Technology

Delivery fee caps hit Silicon Valley

Santa Clara County and San Jose approved a 15% limit on what third-party providers can charge restaurants.
Photograph: Shutterstock

Limits on the fees charged by third-party delivery companies to restaurants have reached Silicon Valley.

Officials in Santa Clara County, Calif., and its largest city, San Jose, on Tuesday unanimously approved temporary 15% delivery fee caps intended to help restaurants struggling during the pandemic. Similar measures are in place in dozens of U.S. cities and counties as well as Washington state.

San Jose’s cap goes a step further than its home county’s by limiting all fees, including marketing and processing fees, to 18% of the order total, according to The Mercury News. It also excludes chains, defined as restaurants with four or more locations. It was set to remain in effect through June. 

Market leader DoorDash was founded in the Silicon Valley hub of Palo Alto and is now headquartered in nearby San Francisco, along with Uber Eats and Postmates. San Francisco has its own delivery fee cap of 15%, as does Los Angeles. 

Delivery companies typically charge restaurants a combination of marketing and delivery fees that can account for more than 30% of the order total.

Restaurants have largely welcomed the fee caps, while the delivery companies say they will ultimately hurt restaurants because costs will be passed to the consumer.

Members help make our journalism possible. Become a Restaurant Business member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.

Multimedia

Exclusive Content

Financing

Red Lobster gives private equity another black eye

The Bottom Line: The role a giant sale-leaseback had in the bankruptcy filing of the seafood chain has drawn more criticism of the investment firms' financial engineering. The criticism is well-earned.

Financing

Beverage chains are taking off as consumers shift their drink preferences

The Bottom Line: Some of the fastest-growing chains in the U.S. push drinks, even as sales at traditional concepts lag in growing delivery and takeout business. How can traditional restaurants get in on the action?

Financing

Brands need to think creatively as the industry heads into a value war

The Bottom Line: Giving customers meal options they can afford will be key to generating traffic this year. But make sure those offers can generate a profit.

Trending

More from our partners