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Restaurant Roundup: Local Laws Threaten Sales For Restaurants, Delivery Services

As restaurant workers struggle to enforce COVID-19 safety measures, Illinois Governor JB Pritzker announced in partnership with the Illinois Department of Public Health (IDPH) on Thursday (Aug. 26) that the state is now putting into effect a mask mandate for all indoor settings for the unvaccinated and vaccinated alike. The mandate will go into effect Monday, Aug. 30.

The requirement will likely have a two-fold impact on the state’s restaurants’ sales. First, the more direct effect is that anti-mask would-be diners may be put off by restaurants’ attempts to enforce the mandate, turning instead either to restaurants risking the consequences of ignoring the legislation or to food-at-home options.

Second, the mandate may place an additional strain on already understaffed restaurants, with the difficulties (and sometimes dangers) of enforcing the mandate potentially prompting workers not to apply for restaurant jobs or to leave their positions. With less staff, Illinois restaurants may be unable to meet customers’ demand, effectively leaving money on the table.

NYC Makes Fee Caps Permanent

Also in local legislative news, New York has made its cap on third-party food delivery services’ fees permanent, per a New York City Council vote Thursday (Aug. 26). The announcement comes as consumers’ rising demand for meal delivery comes into contact with the challenging economics of the model. Even the most popular services continue to operate at a loss, while restaurants struggle to afford both the costs that these services charge and the lost loyalty, as consumers begin to favor aggregators’ marketplaces over the restaurants themselves.

Read more: Prop 22 Reversal Could Strain Food Delivery Volume With New Fees

DoorDash-Olo Lawsuit Draws Attention To Restaurant Delivery Economics

With Capped Fees, Dining Aggregators May Face Tough Post-Covid Future

New York City joins San Francisco in making fee caps permanent, despite Matt Maloney, managing director at Just Eat (JET) and founder and former CEO of JET subsidiary Grubhub predicting last month that this change would not occur anytime soon. On a call with analysts, he attributed San Francisco’s move to codify these limits to “San Francisco being San Francisco.”

See also: Just Eat To Double Down On Strong US Markets Following Grubhub Acquisition

New York and San Francisco are both major food delivery markets in their own right and highly influential in the United States, suggesting that additional cities may soon follow their lead in extending fee caps, which emerged as a response to pandemic lockdowns, into the future, now that it is clear that the delivery boom is not going anywhere anytime soon.  These fee caps can be good news for restaurants — not so much for delivery services, which are fighting back.

“Fee caps increase delivery fees for consumers, and therefore lead to a reduction of orders for both restaurants and couriers,” tweeted JET founder and CEO Jitse Groen. “We believe that these fee caps are unconstitutional, and we will join the industry to oppose them.”

The NYC fee cap was already in our EBITDA guidance. Fee caps increase delivery fees for consumers, and therefore lead to a reduction of orders for both restaurants and couriers. We believe that these fee caps are unconstitutional, and we will join the industry to oppose them.

— Jitse Groen (@jitsegroen) August 27, 2021

Grubhub said in a statement that it would “vigorously fight this illegal action,” and DoorDash told Reuters that the action was “unnecessary and unconstitutional.”

In Australia, Wing Reaching 100,000 F&B Drone Deliveries

Speaking of the tricky economics of food delivery, drone delivery service Wing is passing 100,000 deliveries this week, the company announced in a blog post Wednesday (Aug. 25). Drones are seen as a promising solution for restaurants straining under the cost of delivery services, a cost that comes primarily from the human labor involved. Drones present an option to meet consumers’ need for on-demand convenience without facing near-impossible labor challenges.

Wing delivers in in Logan, Australia, operating in an area with a total population of 110,000 people, making the 100,000 count especially impressive. It suggests that consumers are fully on board with drone delivery, a huge amount of untapped demand for companies that can both develop the technology and get the legal clearance necessary to offer the service. Included in Wing’s 100,000 count are 1,200 roasted chicken deliveries and 10,000 cups of coffee.

“Logan’s success implies a not-too-distant future in which similar high-volume drone delivery services could be replicated in similar cities, and even larger metro areas, around the world,” the blog post states.

Indian Food Tech Company Raises $13M For Cloud Kitchens

Curefood, parent company of India’s EatFit cloud kitchen and meal subscription brand, announced Wednesday (Aug 25) that it had raised $13 million in a Series A funding round, bringing the company’s total funding to $20 million. The company intends to use these funds to grow its portfolio of cloud kitchen brands from four to 10, reports the Hindu Business Line.

“Online food delivery in India is highly fragmented with almost no Indian-origin brands amongst the top ten across the country,” the company’s founder Ankit Nagori told the outlet. “In the next decade, there is an opportunity to build and incubate brands across cuisines with meaningful scale. There will be multiple $50 million brands in the future in the online delivery space and we believe we are in a great position to build, acquire, and own many of them.”

The round included an investment from Binny Bansal, co-founder and board member of Flipkart, which operates a top grocery delivery business in India, among other delivery categories.

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