Cities Are Capping Delivery App Fees to Protect Restaurants During the COVID-19 Crisis
San Francisco and Seattle are limiting what services like DoorDash and Grubhub can charge restaurants for processing orders, while New York and Los Angeles consider similar policies.
On Friday, Seattle mayor Jenny Durkan, city council president M. Lorena González, and council member Lisa Herbold revealed the details of a newly passed emergency order, one which no longer allows third-party delivery apps to charge restaurants exorbitant commission fees. Under this order, the maximum allowable commission is capped at 15 percent of each order's purchase price. It also mandates that 100 percent of customers' tips must be given to the drivers themselves, and it makes it illegal for the delivery services to cut their drivers' pay rates.
According to KIRO 7, these restrictions will remain in place until restaurants are no longer limited to offering takeout or delivery only, and are allowed to resume "normal" service in their dining areas.
"We know that so many of our small businesses are hurting because of the COVID-19 pandemic, and that delivery services have been a lifeline for our restaurants during this unprecedented time. Unfortunately, some third-party delivery services are charging exorbitant commission fees, which exacerbates the financial hardship many restaurants are already experiencing,” Durkan said. “This commission cap will be critical to ensuring that delivery and takeout remain viable options and don’t cause increased financial hardship."
Council president González echoed many of those statements and said that the order was meant to make the delivery system "more fair and equitable" to the city's restaurants, many of which are already struggling to stay open. "With tight margins, every dollar paid to an app-based delivery service is a dollar taken from our local restaurants, economy and workforce," she said. "We cannot allow that to happen."
These commission fees—which typically range from 10 to 30 percent on every order—have been a point of contention in recent weeks, as an increasing number of both restaurants and customers have had to rely on delivery from apps like DoorDash, Grubhub, or UberEats. Earlier this month, San Francisco became the first city to put a 15-percent cap on commissions, a restriction that will also remain in place until the restaurants are allowed to re-open for dine-in service, or until the city's state of emergency is lifted.
According to the San Francisco Chronicle, four of the delivery services—DoorDash, Grubhub, Postmates, and Uber—responded with a joint statement that criticized the city's “rushed, arbitrary" emergency order. "A proposed cap on these commissions would result in fees for consumers rising and service areas shrinking, cutting off consumers from the services they rely upon in this crisis." they wrote. "Delivery people [...] would have fewer work opportunities and lower earnings. And restaurants that need revenue to maintain operations would see fewer orders, potentially forcing more of these businesses to close their doors."
But one strongly worded letter hasn't been enough to prevent other cities from considering their own commission fee caps. On Monday, the Los Angeles Times reported that Los Angeles city councilman Mitch O’Farrell proposed an ordinance that would also limit commission fees to 15 percent of each order's purchase price—and, if the ordinance is approved, he'd like it to remain in place until the city is at "100 [percent] recovery."
"We want to do all we can to help improve [restaurants’] chances of survival, and the worst thing we could do is not lean in when we see these cases that look a lot like price gouging,” he said. “We hear from our restaurants in the district a lot, and when we hear about this price gouging, it’s just unconscionable.”
City councils in Chicago and New York are also reportedly weighing similar measures. And it's not just the United States, either: New Zealand's Restaurant Association is urging its government to cap UberEats "crippling" commission charges, and restaurateurs in the United Arab Emirates have asked the country's assorted delivery apps to give them a break too.