Cities capped food delivery platform fees during the pandemic. Grubhub and Postmates resisted these limits, citing confusion.
Sipa via AP Images
Sipa via AP Images
In D.C. and San Francisco, some delivery companies have been slow on the uptake and quick on the rebound.
For the most part, Covid-19 has meant a financial boost for delivery platforms like DoorDash and Grubhub. As restaurants shuttered their dining rooms across the country, many leaned heavily on these services to maintain a trickle of income. This week, DoorDash raised funds at a valuation of $16 billion, $3 billion above the high it reached in 2019, and Grubhub shares have risen steadily since late March. (The company was recently acquired by Amsterdam-based Just Eat Takeaway.com.)
Yet as fortunes rose for the platforms, restaurant owners complained high commission fees were bleeding them dry. In response, city councils began temporarily capping fees—which in normal times run up to 30 percent—at much lower levels. To date, San Francisco, Los Angeles, New York, Washington, D.C., Cincinnati, Seattle, and others have passed pandemic-related fee caps.
The platforms, predictably, have not welcomed these changes with open arms. Grubhub argued that the fee caps hurt independent restaurants. When Jersey City implemented its fee cap, Uber Eats immediately added a $3 fee for customers and shrank the delivery radius for local restaurants. Postmates persuaded some restaurants to petition against the caps.
To date, San Francisco, Los Angeles, New York, Washington, D.C., Cincinnati, Seattle, and others have passed pandemic-related fee caps.
In some cases, platforms have gone even further, maintaining high fees by insisting local regulations are unclear or claiming that reopening measures void the caps.
In Washington, D.C., Postmates was still charging restaurants between 20 and 33 percent of each order nearly a month after Mayor Muriel Bowser signed legislation that mandated a 15 percent commission cap during the pandemic, the Washington City Paper reported last week. Restaurant owner Rahul Vinod, who complained to the company, shared Postmates’ response with the paper: Postmates said it was working with the city to understand the details of the policy, and it’d get back to him with updates. Another restaurant owner told the paper he’d emailed the platform more than a dozen times, and that the company had ultimately stopped responding. Postmates did not immediately respond to a request for comment.
And in San Francisco, Grubhub notified restaurant owners that the delivery cap had been lifted on June 12, the first day restaurants were allowed to open for outdoor dining, first reported by Tablehopper and confirmed by SFGate. Kagawa-Ya Udon owner Katherine Chaio was told the commission rate for pickup orders would increase from 15 percent to 22 percent, and that the company’s marketing commission would increase from 5 percent to 22 percent. These fees add up quickly, as evidenced by a viral Grubhub bill which circulated in early May. It showed a restaurant selling more than $1000 worth of food through the platform and taking home just $376.54.
These fees add up quickly, as evidenced by a viral Grubhub bill which circulated in early May.
There was just one problem: The fee cap hadn’t officially been lifted. In fact, the mayor updated the city’s stay-at-home order to clarify that the cap would remain in place until restaurants could resume indoor dining. Grubhub, for its part, said the city’s original order had technically expired when restaurants were allowed to reopen their patios, though it eventually appeared to walk back the fee increase. After the story’s publication, Chaio received notice that the commission would remain at 15 percent.
Elsewhere, it appears platforms have largely followed city mandates. In New York City, where fees have been capped at 15 percent and the limits scheduled to last until 90 days after the end of the declared emergency, Hospitality Alliance executive director Andrew Rigie says he’d heard of a few issues but nothing major, and that businesses were submitting complaints directly to the city.
It remains to be seen whether cities will elect to extend fee caps after restaurants reopen their dining rooms. In New York City, local officials were mulling commission limits before the pandemic, though the issue did not come to a vote prior to the onset of Covid-19.
Editor’s note: This story initial credited SFGate for the original reporting on Grubhub’s fee hike. The blog Tablehopper actually broke the story. We have adjusted the credit