City lowers cap on food delivery apps during crisis

BERKELEY >> The city of Berkeley, to help restaurants that continue to struggle as the pandemic and shutdown continue, is lowering the cap on third-party food delivery fees more than it did previously.

The council capped the fee at 10% for thirdparty services, such as Postmates, DoorDash and Grubhub, that charge restaurants to deliver food. The fee cap will remain in place only during the declared COVID-19 local state of emergency.

The change to the city’s municipal code reduces the allowed delivery fee from 15% to 10%; other fees that the app companies may charge restaurants, such as commissions, will continue to be capped at 5%.

While many other local municipalities have capped the delivery fees at 15%, Berkeley may be the first Bay Area city to set the maximum allowed delivery fee at 10%.

Councilmember Rashi Kesarwani, who authored the ordinance, held a roundtable discussion with restaurateurs in October. She said at last week’s council meeting that restaurants said reducing the fee from 15% to 10% would help their industry, which has been hit hard by the closures resulting from the pandemic. She said she also heard from tech companies that developed and run the apps that a reduction in the fee would reduce orders, and be “catastrophic,” although she didn’t specify if that would hurt the companies or restaurants.

“I want to say publicly, this pandemic has been going on for nine months — show me your data. If you really think this is a bad idea, please show me your data to prove your point. If not, don’t make claims that are unfounded,” Kesarwani said.

In July, the City Council passed an ordinance limiting the fees third-party apps could charge restaurants. At the time, the council agreed that the apps couldn’t charge restaurants more than 15%, and couldn’t reduce the compensation rates of delivery drivers or keep any of their tips.

Cities such as San Francisco, Seattle and Los Angeles have all passed similar ordinances to support struggling restaurants that were being harmed by excessively high fees, sometimes close to 30%, according to a city staff report. All three cities capped allowed food delivery fees at 15% during the pandemic.

Portland also lowered the allowed delivery charge to 10%.

Santa Clara County supervisors will consider a 15% cap at their meeting today. Alameda and San Mateo counties already have caps on allowed food delivery fees.

“As many people were reluctant to leave their homes for fear of infection, third-party delivery services became an essential option for restaurants to remain in business. In the

best of times, however, restaurants operate on very slim margins of profit,” read the Berkeley staff report.

The high fees by thirdparty delivery service apps during the early stages of the pandemic forced some eateries to lay off staff, as the restaurants were operating at just a fraction of their typical sales pre-pandemic, according to the city report.

The Berkeley council also accepted $ 232,500 from the East Bay Community Foundation, which will be matched by Alameda County for a total of $ 400,000 to support Berkeley businesses. Some of that funding, combined w ith funding from the Berkeley Relief Fund, will put $50,000 in a grant program to support outdoor dining for restaurants in the city, once outdoor dining is allowed again. The rest of the funding will help establish grant programs for small local businesses, for a one-time $5,000 grant, to help cover costs resulting from the pandemic.