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San Francisco supervisors reportedly moved to make permanent the city’s pandemic-era cap on the commissions restaurants can be charged by third-party food delivery apps like DoorDash, UberEats, Postmates, and GrubHub.
Back in April 2020, Mayor London Breed gave the executive order to temporarily cap food delivery commission fees to protect restaurants that had little choice but to rely on delivery while shelter-in-place orders prevented on-site dining. Set since then, the limit lies at 15% on delivery fees that can otherwise run as high as 30% on some apps. By November, supervisors passed legislation extending the executive order to cover all per-order fees (not just commissions). They also gave restaurants more power over menu pricing on the apps, while requiring food operators’ consent before being listed on those platforms.
All 11 supervisors approved the first reading of an ordinance that would remove the sunset clause on the legislation regulating delivery service commission fees. The legislation will now go to a second reading at the next full board meeting. With a majority of six supervisors, the ordinance would head to Breed’s desk for her to sign, veto, or leave unsigned. It’s unclear if she is in favor of a permanent iteration of the measure.
The Golden Gate Restaurant Association, San Francisco’s largest lobbying body for restaurants, reportedly called the legislation “well thought out.” “This legislation will help ensure our San Francisco restaurants can continue to operate in a financially sustainable way as they recover from the past year plus with limited capacity and lost revenue,” the GGRA said.
Delivery startups have argued that fee caps force them to pass more costs onto consumers ultimately hurting restaurants, too. “A permanent cap would result in unprecedented, damaging and long-term consequences for locally-owned businesses, delivery workers, diners and the local economy,” a spokesperson from GrubHub reportedly said in an email to San Francisco Business Times.
Food service delivery fees typically average 15% to 30% and have been a major point of contention for both customers and restaurants using the service. The markup does not reflect on the delivery worker’s payment either. A New York Times story in Feb. 2020 found that food service delivery markups can cost up to 91% more than if you ordered a meal directly from a restaurant.
California recently passed a bill requiring food delivery apps 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. Though the original bill proposed putting a permanent cap on delivery fees, the version that passed prohibits companies like DoorDash, UberEats, Postmates, and GrubHub from charging higher prices for food than what the restaurant charges its customers.
Not to mention 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.