Dayton has capped the fees food delivery companies like Uber Eats, Grubhub and DoorDash can charge restaurants during the pandemic when many places are struggling to survive.
Some owners and operators have complained about exorbitant third-party takeout and delivery charges that can reach or exceed 30% of purchase prices, cutting deep into potential profits.
Dayton approved this week limiting third-party fees to 15% of menu prices until after the end of the public emergency that was declared by the governor and mayor.
“Legislation like this has been passed in other major Ohio cities, and I believe it will help protect local restaurants and make sure additional dollars are not drained out of our community,” Dayton Mayor Nan Whaley said.
But some third-party companies warn that fee caps can have consequences for consumers and delivery workers.
“Pricing regulations could cause us to increase costs for customers, which could lead to fewer orders for local restaurants and fewer earning opportunities for Dashers,” a DoorDash spokeswoman said.
During the coronavirus crisis, local restaurants saw sales sharply decline because of social distancing, indoor seating restrictions and many people feeling uncomfortable dining out.
Local establishments have relied heavily on takeout and delivery orders, many of which are placed on third-party apps and online.
Many restaurants operate on thin margins, and the fee cap will ease the financial burden they face during a difficult time, maximizing revenue from takeout and delivery orders, the city’s ordinance says.
The fee cap will remain in place until 120 days after a public emergency is lifted that was declared by Ohio Gov. Mike DeWine and Whaley.
The ordinance also says third-party food delivery services cannot in response to the fee cap reduce the compensation rates of delivery drivers or garnish their tips.
The pandemic has been incredibly difficult on local restaurants, Whaley said, and they have seen a significant portion of their sales move to carryout or delivery.
She said she spoke to multiple restaurant owners who told her fees from national delivery companies have been a serious burden since they have had to shift their business models.
The Ohio Restaurant Association believes 15% caps are appropriate while Ohio has ongoing restrictions and afterwards when the industry continues to recover from significant losses, said John Barker, its president and CEO.
“We have successfully advocated for caps in Cleveland, Columbus, Cincinnati, Beachwood, Cleveland Heights, and we are working on other cities,” he said.
More than half of Ohio restaurants use third-party takeout and delivery services, he said, and utilization of these companies increased 85% last year.
More than 10% of restaurant sales go through third-party services, Barker said.
In a blog post, DoorDash said it has been forced to charge customers additional fees when they live in markets that have price controls. The company says it has fixed costs per delivery and fee caps often mean its commissions do not cover the costs of the delivery services it provides to merchants.
DoorDash says the fees it collects from restaurants pay for credit card processing, insurance, support agents, background checks, marketing and advertising for restaurants, app and website maintenance, and the wages of its delivery workers.
Some restaurants hire their own delivery drivers and only receive orders through DoorDash, while others want more comprehensive services, including “Dasher” delivery, the company said.
“Pricing regulations can also remove options available to restaurants by limiting their ability to opt-in to additional services to help their business,” a company spokeswoman told this newspaper.
A DoorDash representative reached out to the city and asked to amend the ordinance to lift the fee cap when restaurants are at 100% capacity with no restrictions.
The representative also asked the city to allow fees that exceed the 15% limit if restaurants agree to optional products and services, like advertising, marketing or access to customer subscription programs.
A Grubhub spokesperson said fee caps are arbitrary price controls and it’s a mistake to impose them during a time of crisis when restaurants more than ever need support, visibility and order volume.
“Any caps on fees ― regardless of the duration ― result in damaging, unintended consequences for locally owned businesses, delivery workers, diners and the local economy,” a spokesperson said.
Grubhub sends more than 650,000 orders to restaurants every day, which led to more than $8 billion in sales from its marketplace in 2020.
Grubhub’s gross food sales increased 47% last year, compared to 2019, according to the company’s investor report.
Dana Downs, chef and owner of Roost Modern Italian in the Oregon District, said she decided against using third-party delivery services because they wanted to charge a 30% fee and weren’t willing to negotiate.
Roost just started taking orders online on Thursday and Downs said she still hasn’t decided whether to offer delivery services. Roost likely would handle its own deliveries, she said, because she wants her drivers to have a certain level of professionalism that reflects the brand.
Downs said she’s very impressed the city imposed a cap on fees to support its restaurants.
She said, however, she hopes that doesn’t lead to delivery companies pulling out of the local market because that could hurt businesses’ sales.
“It’s great the city is backing up restaurants by doing that,” she said. “It’ll be interesting to see what happens.”
Credit: Christie Hemm Klok
Credit: Christie Hemm Klok
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