The Los Angeles City Council today voted to cap app delivery fees for restaurants at 15 percent of the total transaction. The unanimously-approved motion, put forth by councilmembers Mitch O’Farrell, Curren Price, Jr. and Paul Krekorian, was intended to make it “unlawful for a third-party food delivery service to charge a restaurant ... more than 15 percent of the purchase price of such online order during the local public health emergency related to COVID-19,” per the language of the motion, which only applies to restaurants within the city limits of Los Angeles.
The motion directs the city attorney’s office to craft the language of the ordinance, which will then be put back in front of the city council for final approval.
“Local restaurants were impacted by exorbitant delivery fees long before this pandemic struck,” said councilmember O’Farrell in his opening statements on the motion. “In many instances restaurants actually lose money with these orders,” he added, noting that some operators were okay with using the apps as something of a marketing tool before the pandemic. But these days, newly empty restaurant dining rooms have “laid bare the vulnerabilities of restaurants having to rely on these app services.”
“Why should restaurants and their customers be put in a position to subsidize these app delivery companies?,” O’Farrell said.
The new motion will not only cap third party app delivery fees at 15 percent per order, it also caps non-delivery fees from those same apps — including fees for pickup and takeout at restaurants — at five percent of the total order. The motion further mandates that 100 percent of all tips given within the app must be given to the driver who actually distributes the food, and cannot be kept by the app companies themselves. An urgency clause would enact the new cap immediately, and calls for transparency on all app fees in the future. The current motion would sunset 90 days after restaurant dining rooms are allowed to reopen.
“This is about local interests over Wall Street interests, and the action we could take could ensure the survival of restaurants we love,” O’Farrell said, adding that “this is not a permanent ordinance.”
“I have a lot of mom and pop restaurants in my district that are happy to pay a percentage for the sale,” added councilmember Curren Price, Jr. “These caps serve consumers, the drivers, restaurants, and the platform.”
Other cities like San Francisco have previously enacted caps on delivery fees for restaurants, as operators nationwide continue to call out companies like Uber Eats, DoorDash, GrubHub, and Postmates for charging fees upwards of 30 percent during this unprecedented pandemic. SF’s cap currently sits at 15 percent, and is also set to expire only once the public health emergency and lockdown orders are lifted.
What’s more, some local restaurants have become increasingly uncomfortable with third party delivery apps because they say they cannot control environmental factors once the food leaves their restaurant. Some describe unsanitary and unsafe processes from the drivers themselves, and concern for customers and their own workers as a result.
It’s worth noting that not everyone has been publicly behind the proposed cap on third party food delivery fees. In a petition this week — notably commissioned by Postmates itself — some restaurant operators like Marc Canter of Canter’s Deli said that the limitation would just lead to higher costs for customers and reduced service for restaurants, which are still relying on the apps as a lifeline while dining rooms continue to be closed by order of California governor Gavin Newsom. “Of course everyone wants a discount, but how?” Canter told the LA Times, “Where are they going to get the money that provides their platform and hires drivers?”