Chicago would impose a 10% cap on delivery fees that restaurants pay to third-party services, but restaurants would get the break immediately only if two-thirds of the City Council approves, under a plan proposed Monday by mayoral allies.
Ever since the stay-at-home shutdown triggered by the coronavirus, Finance Committee Chairman Scott Waguespack (32nd) has sought a 5% cap on delivery service fees to give restaurant patrons a break.
But, the ordinance championed by Mayor Lori Lightfoot and jointly introduced Wednesday by Waguespack and Aviation Committee Chairman Matt O’Shea (19th) includes a 10% cap on “online” restaurant orders.
UberEats, Grubhub, Postmates, DoorDash and similar services also would be prohibited from charging restaurants “any combination of fees, commissions, or costs” that is “greater than 15 percent of the orders placed through” the third-party delivery service.
It would also 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.
And third-party delivery services would be required to “provide on their platform a mechanism for customers to provide gratuities” to restaurant employees.
Violators would be punished by daily fines ranging from $1,000 to $3,000 per offense.
The ordinance would automatically sunset — without a City Council vote to repeal it — 90 days after city and state restrictions on indoor capacity are eased to allow at least 40% capacity.
But there’s a catch: Chicago restaurants — already fighting for survival amid a new ban on indoor dining — would get the break immediately, but only if two-thirds of the City Council approves. Otherwise, the cap would take effect “upon passage and publication,” which normally takes about a month. That’s precious time many restaurants don’t have.
Waguespack noted in a text message that his proposal includes “15 percent overall, including delivery.”
O’Shea made no apologies for the more modest proposal.
“We are trying to be reasonable, working with the Illinois Restaurant Association. If the cap is too low, we run the risk of losing drivers willing to provide the service,” O’Shea wrote, in a text message to the Sun-Times.
He argued a 10% cap would “provide badly-needed temporary relief to struggling restaurants, many in danger of closing because of the pandemic.”
Ald. Tom Tunney (44th), owner of Ann Sather’s Restaurants, said a 5% cap “is not sustainable for the third-party delivery guys” and 10% makes more sense.
“People have to make some money on transaction,” Tunney said. “There’s so many floating targets. As restauranteurs, we don’t even know how to interpret these fees. It’s almost like credit card fees. There’s so many different cards. So many different users. At the end of the day, you just figure out what the overall commission is. It’s got to be pretty simple.”
A spokesman for Grubhub argued fee caps are “well-intentioned, but counterproductive” at a time when restaurants “need visibility and order volume than ever.”
That’s because they limit how small and independent restaurants in particular “can effectively market themselves to drive demand, which severely impacts how many customers and orders” third-party delivery services can bring to them.
“Caps lower pay for drivers by reducing the number of orders to be delivered; reducing restaurant orders; increasing costs for diners; disrupting an essential supply chain of meals; and costing jobs, tax revenues and economic activity,” the Grubhub statement said.
“We understand the ordinance is being revised and our hope is that the final proposal supports Chicago’s restaurants while allowing for a fair playing field that doesn’t provide a competitive advantage to one business model over another.”
Uber spokesman Robert Kellman agreed the proposed ordinance, “puts marketing profits ahead of paying drivers.”
“A more reasonable approach would be to expand a cap on deliveries so that the tens of thousands of drivers who deliver food to help support their families would take less of a hit to their pocketbooks,” Kellman was quoted as saying in a statement.
Third-party delivery services have been united in their opposition to a cap ever since Lightfoot threw her support behind the idea earlier this month after Gov. J.B. Pritzker ordered restaurants and bars to stop serving indoor patrons for a second time.
A joint City Council committee is scheduled to consider the proposed cap Tuesday.
New York proposed a 20% cap on restaurant delivery services, but retained 15% for drivers. In Los Angeles, 10% of the 15% cap was for drivers.
