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The California State Assembly has reportedly passed a bill requiring food delivery apps like DoorDash, UberEats, Postmates, and GrubHub to provide an itemized breakdown of costs to both customers and restaurants for each transaction. This means that it must list food price, fees, tips, and commissions separately.
Introduced by San Diego assemblywoman Lorena Gonzalez of San Diego — who also wrote AB 5— AB 286 passed the Assembly with bipartisan support in a 55 to 8 vote. However, the state-level bill originally proposed putting a permanent cap on delivery fees, but that portion of the original bill was removed prior to the vote. It will, however, prohibit food delivery companies from charging higher prices for food than what the restaurant charges its customers.
There are already many local jurisdictions in California that have instituted ordinances that cap the commissions, fees, and service charges that third-party food delivery companies can charge. But AB 286 would be a statewide policy that is consistent across jurisdictions, providing relief to small restaurants and other food facilities.
AB 286 fits the National Restaurant Association’s recently released Public Policy Principles for Third Party Delivery, a set of guidelines aimed at easing tensions between restaurants and delivery firms. One of those seven principles is, “Restaurants deserve transparency on fees (including commission, delivery fees, and promotional fees) charged by third-party delivery companies.” Contractual transparency, including fees, is also listed in the association’s guidelines.
In March 2021, 47% of people in the U.S. ordered from one of the major delivery players, up from 38% a year ago, while delivery orders overall increased 137% in 2020, according to NPD Group data. Foodservice delivery fees typically average 15% to 30% and have been a major point of contention for both customers and restaurants using the service. A New York Times story in Feb. 2020 found that foodservice delivery markups can cost up to 91% more than if you ordered a meal directly from a restaurant.
Moreover, app-based food delivery drivers have also voiced concerns over a lack of pay transparency, with many reporting having their tips taken by food delivery companies. A 2019 report in the New York Times revealed DoorDash was using customer tips to subsidize workers’ base pay, which was followed by the company reportedly agreeing to pay $2.5 million to settle a lawsuit alleging DoorDash kept customer tips that were intended to go to their delivery drivers. AB 286 clearly states that delivery workers are always entitled to the full amount of the tips and gratuities added by the customer.
“Small mom and pop restaurants and their customers have a right to know when they’re charged hidden fees on delivery orders so they can make informed decisions,” Assemblywoman Lorena Gonzalez said on her website. “This bill ensures customers and business owners can understand what they’re being charged, and delivery workers are actually receiving the full amount of their tips.”