Los Angeles is pushing forward with plans to limit how much delivery services such as Postmates, Grubhub and Uber Eats can charge restaurants, capping delivery fees at 15% of the purchase price for orders during the COVID-19 crisis.
The City Council voted 14-0 Wednesday to ask city attorneys to draft such a law, following other cities including San Francisco and New York City. Restaurants currently pay as much as 30% in fees to third-party delivery apps, which Councilman Mitch O’Farrell denounced as exorbitant.
O’Farrell said that, during the pandemic, restaurants were relying much more heavily on delivery sales and had become “completely at the mercy of these third-party delivery apps.”
“If we keep going down this road, restaurants will be forced to raise their prices and risk losing customers,” the councilman said. “Why should restaurants, and their customers, be put in a position to subsidize delivery app companies? We need to level the playing field.”
The proposal passed Wednesday also would limit other fees charged by the delivery companies — those for services other than delivery — to a maximum of 5% of the purchase price of each order. And it would require that 100% of delivery tips from customers go to drivers. The restrictions would end 90 days after L.A. lifts its ban on dining inside restaurants.
During the meeting, council members rejected a push by Councilman Bob Blumenfield to limit which restaurants were covered by the fee cap. Blumenfield, who argued that bigger chains had enough leverage to negotiate for better fees for themselves, said the fee limits should apply only to restaurants that had five or fewer locations.
O’Farrell countered that limiting the fee restrictions to smaller businesses might prod delivery apps to drop mom-and-pop restaurants in favor of bigger chains. Blumenfield’s proposal failed on a 4-10 vote.
Many restaurant owners have complained that they have little choice but to fork over significant fees to keep ferrying meals to customers, since many diners don’t want to leave their homes during the coronavirus pandemic. One restaurateur called the delivery services “a necessary evil.”
“Even before the madness, it was just a terrible deal no matter how you slice it,” Anca Caliman, co-owner of Lemon Poppy Kitchen in Glassell Park and Parsnip in Highland Park, told The Times.
Shawn Nee, owner of the Silver Lake restaurant Burgers Never Say Die, said his restaurant started using a delivery app during the pandemic and had to hike its prices on the app to avoid losing money. Limiting the fees “means more money in our pocket,” Nee said. “I could potentially give some of my staff the salaries they were making before.”
The planned cap was also backed by the Hollywood Chamber of Commerce and the labor unions Teamsters Local 396 and UFCW Local 770, which represent workers in package delivery, grocery stores, healthcare and other industries.
Although many restaurant owners have enthusiastically backed the proposed law as a crucial lifeline to help them survive — and some have pressed for a lower cap of 10% — others have signed a petition facilitated by Postmates that opposes the plan, arguing that caps would end up hurting restaurants.
Marc Canter, owner of Canter’s Deli, argued that capping fees at 15% would be “shooting yourself in the foot” for restaurants that relied on delivery services to keep sales flowing during the COVID-19 pandemic.
“I don’t think [delivery services] could survive on 15% unless they could have a government supplement,” Canter said.
Delivery drivers also warned that they could take a financial hit from the measure. Several phoned into the meeting Wednesday, arguing the proposed law would reduce the work available for them during the pandemic. Postmates has warned that, if the law passes, the company could end up halting delivery and other restaurant services in Los Angeles.
Postmates said in a statement following the Wednesday vote that “government price setting” threatened jobs and created “a false choice between local restaurants and the delivery network companies that support them.” The company has argued instead for a fee charged on delivery orders to assist restaurants, which council members are also exploring as an option.
City lawyers will now draft the proposed law, which will return to the council for final approval before it can go into effect.
Times staff writer Jenn Harris contributed to this report.