Restaurants get a break on profit-eating delivery fees from third-party apps

The apps can only take a 15 percent cut, at least until February.

Julian Rai gingerly opens the door after grabbing a Grubhub order at Ice Cream Riot in Capitol Hill. March 13, 2020. (Kevin J. Beaty/Denverite)

Julian Rai gingerly opens the door after grabbing a Grubhub order at Ice Cream Riot in Capitol Hill. March 13, 2020. (Kevin J. Beaty/Denverite)

staff photos

A law passed Monday by the Denver City Council caps fees taken by third-party food-delivery apps at 15 percent of the customer’s tab.

City Councilwoman Kendra Black sponsored the bill in response to the pandemic-caused recession that has leveled local restaurants. A quarter of all jobs lost in Denver during the COVID-19 era have come from the restaurant industry, according to city council documents. Restaurants employ about 10 percent of the city’s workforce.

To pick up and deliver food, apps like DoorDash, Grubhub, UberEats and Postmates had been charging restaurants up to 35 percent of each customer’s bill, said Black, who worked with delivery companies and the restaurant industry on the law. She said large chains have better luck negotiating smaller fees than local, small businesses.

“It’s really the little guys who are paying the highest rate, and it does really hurt them,” Black said during a committee meeting last month.

Spokespeople for DoorDash and Postmates framed the cost to restaurants as a “commission” — not a fee — that’s negotiated based on restaurants’ needs. That commission is the company’s main source of revenue, said Ashley De Smeth, head of public affairs and policy communications for Postmates.

“Arbitrarily setting on-demand delivery prices has real consequences that undermine our ability to operate (and) fund relief efforts and benefit programs for merchants, couriers and customers, and kills the whole industry’s ability to provide the services restaurants need to stay open during this national emergency,” De Smeth said in a statement. “But to keep delivery available to all customers and merchants in Denver, we hope the council will consider a phasing out of the cap in proportion to the opening of in-room dining capacity.”

The law will expire on February 9 unless city council renews it. Black said council will monitor the state of the local industry through the winter.

Taylor Bennett, global head of public affairs for DoorDash, said “price-fixing” might unintentionally harm business owners, customers and couriers. The company is “eager” to work with the city council on future policies, he said in a statement.

Denver joins more than a dozen cities and states that have passed similar laws with a cap of around 15 percent. Councilwoman Robin Kniech urged residents to ask restaurants if they provide in-house delivery to keep even more money in the pockets of local business owners.

“It’s always best to check there first … because 15 percent is still steep,” Kniech said.

Delivery apps can charge restaurants more than 15 percent if they opt into other services like marketing, according to the law.

Another part of the law affirms that couriers must retain all of their tips; food-delivery apps cannot garnish gratuities to make up for smaller profits from local restaurants, the law states. And restaurants must opt into the service — a stipulation that came from apps listing restaurants without their permission, Black said.

The council unanimously OK’d the new law.

 

 

 

 

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