Coronavirus pushes cities to cap third-party delivery fees

Seattle, San Francisco, New York City are among cities proposing commission limits

More U.S. cities are capping commission fees third party delivery services charge restaurants, many of which are mom-and-pop small business owners.

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Seattle is the latest to forbid delivery services like Uber Eats, Grubhub, Postmates and DoorDash from charging more than 15 percent commission for take out orders to reduce the financial burden for restaurants during COVID-19, city officials said.

Seattle is the latest city to put a cap on third-party delivery services. 

The city’s emergency order to cap fees is effective on Friday and joins a number of other cities that have implemented or proposed similar policies to prevent the food-tech companies from taking up to 30 percent in commission, making it impossible for small business owners to make a profit. Commission fees typically cover delivery costs and marketing for restaurants listed on the app.

San Francisco this month temporarily capped delivery fees at 15 percent. And in Los Angeles and Boston, City Council members are proposing a 15 percent cap. The New York City Council is slated to host a public hearing via Zoom on Wednesday to potentially restrict third-party delivery services from charging more than 10 percent. And a council member in Chicago is proposing a 5 percent cap.

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UBERUBER TECHNOLOGIES INC.50.80-0.46-0.90%
GRUBGRUBHUB INC69.69+0.77+1.12%

Small businesses have pushed back against delivery services for charging high commission fees that take a big bite out of business, particularly for those where the average check is around $10 because restaurants have difficulty making a profit.

DOORDASH REDUCES RESTAURANT FEES BY 50 PERCENT

And with social distancing orders in place across the country with COVID-19, restaurants have had to pivot to delivery-only business models, which has caused them to lose much of their revenue.

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Earlier this month, DoorDash announced it would cut commission fees at restaurants by 50 percent. And UberEats said last month it would waive delivery fees charged to more than 100,000 independent restaurants across the United States and Canada, while Grubhub said in March it would suspend collecting up to $100 million in commissions from independent restaurants throughout the country as health officials urge consumers to socially distance themselves.

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Some restaurants, however, have said they were still being charged at much as 30 percent commission fees from some of the third-party delivery services.