L.A. looks to help restaurants by capping food delivery service fees at 15%
Los Angeles restaurant owners, who have been vocal about high service fees charged by food delivery apps, soon could pay significantly less if a new city ordinance is approved.
Restaurants currently pay as much as 30% in fees to third-party delivery apps such as Postmates, Grubhub and UberEats.
Under the proposed ordinance, introduced in a motion request by Los Angeles City Councilman Mitch O’Farrell, the apps could charge no more than 15% of the purchase price per order in fees during the COVID-19 pandemic.
“We want to do all we can to help improve their [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,” O’Farrell said in an interview Monday. “We hear from our restaurants in the district a lot, and when we hear about this price gouging, it’s just unconscionable.”
O’Farrell said he looked to DoorDash recently lowering its commission fees for restaurants with five or fewer locations by 50% as a general guide for what could be fair.
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“If they can do it, so can everyone else,” he said. “What we want to do is our best at some regulation here so that the competitive marketplace can do a reset and motivate these apps to have more conscientious business practices. The worst thing that anyone could possibly do is profit off of someone’s vulnerabilities.”
O’Farrell said the delivery fees were something that he had been looking into pre-pandemic, but that the current situation — restaurants forced to close their dining rooms, with many laying off most if not all of their employees as a result — accelerated the urgency of the issue. He noted that San Francisco implemented a 15% cap on delivery service fees this month and that New York City is attempting its own fee cap of 10%.
When asked if the reduced fees could last beyond the pandemic, O’Farrell said he’d like to see the ordinance stay in place “until 100% recovery.”
“Otherwise what we do is going to help in the short term, but it could do some longer harm if we pull back too soon,” he said.
Caitlin Cutler, who co-owns Ronan Italian restaurant on Melrose Avenue, said any attention brought to the issue is a good thing but is worried that it might not be enough.
“Our biggest problem is that we are paying so much money and getting terrible service” from the apps, Cutler said. “Most drivers show up with no masks and no gloves. As a restaurant we are being looked at with such scrutiny and trying to make everything as clean as possible.”
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Cutler said that in addition to lower fees, she’s looking for more transparency for the delivery companies about what the money is being used for.
Although the motion didn’t make it onto this week’s Wednesday City Council meeting agenda, O’Farrell hopes for a speedy process. The ordinance could be voted on, drafted and approved in a matter of days, he believes.
“This can’t happen soon enough,” he said.
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