San Francisco on Friday announced a temporary 15% cap on fees delivery companies can charge restaurants during the coronavirus crisis.
Why it matters: Food delivery has skyrocketed as residents remain confined in their homes except for essential trips. The service has become the primary source of revenue for restaurants as they can no longer serve on-site patrons.
- Typically, third-party delivery companies charge fees to the customer and also take a commission from the restaurants.
Between the lines: While some companies have slashed fees for customers during the COVID-19 outbreak to incentivize them to order more, restaurants have complained that high fees eat into their already-reduced revenues.
Yes, but: Critics of such fee caps argue this leads to unintended consequences like lower incentives for the delivery companies to work with specific restaurants or in certain areas, change how they pay drivers, or shift fees to customers to make up for lost money (and potentially decreasing demand for delivery).
- "In the face of this new policy shift, we are going to give restaurants the ability to pass some of these optional costs onto consumers," a GrubHub spokesperson said of the additional fees it charges restaurants for services beyond delivery, which add up to more than 15%.
- Uber Eats said that "regulating the commissions that fund our marketplace—particularly during these unprecedented times—would force us to radically alter the way we do business, set a far-reaching precedent in a highly competitive market, and could ultimately hurt those that we’re trying to help the most: customers, small businesses and delivery people."
- Pointing to an announcement the day before of cutting its restaurant fees by half, DoorDash added: "We are reviewing the Mayor’s order, including the legal basis for such an extraordinary unilateral action, and will respond accordingly."
Editor's note: The story has been updated with comments from delivery companies.
