When the pandemic hit, more people than ever before turned to third-party food delivery services as restaurants closed and people hesitated to go out. Services such as DoorDash and GrubHub quickly found business booming. However, restaurants and customers began to complain about some of their practices. In response to these complaints, a new Texas bill, Senate Bill 911, was recently signed into action, effective January 1, 2022.
Protecting Restaurants
Restaurant owners complained that many delivery services were not transparent in their practices; they used restaurant logos and/or responded to customers as if they were working for the restaurants instead of as separate businesses.
In addition, third-party delivery services were sometimes labeled as predatory in their practices, particularly harmful to small businesses. Excessive fees for phone calls, marketing, delivery, and processing, some of which restaurants did not explicitly agree to, were costing restaurants much of their profits. In fact, a number of restaurants complained that after paying the fees, the money they received did not even cover the cost of the food they provided.
Providing Transparency
Chapter 114 of Senate Bill 911, cited in full at the end of this article, increases transparency of third-party delivery services by requiring the following:
- They cannot mislead customers by using logos and trademarks suggesting that the restaurant supports or recommends the service;
- They cannot charge fees unless the restaurant has agreed in writing to pay those fees;
- They must remove restaurants from their listing within ten days of the restaurant’s request to be removed;
- They must provide a means for customers to complain directly to the delivery service when customers are dissatisfied with an order.
The bill also provides that a restaurant can sue for damages if a third-party delivery service does not follow these new regulations.
Better known services such as DoorDash, Uber Eats, and GrubHub support the bill, as does the Texas Restaurant Association. Senate Bill 911 limits the ability of city and county governments to further regulate these delivery services, including a limit on city and county officials’ ability to cap fees.
Running a business is challenging even without a global pandemic. An experienced business attorney offers the skill and expertise to handle predatory practices that impede the success of a business, a wise choice for a business owner.
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| CHAPTER 114. THIRD-PARTY FOOD DELIVERY SERVICES | ||
| Sec. 114.0001. DEFINITIONS. In this chapter: | ||
| (1) "Mark" and "trade name" have the meanings assigned | ||
| by Section 16.001. | ||
| (2) "Restaurant" has the meaning assigned by Section | ||
| 1.04, Alcoholic Beverage Code. | ||
| (3) "Third-party food delivery service" means a | ||
| website, mobile application, or other service that acts as an | ||
| intermediary between consumers and multiple restaurants not owned | ||
| or operated by the service to arrange for the delivery or pickup of | ||
| food or beverages from those restaurants. | ||
| Sec. 114.0002. PROHIBITED ACTS. A third-party food | ||
| delivery service may not: | ||
| (1) arrange for the delivery or pickup of food or | ||
| beverages from a restaurant in this state unless the service has | ||
| filed a certificate of formation or registration with the secretary | ||
| of state; | ||
| (2) use a restaurant's mark or trade name in connection | ||
| with the service in a misleading way that suggests the restaurant | ||
| sponsors or endorses the service; | ||
| (3) add a restaurant removed from the service under | ||
| Section 114.0003 to the service unless the service has received | ||
| written consent from the restaurant to add the restaurant to the | ||
| service; or | ||
| (4) charge a restaurant a fee or require the | ||
| restaurant to absorb a fee in connection with the service's | ||
| arrangement of an order from that restaurant unless the restaurant | ||
| has agreed to pay or absorb the fee under an agreement that meets | ||
| the requirements of Section 114.0004. | ||
| Sec. 114.0003. REQUIREMENTS FOR SERVICE. A third-party | ||
| food delivery service shall: | ||
| (1) provide a consumer a clearly identified mechanism | ||
| for the consumer to express concerns or complaints directly to the | ||
| service regarding an order arranged through the service; and | ||
| (2) remove a restaurant from the service not later | ||
| than the 10th day after the date the service receives a request from | ||
| the restaurant to be removed from the service if the service does | ||
| not have an agreement with the restaurant that meets the | ||
| requirements of Section 114.0004. | ||
| Sec. 114.0004. TERMS OF AGREEMENT WITH RESTAURANT. (a) An | ||
| agreement between a third-party food delivery service and a | ||
| restaurant must: | ||
| (1) be in writing; | ||
| (2) expressly authorize the service to arrange for the | ||
| delivery or pickup of food or beverages from that restaurant; and | ||
| (3) clearly state each fee, including a commission or | ||
| other charge, that the restaurant will be required to pay to the | ||
| service or absorb in connection with an order arranged through the | ||
| service. | ||
| (b) The agreement may not include any provision that | ||
| requires the restaurant to indemnify the third-party food delivery | ||
| service, including an employee or independent contractor of the | ||
| service, for claims or liabilities resulting from acts or omissions | ||
| of the service or of an employee or independent contractor of the | ||
| service. | ||
| (c) A provision in an agreement that violates Subsection (b) | ||
| is void and unenforceable. | ||
| Sec. 114.0005. PRIVATE CAUSE OF ACTION. (a) If a | ||
| third-party food delivery service violates this chapter, a | ||
| restaurant aggrieved by the violation may bring an action against | ||
| the service for: | ||
| (1) injunctive relief; and | ||
| (2) damages in an amount equal to: | ||
| (A) the restaurant's actual damages arising from | ||
| the violation; or | ||
| (B) the service's profits arising from the | ||
| violation. | ||
| (b) If the court finds that the defendant committed the | ||
| violation knowingly or in bad faith, the court may award the | ||
| plaintiff: | ||
| (1) exemplary damages in an amount that is not more | ||
| than three times the sum of: | ||
| (A) the plaintiff's actual damages; and | ||
| (B) the defendant's profits arising from the | ||
| violation; and | ||
| (2) the plaintiff's reasonable attorney's fees. | ||
| SECTION 7. Chapter 250, Local Government Code, is amended | ||
| by adding Section 250.011 to read as follows: | ||
| Sec. 250.011. THIRD-PARTY FOOD DELIVERY SERVICES. (a) In | ||
| this section, "third-party food delivery service" has the meaning | ||
| assigned by Section 114.0001, Business & Commerce Code. | ||
| (b) Notwithstanding any other law, a municipality or county | ||
| may not adopt or enforce an ordinance or regulation to the extent | ||
| that the ordinance or regulation affects the terms of agreements | ||
| between third-party food delivery services and restaurants that | ||
| meet the requirements of Section 114.0004(a), Business & Commerce | ||
| Code. | ||
| SECTION 8. Section 114.0004, Business & Commerce Code, as | ||
| added by this Act, applies only to an agreement entered into or | ||
| renewed on or after the effective date of this Act. | ||
| SECTION 9. This Act takes effect January 1, 2022. | ||