Restaurant group wants cap on delivery app fees
City, province don’t plan to get involved in industry’s price-gouging complaint
Alberta’s restaurant industry is calling on government to follow in the footsteps of some U.S. jurisdictions by imposing a cap on fees charged by food delivery apps such as Skip the Dishes and Uber Eats.
However, there is little appetite on the part of either the city or the province to wade into the fray, even as restaurant owners say they are being bled dry by delivery commissions and fees.
The Alberta Hospitality Association — a newly formed group that advocates for restaurant and bar owners in the wake of the COVID-19 crisis — wants to see mandated fee limits imposed on delivery app companies, some of whom charge commissions as high as 25 to 30 per cent.
“Most restaurants are losing money by the end of that order,” said Ernie Tsu, owner of Calgary’s Trolley 5 Brewpub and a board member with the Alberta Hospitality Association. “It’s our hope that the government steps in and makes a mandate on this, because that would give the restaurant industry more of a fighting chance.”
Many Alberta restaurants trying to stay afloat during the pandemic have turned to takeout and delivery models since public health restrictions required the shutdown of dine-in service in March. Apps can be one way to increase delivery sales, and even restaurants that resisted them in the past have signed contracts with companies such as San Francisco-based Doordash or Winnipeg-based Skip the Dishes in the past two months.
But the restaurant industry operates with tight margins at the best of times, and some owners say the fees charged by the app companies are unsustainable. At Calgary’s Modern Steak, owner Stephen Deere said he has spent $72,000 on delivery fees since mid-march, money that otherwise could have been spent on advertising, recalling laid-off staff or buying new equipment.
“At the end of the day, that $72,000 is really bottom-line dollars that could be put into all sorts of programs to help stabilize and grow the business,” Deere said. “I use the apps because I understand there are people out there who are immunocompromised or who are self-isolating or who don’t feel safe going out and picking up their food themselves. But do I feel my business has gotten any value out of it? Absolutely not.”
In the U.S., some jurisdictions have already started taking aim at delivery app companies in an effort to help their local restaurant industries survive COVID -19. San Francisco, New York City and Seattle have already banned companies including Grubhub and Uber Eats from charging restaurants delivery fees of more than 15 per cent. Boston and Los Angeles have debated doing the same, while Chicago has imposed new rules requiring delivery apps to disclose all of their fees, including the cut they take from restaurants, to users.
Also south of the border, restaurant operators who allege unfair rates have launched a class-action lawsuit against delivery services Uber Eats, Grubhub, Doordash and Postmates.
In an emailed statement, Skip the Dishes said it is only successful if its restaurant partners are successful, which is why it is offering a 25-per-cent reduction in fees for local, independent restaurants
It’s our hope ... government steps in ... because that would give (restaurants) more of a fighting chance.
during COVID -19. The company is also offering a low commission rate of 10.5 per cent to any restaurant that wishes to utilize its own staff to facilitate delivery, and has initiated a number of other measures designed to support restaurant partners during the pandemic, including accelerated payments to improve cash flow.
Doordash — which has reduced commissions by 50 per cent through the end of May for 150,000 restaurants in the U.S., Canada and Australia — said mandated fee caps of the type the Alberta Hospitality
Association is asking for have the unintended consequence of reducing sales for restaurants when they need them most. “A cap to our commissions means we are not 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,” the company said in an emailed statement.
On Tuesday, Calgary Mayor Naheed Nenshi told reporters he’s not convinced that mandating a commission cap would even be within the city’s powers, under the Municipal Government Act.
“Look, I’m a free-market guy and I’d prefer to let the market sort itself out before we have to engage in all of this,” said Nenshi, adding he encourages customers to check with restaurants directly about preferred ordering methods. “The best thing to do is to phone the restaurant or go directly to their website, and if you can pick up rather than get delivery … that’s always a bit better.”
Justin Brattinga, press secretary for Economic Development Minister Tanya Fir, said there is currently no legislation in Alberta that governs the operations of food delivery apps. While he said the minister is aware of the concerns of some restaurant owners, he said other operators find the apps to be a helpful way for them to continue to reach customers.
Brattinga said anyone with concerns about possible price gouging during the pandemic should address them to Service Alberta’s Consumer Investigation Unit.
“Currently, to our knowledge, no provinces have legislated around this issue and we are not planning to at this time,” he said.
According to a report released in February by Dalhousie University, Canadians ordered $1.5 billion worth of meals by using food delivery apps in 2019.