The L.A. City Council Has Voted to Cap the Fees Delivery Apps Charge to Local Restaurants

Many restaurants say they’ve depended on apps during the pandemic, but the fees cut into their already-slim margins
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Ordering food from local restaurants during the pandemic is a great way to help the economy and your community–but how you place your order can mean radically different things for a restaurant’s bottom line. Placing an order directly with the restaurant means that your entire bill goes to that restaurant, much as it would if you ate in the dining room. But order via a third-party delivery app like Postmates, Grubhub, or Uber Eats, and the restaurant might make 30 percent less off your same ticket. That’s because those apps charge fees to the restaurant, in addition to the fees they charge you, their end user. Now, L.A. City Council is taking action to cap the fees those tech companies can extract from restaurants, at least for the duration of the COVID-19 emergency.

Today’s unanimous vote in the council will direct city attorneys to draft up regulations that would establish some ground rules for fees charged by the apps, the Los Angeles Times reports. The proposal would cap fees charged by apps to 15 percent for delivery orders or 5 percent on services other than delivery, such as curbside pickup. The proposal also requires that 100 percent of tips customers add to their bill go directly to the driver. Once finalized, the rules would stay in effect for 90 days after whatever date L.A. ultimately lifts pandemic-related bans on dine-in restaurants.

“We want to do all we can to help improve their [restaurants’] chances of survival, and the worst thing we could do is not lean in when we see these cases that look a lot like price gouging,” Councilmember Mitch O’Farrell, a proponent of the new regulations, told the Times in April. “What we want to do is our best at some regulation here so that the competitive marketplace can do a reset and motivate these apps to have more conscientious business practices. The worst thing that anyone could possibly do is profit off of someone’s vulnerabilities.”

Saving that 15 percent per order means more money goes into restaurant tills, which, some business owners say, could make the difference between paying workers for more hours or cutting back.

“I could potentially give some of my staff the salaries they were making before,” Shawn Nee of Burgers Never Say Die told the Times. 

Naturally, not everyone agrees that capping fees would be a win. Postmates has in recent weeks prompted app users to act to “keep delivery in Los Angeles,” by clicking a button in the app that sends a message against the proposal to council members. The company also circulated a petition amongst local restaurant owners, collecting endorsements from brands including Sweetfin, Fat Sal’s Deli, and Canter’s.

“Of course everyone wants a discount, but how?” Canter’s Deli owner Marc Canter told the Times. “Where are they going to get the money that provides their platform and hires drivers? It would be the same thing as the government telling Ford Motors they have to start producing cars and make all cars $3,000 from now on.”


RELATED: Delivery Apps Are Forcing L.A. Restaurants to Adjust to a Take-Out World—or Risk Starvation


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