City limits to 15% fees delivery apps can charge restaurants

Ones such as Doordash, Uber Eats and Grubhub have attached charges that run as high as 30%

Santa Clara became the latest city to cap the amount third-party delivery companies charge restaurants during the coronavirus pandemic, passing a temporary ordinance Tuesday night that immediately limits the fees to 15%.

The city council voted 6-0 to put the emergency ordinance into effect, hoping the limit that third-party delivery service apps such as Doordash, Uber Eats and Grubhub charge will help local restaurants survive.

In addition to capping delivery fees, the ordinance prohibits delivery companies from taking any portion of the driver’s tips and requires delivery companies to disclose fees charged to customers, including gratuities and discounts offered by the restaurant.

If delivery companies charge restaurants more than 15% from now through Wednesday, the city will issue no violations if refunds are paid to the restaurant before Sept. 19.

“Several restaurant owners told me they are facing fees as high as 30% from these third-party food delivery apps,” Santa Clara Mayor Lisa Gillmor said in a statement. “Many of them have no choice but to pay these fees due to their current reliance on delivery orders.”

The ordinance will remain in effect until the council ends its COVID-19 local emergency proclamation.

Santa Clara joins cities such as San Francisco, Berkeley, Fremont, San Leandro, Santa Cruz to put a 15% cap on delivery fees to restaurants during the coronavirus crisis.

Santa Clara Assistant City Manager Ruth Shikada said she became aware of the delivery price hikes while visiting local restaurants that received small-business assistance grants. Restaurant

owners told her that though they were grateful for the grant, much of their business amid the pandemic depends on delivery services.

“That’s when we started to look at benchmarking other cities and what they were doing and noticing that some of the other cities had already started putting in a cap,” Shikada told the council.

Shikada said there could be an unintended impact from the ordinance, such as higher delivery costs for customers, delivery companies marketing restaurants outside of Santa Clara, delivery staff cuts, smaller delivery areas and reduced driver pay.

“These are unintended consequences that we noticed from staff reports in other cities,” Shikada said. “But just based upon conversations, we haven’t seen a lot of these things occur.”

Neither Uber or Doordash returned emails requesting comment, but after Fremont limited fees delivery apps charge restaurants in July, a Doordash spokesperson told this publication in an email, “A cap to our commissions means we may not be able to provide the level of quality customers expect from a delivery provider, pay Dashers meaningful earnings and drive volume and sales that are so important to restaurants right now.”