Erving Goffman’s concept of dramaturgy.

The world is literally a stage

One of the first texts that I had to read in university was Goffman’s The Presentation of Self in Everyday Life, wherein he explains his concepts by using the imagery of theatre to illustrate the nuances of social existence and interaction.

At the core of each interaction is the actor—the central individual—and the audience. The latter is comprised of other individuals who observe the negotiations between identity and space, as well as react to the actor’s performances.

And within this ecosystem, we are presented with two settings: the front stage and backstage. The front stage is where the audience observes the actor’s performance. Aware that they are being watched, the actor performs their part, while adhering to the agreed-upon social conventions. But it is when the actor retreats backstage that they are able to shed the accepted guise and relax as their true self.

Specific to the front stage is the actor’s deployment of “impression management”. In order to influence the perception of their performance, the actor both consciously and subconsciously self-regulates and -controls what is shared and observed with the audience.

If the above sounds familiar, it’s because we all have been making some effort at self-presentation throughout our lives. There are numerous “front stages” on which we perform, such as our workplace with our coworkers or at a bar with a first date. And when we retire for the day, backstage can constitute as our own apartment or an unfiltered group chat with close friends.

Applying dramaturgy to “authenticity”

Coming back to the topic on-hand, I’d venture to say that the very idea of authenticity, as we refer to it, is rooted in: a) the actor catering to the audience’s expectations; b) the audience’s values of what ought to be being informed through these and other personal experiences; and c) continued reinforcement of a through b and vice versa.

Where Chinese food has been ever-so present in North America for the last two centuries in both urban and rural spaces, its identity, as portrayed by various actors, has been continually reinforced by the audience’s expectation of what it has been and assumption how it should continue to exist as such. But these expectations and assumptions aren’t homogeneous in the least. As we can see in Ann Hui’s Chop Suey Nation, for instance, what constitutes as Chinese food in Canada varies across provinces with regional dishes (such as “Newfoundland chow mien” and Alberta’s “Chinese pierogies”).

This existence of multiple performances and audiences particularly come to light as cross-cultural exchanges have made themselves more readily available with tourism (barring the pandemic's effect in halting on travel). Going beyond the regional influences within North American Chinese food, there is a bevy of differences in experiences when it comes to Chinese food around the globe. And so the chef as actor comes to perform on a front stage that is now host to a wider variety of audiences and expectations. In which case, there is no level of impression management that will satisfy everyone.

In addition to the performance for others, we must also keep in mind the experiences that inform the tastes of second- and third-generation chefs are so vastly different from those of the first generation. No longer is the backstage informed solely by a monolithic background, but rather, it is instead a confluence of the immigrant household and the Western experience outside of the home.

As an example of this evolving backstage, when we opened the Nolita storefront, I described the menu to friends as the dishes that we grew up eating but adding the toppings that our parents told us weren’t “traditional”. We were being naughty, as I’d like to joke. To add a condiment that blended bacon and X.O. sauce to dumplings was very true to an upbringing where my family would store bacon in the same fridge that housed bittermelon. It is to say that just because my experience with food is different than someone else’s, it doesn’t mean that mine is any less authentic. It’s simply different.

This fixation on a cultural food cannon is unnecessarily rigid. Instead of obsessing over how the food “ought to be”, go along for the ride. Think of any dining experience like a book—you’re never going to get into it if you expect the plot to always follow a certain prescription. Part of going out to eat at a restaurant is to see someone else’s point of view; sure, they are still putting on a performance but isn’t it time that they should be able to share a part of themselves with you without pre-conceived opinions?

In other news…

  • Fee caps on third-party delivery platforms in NYC are now law (Pix 11)

  • Congress introduced the ENTRÉE Act to add $60B to the Restaurant Revitalization Fund (Nation’s Restaurant News); per Section 2(b), this bill seeks to provide relief for the Fund without the obligations of fulfilling Priority Groups

  • Excluded Workers Fund applications are expected to open this month; however, the DOL’s requirements are looking fairly restrictive (NY1)

Further reading:

So, who really benefited from the Restaurant Revitalization Fund?

The SBA released a data set detailing approval dates, names, and dollars

Are we better off knowing? I don’t know.

The SBA responded to the Independent Restaurant Coalition’s FOIA request with a data set detailing the recipients of the grant money. I would’ve also like to see the information about those whose grants were rescinded because of the priority group kerfuffle and subsequent injunction, but I’ll take what we can get. (Weirdly enough, the original link to the data set on sba.gov is now posting a 404 error EDIT: It’s back up; looks like they made some updates to the file with it being marked as “Last updated 7/12”).

Of the 370 000+ applications received, less than a third (101 004) were funded. The median award was $125 631, and the average was $282 909. The average being at least $150 000 higher than the median brings me to the next point, which is 5% of applicants received more than $1M+. But this group of 5% ended up totaling 39% of the total $28.6B fund. It’s not to say that a lot the businesses receiving more than $1M didn’t deserve it—I’m sure many do, but I do have some thoughts below on some of those who received such a lump sum.

Shall we begin?

Disclosure: I filed the applications for the businesses that I am involved with and received funds for all of them. The numbers are readily available in the data set and the business entity names are fairly self-identifying.

Where did the money go?

Mapping out the money by state, we can see that the top recipients were: California ($5.7B), New York ($3.7B), Texas ($1.7B), Illinois ($1.4B), and Florida ($1.3B). Approximately 60%–70% of the funds received in these states were by those that self-certified as minority-, women-, or veteran-owned (priority groups).

If we take a look at the number of total grant recipients who belonged in one of these categories, we can observe the following (and yes, groups can overlap; I didn’t review the data for exclusivity):

  • 44% of applicants stated they were women-owned, receiving a total of $10.2B in aid, which is only 35% of the total grant money available

  • 34% of applicants stated that they were minority-owned businesses and/or in economically disadvantaged areas, receiving $9B in aid, which hovers at 31.5% of the total grant money available

  • 6% of applicants stated they were veterans, receiving a total of $1.7B in aid, which is ~6% of the total grant money available

It becomes apparent that not all groups are created equal, with the largest disparity between number of women-owned businesses being approved for funds vs. not being awarded a comparable amount in grant money. Minority-owned and economically disadvantaged located businesses do better in terms of closing that difference, but it is only with veteran-owned businesses that we finally see a 1:1 ratio. While it’s difficult to scrutinize this large delta without reviewing the applications and amounts requested vs. granted, I can’t help but wonder where a lot of the money ended up going.

10% of grant recipients belonged to a franchise business

To dive deeper into the numbers, we see that franchisees took home ~$2.65B of the possible $28.6B available, which is comparable to the 10% total applicants who noted themselves as a franchisee. And of those grant recipients, the top ten franchise applicants received approximately $1B in grant funds.

Even more striking about those top ten franchises? Subway franchisees dwarf the number of applications compared to other franchises (McDonald’s didn’t even crack 100 franchisee applications) by a ratio of 7:1 with the next closest franchise (Dunkin’ and Dunkin/Baskin Robbins co-brand).

Subway

  • 2868 applications granted

  • 72% self-certified as belonging to one of the priority groups

  • $362M distributed to Subway franchisees

Dunkin’ Donuts (and Baskin Robbins co-brand)

  • 404 applications granted

  • 78% self-certified as belonging to one of the priority groups

  • $90M distributed to Dunkin’ franchisees

IHOP

  • 295 applications granted

  • 76% self-certified as belonging to one of the priority groups

  • $118M distributed to IHOP franchisees

Kona Ice

  • 207 applications granted

  • 61% self-certified as belonging to one of the priority groups

  • $15.5M distributed to Kona Ice franchisees

Menchie’s

  • 147 applications granted

  • 66% self-certified as belonging to one of the priority groups

  • $18.5M distributed to Menchie’s franchisees

Denny’s

  • 137 applications granted

  • 64% self-certified as belonging to one of the priority groups

  • $79M distributed to Denny’s franchisees

Jimmy John’s

  • 131 applications granted

  • 44% self-certified as belonging to one of the priority groups

  • $29B distributed to Jimmy John’s franchisees

Golden Corral

  • 125 applications granted

  • 64% self-certified as belonging to one of the priority groups

  • $277M distributed to Golden Corral franchisees

Charleys Philly Steaks

  • 112 applications granted

  • 92% self-certified as belonging to one of the priority groups

  • $32M distributed to Charleys Philly Steaks franchisees

Moe’s Southwest Grill

  • 108 applications granted

  • 73% self-certified as belonging to one of the priority groups

  • $22M distributed to Moe’s Southwest Grill franchisees

Even though there is an “owner” at the end of the day for a franchise business, they still have had quite the leg up in comparison to their local small business siblings. After all, franchisees benefit by building off of the established brand and receiving the coverage of continued regional and national advertising campaigns.

And with the high number of approved applicants for Subway franchisees, I’d venture a guess that the parent corporations also provided support in varying degrees for RRF applications. To contextualize the numbers, the sandwich giant had 2868 approved folks, which represents over 10% of all U.S. Subway franchise businesses (per 2019 data), whereas McDonald’s only saw 67 approved applications out its 13 175 U.S. franchise locations (per 2020 data). Smaller chains, such as Kona Ice and Menchie’s saw a large number of their franchisees receive grants as well, 16% (out of 1279 locations) and 41% (out of 358 locations) respectively, which leads me to believe that some parent companies were more willing than others to lend a hand in guiding applicants through the process.

Meanwhile in NYC…

An interesting data point this information release is the businesses that benefited the most after the injunction. What I ended up finding was that the June approvals included quite a few fine dining establishments, large caterers and venues, small business chains, and hotels (and a JFK Dunkin’ Donuts that received $10M). If it wasn’t made clear before the pandemic, it should be noted now: these businesses that command such capital and cachet are seldom operated by or have a majority shareholder that is a minority, woman, or a veteran.

To understand how much was at stake here by moving all the priority groups to the very back of the line, for the June recipients that received over $1M in grant funds, it totaled to $864M with some recognizable names:

  • Greenwich Hotel, $5M (approved June 4)

  • The William Vale, $5M (approved (June 25)

  • Le Bernadin, $5M (approved June 4)

  • Bowery Hotel, $5M (approved June 4)

  • Gabriel Kreuther, $4.86M (approved June 25)

  • Daily Provisions, $2.975M (approved June 4)

Granted, everyone applied at the same time in early May, but these amounts are also based on gross receipts where you can see how well-to-do these businesses are to begin with (and this does not count any licensing or other deals/businesses that the individuals may have). Where the Fund was meant to help the mom-and-pop shops, the injunction ended up dealing quite the blow and reinforced the message of who really matters in this ecosystem—those who are already at the top.

Further Reading

Will New York permanently cap delivery platform commission fees?

San Francisco was the first on June 22—will New York City follow suit?

San Francisco made big waves last month when its Board of Supervisors voted unanimously to pass a permanent 15% fee cap, thereby limiting the amount that delivery platforms can charge restaurants. In a give-and-take approach, the legislation does not limit delivery platforms from charging restaurants additional fees for “marketing” and “additional services”—which gives way to DoorDash’s partnership plans.

The commission limits are not new, as many large cities—including New York, Philadelphia, Washington D.C., and Portland—enacted laws limiting commission fees, citing the economic devastation brought on by the pandemic. However, these caps were limited in scope by the duration of the pandemic (and in NYC’s case, the duration of the pandemic plus 90 days after being able to resume 100% indoor dining). And with states lifting restrictions, there is a tremendous level of anxiety from businesses about what it means going forward. While delivery platforms saw record growth in 2020, restaurants and bars across the country have been left in the lurch—and holding onto massive debt—particularly with the Restaurant Revitalization Fund fully depleted. Thus, it becomes a no brainer, from my perspective, that cities need to review their local ordinances before they expire, and greatly affect vulnerable and recovering businesses.

Permanent fee caps in New York

Introduced and heard by the Committee on Small Business just before the long weekend, NYC Council Members Francisco Moya and Mark Gjonaj shared Int 2359-2021, which seeks to lift the disaster restriction on Local Law 2020/088. In addition to this amendment, three others were proposed and reviewed on July 1st by the Committee:

  • Int 2333: as it pertains to the prohibition of delivery services arranging and listing food service establishments without their consent

  • Int 2335: as it pertains to requiring transparency in the telephone numbers for food establishments listed by delivery services

  • Int 2356: as it pertains to the prohibition of delivery services charging food establishment businesses for calls that do not result in a transaction

With regards to Int 2359-2021, Council Members Moya and Gjonaj make few changes to the original Local Law. The key differences are as follows:

  • Statements regarding the Local Law only being in effect during declared emergencies are omitted

  • Addition of the word “transaction” as it relates to credit card, so that it no longer just reads “credit card fee”, but rather, “credit card transaction fee”. In including the word “transaction”, delivery platforms are no longer able to massage the definition on what constitutes as such a fee into something more

    • Keep in mind that 2(b) states that any additional service, apart from the delivery fee, cannot exceed 5% (for a total maximum charge of 20% to restaurants), but credit card transaction fees were not included in that 5%. Thus, having a loosely phrased “credit card fee” posed as a possible loophole that delivery platforms could exploit should they wish to

    • To bolster 2(b), a definition of credit cards has been added as well

Should this amendment pass and signed into law, it would take immediate effect. At the moment, the amendment’s status is noted as “Laid in Committee”. This term means that floor action action will be postponed to the next legislative day. In other words, the vote has not yet taken place, but we’ve already had at least one hearing on the matter. Unfortunately, though, it can take some time before we see a vote. Take this example, as mentioned by City Limits, where Local Law 2019/092 was heard in January 2019, but not voted upon until four months later in April.

With the state of emergency no longer in effect as of June 24 in New York, the city’s fee caps are slated to expire on September 22nd. In other words, the clock is ticking. Restaurants cannot afford to wait much longer and risk being subjected to unreasonable commission fees if delivery platforms are not willing to work together with small businesses as equitable partners. City Council needs to intervene now and take the preventative action and protect our dining establishments by moving on this package as quickly as possible.

Edit 1: I originally tied the lifting of restrictions (June 15) to the end of state of emergency; however, Governor Cuomo officially lifted the state of emergency on June 24. I’ve updated the text as needed.

Edit 2: Council Member Gjonaj’s Chief of Staff Reginald Johnson noted that the expiration clause was meant to be written as an “and/or” trigger, as opposed to my parsing of AND, which means that 15% delivery fee commission will lift on August 17. I’ve included a copy of Local Law 2020/088’s expiration clause below with my emphasis in bold, and am letting Edit 1 stand for previous reference.

The requirements of this section apply only during the period in which a state disaster emergency has been declared by the governor of the state of New York or a state of emergency has been declared by the mayor, such declaration is in effect in the city, and all food service establishments in the city are prohibited from operating at the maximum indoor occupancy and for a period of 90 days thereafter.

Further reading

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