Operations

San Francisco caps third-party delivery commissions at 15%

The city becomes the first to restrict delivery fees imposed on restaurants during the coronavirus pandemic, with similar movements afoot elsewhere.
Photograph: Shutterstock

San Francisco has become the first U.S. city to restrict the commission fees third-party delivery providers can charge restaurants during the COVID-19 emergency.

City officials will begin enforcing the 15% commission cap Monday, and it will be in effect through the remainder of the city’s state of emergency or until restaurants there can resume dine-in operations, according to a news release.

“Restaurants across San Francisco are struggling to stay open,” Mayor London Breed said in a statement. “In these tough financial circumstances, every dollar counts and can make the difference between a restaurant staying open or shuttering. It can make the difference between staying afloat or needing to lay off staff.”

Of the roughly 4,000 restaurants in San Francisco, approximately 30% to 50% remain open for off-premise business, according to the Golden Gate Restaurant Association.

Unsurprisingly, third-party delivery providers are displeased with the city’s action.

“In the face of this new policy shift, we are going to give restaurants the ability to pass some of these optional costs onto consumers,” a Grubhub spokesperson said in a statement to Restaurant Business. “Unfortunately, this will result in significantly higher diner fees and decreased restaurant orders.”

DoorDash, which recently announced that it and its sister company, Caviar, would temporarily reduce commission fees for 150,000 independent restaurants around the country—and more than 1,600 in San Francisco--said it is “reviewing” Breed’s order.

“We are reviewing the Mayor’s order, including the legal basis for such an extraordinary unilateral action, and will respond accordingly,” a DoorDash spokeswoman said in a statement to RB. “At the same time, we will maintain our ongoing commitment to protecting [workers] and ensuring they have strong earning opportunities, especially during this crisis when so many are struggling to make ends meet.”

The pandemic has put ongoing tensions between restaurants and delivery companies under a microscope, with many independent operators depending on delivery for the first time amid state-mandated shutdowns of dining rooms.

It is unclear whether other cities will follow San Francisco’s lead in capping delivery fees, but restaurants in New York are pressing the state to take action.

The NYC Hospitality Alliance is urging its members to call on the state’s governor or the New York City mayor to restrict third-party delivery commissions to 10% during the coronavirus shutdown.

The advocacy group has started a letter-writing campaign, encouraging restaurants to reach out to elected leaders to support the cap.

“Small businesses cannot wait,” the NYC Hospitality Alliance said in its appeal.

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