Chicago restaurants forced to close their dining rooms for the second time during the coronavirus pandemic are at least hoping to cash in on carry-out orders during Thanksgiving.
On Monday, they’ll get a bit of a break that has nothing to do with selling turkey and all the trimmings.
With a two-thirds vote to make it effective immediately, the City Council is poised to rein in what critics call “predatory” delivery fees that third-party services charge those restaurants, capping them at 10%.
For many restaurants, service fees of 30% or more “could be the difference between black ink and red-ink in a given month,” Downtown Ald. Brian Hopkins (2nd) has argued.
“What we’ve seen from some of these third-party services ... is absolutely rapacious and predatory behavior that has to stop,” Hopkins said during a committee meeting last week.
“This ordinance is not perfect. Enforcement is going to be a challenge. [But] it’s really the best we can do right now.”
The ordinance championed by Mayor Lori Lightfoot would automatically expire 60 days after city and state restrictions on indoor capacity allow at least 40% capacity.
UberEats, Grubhub, Postmates, DoorDash and similar services also would be prohibited from charging restaurants “any combination of fees, commissions, or costs” greater than 15% percent of the orders placed through the third-party delivery service.
It would be illegal to “charge customers a purchase price for food or beverages that is higher than the price set” by the restaurant or the menu price.
Third-party delivery services also would be required to “provide on their platform a mechanism for customers to provide gratuities” to restaurant employees.
Violators would face daily fines ranging from $1,000 to $3,000 per offense.
At last week’s joint committee meeting, James Beard Award winning chef and restaurant owner Beverly Kim talked about the dire straits restaurateurs face.
The owner of the Michelin-starred Avondale restaurant Parachute likened restaurant delivery fees to “pay-day loans.”
“Some of us are choosing to avoid using deliver apps altogether, but at the risk of losing the ability to stay competitive,” since “delivery apps search engines are much, much more powerful than our own marketing,” Kim said then.
Many “are also frustrated at the predatory false websites without restaurant owners’ consent that the delivery apps create. In the end, it has created angry customers when deliveries are not fulfilled or the menus are outdated and it damages our hard-earned brand identity and reputation. … It is an unconstitutional practice.”
In a “normal economy,” restaurants operate on razor-thin profit margins — 6% to 8%, Kim said. During the pandemic, they’re struggling to “even attain zero percent profitability” — despite laying off the majority of staff, Kim said.
“On the other hand, these delivery apps are hitting record profitability during this pandemic. We need to be able to come to the table and set reasonable fees so the fabric of Chicago’s small, independent restaurants that make it America’s best city for four years in a row can survive,” she said.
Illinois Restaurant Association President Sam Toia said Chicago restaurant are “running out of options” after being forced to stop serving indoor diners again to rein in a second surge of the coronavirus that’s even worse than the first.
“If you make a $10 order through a third-party deliver service, a restaurant may get $7 of that order. The delivery service takes the rest. … There is just not enough money coming in right now to be able to afford paying such a high percentage of every meal you serve,” Toia said.
“The time is now to put guardrails in place to cap the amount that delivery services can charge to small, independent restaurants that are hanging on. … Delivery services need to realize that, if Chicago restaurants can’t survive through this crisis, there will be no restaurant to deliver food from.”
Amy Healy, head of public affairs for Grubhub, reiterated the Chicago-based company’s contention that fee caps “drive up diner fees and that results in fewer order for restaurants and fewer work opportunities for drivers.”
Healy drew a distinction between companies focused on only the “logistics” of “driving food from restaurant to the diner” and Grubhub, which was “founded around the principle of helping restaurants grow and thrive in the age of the internet,” she said.
“We provide support, like search-engine marketing and optimization, loyalty rewards programs, point-of-sale integration and other services…We are contracted to provide for our restaurant partners,” Healy added.
“We support a proposal that supports restaurants in Chicago by allowing for a fair playing field that doesn’t provide a competitive advantage for one business model over another.”
