Part of the Food Policy Snapshot Series
Policy name: Permanent Cap on Delivery App Commission Fees
Overview: The San Francisco Board of Supervisors has voted to put a permanent 15 percent cap on commission fees that delivery companies charge restaurants.
Location: San Francisco, CA
Population: 0.9 million
Food policy category: Food services
Program goals: To allow restaurants to remain profitable while providing delivery services.
How it works: Delivery companies such as DoorDash, Grubhub, and Uber Eats must cap the commissions they charge restaurants at 15 percent per order.
Progress to date: On April 10, 2020, during the height of the COVID-19 pandemic, San Francisco Mayor London Breed announced an emergency order temporarily limiting the fees third-party food delivery services could charge restaurants. The emergency order was to remain in place until 60 days after restaurants were able to reopen at 100 percent capacity. San Francisco’s restaurants reopened at full capacity on June 15, 2021, meaning that the emergency order would have ended on August 15. On June 22, however, the Board voted to make the policy permanent.
Why it is important: During the pandemic, when restaurants were closed to indoor dining, these establishments relied on delivery and takeout orders to stay in business, yet the delivery companies’ commission fees made it difficult for many restaurants to make a profit. From March to August 2020, San Francisco restaurant sales dropped 91 percent, and half the restaurants in the city had closed.
Even before the pandemic, restaurants were unhappy with these fees, which ranged from 15 to 30 percent per order and cut into restaurants’ profit margins, which are generally very small – only between three and six percent on average. Capping those commission fees will hopefully allow restaurants to continue offering the convenience of home delivery while preventing them from losing too much revenue.
Program/Policy initiated: The policy was initiated as an emergency order on April 10, 2020, and was made permanent on June 22, 2021.
Point of contact: N/A
Similar practices: Several cities, including New York City, Los Angeles, and Chicago, have had temporary policies in place during the pandemic to cap commission fees from delivery companies, but San Francisco is the first to make this policy permanent.
Evaluation: While a formal evaluation has not been conducted, there appear to be differing opinions on the policy from restaurants and delivery services. Laurie Thomas of the Golden Gate Restaurant Association applauded the policy, stating, “This legislation will help ensure our San Francisco restaurants can continue to operate in a financially sustainable way as they recover from the past year plus with limited capacity and lost revenue.” On the other hand, delivery companies have noted that the cap on restaurant fees is forcing them to increase prices for the consumer, which may result in consumers being less interested in ordering from the restaurants and, therefore, reducing work opportunities for delivery drivers.
Learn more:
- Food Delivery Apps Say They’re Saving Restaurants. Instead They’re Charging Big Fees (CNET)
- It’s Not Just You—Food Delivery Is More Expensive Than It Used to Be (Food and Wine)
- Restaurants Press to Keep Delivery App Caps as They Rebound From Pandemic (CTV News)
- Some NYC Restaurants Tire of Forking Over Delivery-App Fees (The Wall Street Journal)
References:
- City Council Approves 15% Cap On Service Fees Charged By Food Delivery Apps (CBS Chicago)
- Delivery Apps like Grubhub and DoorDash Charge Restaurants Huge Commission Fees. Are Delivery Co-ops the Solution? (The Counter)
- LA City Council’s 15 Percent Food Delivery Fee Cap Is About to Take Effect (Eater Los Angeles)
- Mayor London Breed Announces Delivery Fee Cap to Support San Francisco Restaurants During COVID-19 Pandemic (City and County of San Francisco)
- New York City Council Votes to Cap Food-Delivery App Fees at 15% During States of Emergency (CNBC)
- San Francisco Permanently Caps Delivery App Fees For Restaurants at 15% (SFist)
- San Francisco will Permanently Cap Food Delivery Fees for DoorDash, Grubhub and Other Apps (San Francisco Chronicle)
- SF is the First City in the Country to Pass a Permanent Cap on Delivery App Fees (SF Eater)
- S.F. Supervisors unanimously approve permanent cap on food delivery app fees (San Francisco Business Times)
- Study: Sales at San Francisco Restaurants Have Dropped By 91 Percent (SF Eater)
- What is the Average Profit Margin for a Restaurant? (Restaurant365)
- Why DoorDash and Uber Eats Delivery Is Costing You More (The Wall Street Journal)
