Raising delivery costs could cook restaurants

The very nature of being in the New York City restaurant business has shifted dramatically since the start of the COVID-19 pandemic, as many restaurants have worked to modernize their businesses through opportunities provided by delivery platforms. But as the city prepares to establish a minimum pay rate for the delivery workers that make this possible, it’s important for them to consider the potential for harmful impacts on small businesses.

My restaurant, POPRICE, is a prime example of a business succeeding in this new world. We opened in August 2020, serving customers delicious modern Chinese takeout at an affordable price from our Flushing, East Flatbush, and Long Island City kitchens (two of them are ghost kitchens). Despite opening our doors during the peak of the pandemic and the unique challenges of owning a restaurant, we had high hopes for how our business could quickly take off.

As a former restaurant manager, I realized the benefits that came from using platforms like DoorDash, GrubHub and UberEats, and knew how important they had become to a restaurant’s success. We don’t offer in-person dining, and instead rely entirely on takeout and delivery.

Like many other restaurants in New York City, we were not able to offer our own delivery service due to staffing challenges, so we use many of these popular delivery apps to help us reach new customers and expand our business — about 80% of our business now comes from these platforms. We’ve been fortunate to have a lot of success, and have even been able to open three locations.

There are so many businesses like ours that have worked to build their online presence, because delivery platforms are now so widely used and crucial to success. That is why when I heard that New York City proposed a novel and expansive minimum pays standard for delivery workers, I had concerns about what that could mean for a restaurant like mine, likely driving up costs and even significantly limiting the number of workers available to fulfill orders.

Let me be clear: delivery plays an important role for restaurants in the city, I have tremendous respect for these workers. Delivery workers helped New York City’s restaurants during our toughest times, and our business continues to work closely with them.

However, as a small business owner, I know that every dollar counts when you’re trying to bring in new customers. It is hard enough for those in the restaurant industry, with already-thin margins, but it is especially difficult for newer small businesses, like ours, that were established in a post-pandemic world that relies heavily on food delivery services.

The proposed new pay structure for delivery workers could dramatically increase the cost for each order — by the city’s own estimate potentially adding more than $5 per order, which would be passed on to customers and lead to fewer orders being placed. The rule also includes provisions that are likely to mean fewer workers able to freely access these platforms, which will really harm our ability to meet customer demand.

While the full impact of the proposed minimum pay rate for delivery workers is still uncertain, what is clear is that restaurants like ours cannot afford the likely decline in orders that would come if the city is not careful in how it moves forward with its current proposal and significant additional costs get passed on to consumers.

Like many other businesses we have been struggling with challenges like inflation, supply chain issues and a nationwide labor shortage. On top of that, with rising costs weighing heavily on all New Yorkers, five extra dollars on every delivery may be the difference in whether or not someone places an order.

And the decrease in deliveries would be especially hard for restaurants in further out areas of New York City like where my kitchens are located. If businesses in those areas are not receiving enough orders, the city’s study makes clear that delivery platforms may need to severely reduce or eliminate service altogether in response to the proposed minimum pay rate.

This could be devastating to all takeout restaurants, and probably all other existing delivery concept businesses such as delivery platforms, ghost kitchens, etc.

While not always perfect, delivery platforms are a crucial part of the next chapter for so many restaurants and small businesses. The city needs to work towards a solution that works for delivery workers, small business owners, entrepreneurs, and New Yorkers who depend on these services. We need to make sure that this minimum pay rate works for everyone and ensures that it is possible for restaurants to connect with their customers and show them the best of what this great city has to offer.

Zhang is the owner of POPRICE restaurant.