Warning 'Countless Restaurants' Face Closure, LA May Act To Curb 'Exorbitant' App Delivery Fees
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Can Los Angeles city officials curb the fees that food delivery apps charge restaurants? They're about to try.
On Wednesday, the Los Angeles City Council will consider asking City Attorney Mike Feuer to prepare an ordinance temporarily banning "third-party food delivery services" such as Uber Eats, Postmates, Grubhub, DoorDash and Caviar from charging restaurants more than 15% of the cost of an online order. The order would only last as long as L.A. Mayor Eric Garcetti's public health emergency declaration remains in effect.
The potential motion would not affect the fees that food delivery apps charge consumers. It would only affect the fees these apps charge restaurants on the backend -- and those can be steep.
While stay-at-home orders have crushed the restaurant industry, they've been a boon for delivery apps, which are serving a record number of customers.
These apps typically charge restaurants a 30% commission on orders although with promotions and marketing, the fees could be much higher, as a viral post from one Chicago restaurateur shows.
Concerns about delivery app fees have been growing for the last few years but the COVID-19 quarantine has given them new urgency. It has also taken what was once a restaurant industry issue and made it very public.
In early April, San Francisco passed an emergency order capping food delivery app fees at 15%. Last week, New York followed suit with a similar ordinance while Chicago passed rules that require delivery companies to disclose how much they're charging restaurants in commissions and service fees. Seattle, Washington D.C. and Jersey City have also passed orders limiting fees delivery app fees.
The L.A. City Council will take its first steps toward considering a similar cap on delivery fees at tomorrow's (Wed., May 20) meeting, where it's the second-to-last item on the agenda.
The motion was sponsored by Mitch O'Farrell, who represents Mid-Wilshire/Koreatown, East Hollywood, Silver Lake and parts of Northeast L.A., and Paul Krekorian, who reps Van Nuys, North Hollywood, Studio City and other swaths of the southeast San Fernando Valley.