Restaurants and bars are among those businesses most severely impacted by the government’s COVID-19 shutdown restrictions. Due to physical distancing directives and stay-at-home advisories, restaurants have been forced to transition to pick-up and delivery services only, putting many in jeopardy of never being able to open again. As these businesses are integral to Boston’s neighborhoods and their communities, the City Council explored how to offer financial assistance during their weekly meeting.
Liquor License Buybacks
The Massachusetts Restaurant Association predicts that approximately 40% of restaurants may not reopen once the current shutdown is lifted. While unemployment claims in the state continue to grow, about 90% of restaurant workers have been laid off or furloughed.
Working with local restaurateurs, including the North End’s Philip Frattaroli (Ducali, Cunard Tavern), City Councilor Lydia Edwards (District 1) suggested offering financial relief where the city could offer voluntary buyback of licenses and then lease them out as non-transferable licenses. Existing restaurants would receive an influx of cash and the city would recoup the money through the new leases. “I’m proud to represent probably the largest concentration of restaurants and the fact is that many of them do not expect to open up again,” said Edwards on Wednesday afternoon.
In the event that a large portion of restaurants close permanently, Councilor Michael Flaherty (At-Large) raised his concern over flooding the market with those businesses’ liquor licenses. He pointed to the taxis medallion collapse after ride-share apps rose in popularity and stated the City should do what it can to prevent that from occurring in the restaurant industry.
“If what we’re hearing is true, that close to twenty…twenty-five to thirty percent of the businesses are not reopening, that will obviously flood the market,” said Councilor Flaherty. “It is a commodity. It’s something unlike any other license; it’s borrowed on, it’s pledged, and it can be seized to satisfy a debt or a loan.”
According to Councilor Edwards, many restaurants hold assets in the form of liquor licenses. She proposed that the City of Boston be allowed to purchase those licenses from struggling businesses as a way to offer financial assistance during the COVID-19 pandemic. The City would then control those non-transferable licenses, either to lease back to the restaurant so that it could reopen following the shutdown or (in the case that the business still couldn’t reopen) distribute licenses in a more equitable way. Non-transferable licenses would differ from existing alcohol licenses that have a high value in the secondary market where they can be sold for upwards of $400,000.
Reducing Commission Fees for Delivery Services
As restaurants become more reliant on their delivery and pick-up orders, they have to utilize third party delivery companies to fulfill those needs. This can mean that restaurants accumulate thousands of dollars in commission fees for those delivery services.
Popular third party delivery apps such as Grubhub, DoorDash, Postmates, and UberEats typically charge a 15-30% commission fee per order. In mid-March, Grubhub initiated relief efforts for its independent restaurant clients by temporarily suspending commission fees of up to $100 million. DoorDash enacted similar commission relief support by eliminating commission fees for thirty days for new businesses, halting fees for pick-up orders, and reducing fees for existing clients. UberEats also followed suit and announced it would waive delivery fees for independent restaurants across the U.S. and Canada. However, Postmates still charges restaurants up to 30% to use their services in Boston.
“At a time when many of our restaurants are struggling and fearing that they won’t reopen, exorbitant commission fees on each and every order, quite frankly, feels a little exploitive,” said Councilor Flaherty.
Following San Francisco’s lead in enacting a temporary 15% cap on commission fees, the City Council proposed examining commission fees further and how reducing them could help Boston’s restaurants survive the pandemic. Councilors expressed the hope that these third party companies would negotiate better conditions without requiring a hearing on the matter.
