UPDATE: This story has been updated with comments from Grubhub and the Protect App-Based Drivers & Services Coalition.
San Francisco will become the first place in the U.S. to permanently limit the fees that delivery companies charge restaurants.
The city's Board of Supervisors on Tuesday voted unanimously to remove the sunset date from an ordinance that limits delivery fees to 15% of the order total. The cap was put in place last April to help restaurants during the pandemic and would have expired 60 days after restaurants were allowed to return to 100% seating capacity.
The ordinance applies only to delivery fees and not other charges such as marketing, which can make up a significant portion of the commissions that restaurants pay to their delivery partners. The latest resolution could still be amended and requires the mayor's signature.
The Golden Gate Restaurant Association celebrated the measure's approval.
"This legislation is well thought out, allowing the ability for restaurant operators to sign a completely separate marketing agreement for additional services, while ensuring that a clear 15% cap will remain on the delivery service," the group said in a statement. "This legislation will help ensure our San Francisco restaurants can continue to operate in a financially sustainable way as they recover from the past year-plus with limited capacity and lost revenue."
Dozens of cities, counties and states enacted similar limits to help restaurants as they came to depend heavily on off-premise business during the pandemic. Many operators complained about the high fees and commissions charged by third-party providers. Those charges can reach 30% or more of the order total, and are used to cover things like marketing and driver pay.
The caps have been generally supported by restaurants, but delivery companies say they are a one-size-fits-all solution that forces them to raise prices for the consumer, ultimately hurting demand. DoorDash and Uber Eats have tacked on additional customer charges in some places to help offset fee caps.
"Fee caps are arbitrary price controls and exactly the wrong thing to do when San Francisco's restaurants need more support, visibility and order volume than ever," a Grubhub spokesperson said in a statement. "A permanent cap would result in unprecedented, damaging and long-term consequences for locally-owned businesses, delivery workers, diners and the local economy."
Geoff Vetter, spokesperson for the California-based Protect App-Based Drivers & Services Coalition—formerly known as the Yes on Prop 22 Coalition—said fee caps are bad for drivers, restaurants and customers.
"In cities with temporary fee caps, customers experienced price increases between $1.50 to $3 per order, which led to significantly reduced customer demand – hurting the very restaurants they were intended to help," Vetter said in a statement. "Our broad coalition of thousands of drivers, app-based platforms, community, and social justice advocates will continue working with the Mayor and Board of Supervisors to educate them about the harm of a permanent fee cap."
In most jurisdictions, fee caps were designed to expire sometime after the pandemic is over. But officials in some places, including New York City, want to make them permanent.