L.A. moves to cap fees charged by delivery apps

Council wants a law that would limit how much services can charge restaurants.

Los Angeles is pushing forward with plans to limit how much delivery services such as Postmates, Grubhub and Uber Eats can charge restaurants, capping delivery fees at 15% of the purchase price for orders during the COVID-19 crisis.

The City Council voted 14 to 0 Wednesday to ask city attorneys to draft such a law, following other cities including San Francisco and New York City. Restaurants currently pay as much as 30% in fees to third-party delivery apps, which Councilman Mitch O’Farrell denounced as exorbitant.

O’Farrell said that, during the pandemic, restaurants were relying much more heavily on delivery sales and had become “completely at the mercy of these third-party delivery apps.”

“If we keep going down this road, restaurants will be forced to raise their prices and risk losing customers,” the councilman said. “Why should restaurants, and their customers, be put in a position to subsidize delivery app companies? We need to level the playing field.”

The proposal passed Wednesday also would limit other fees charged by the delivery companies — those for services other than delivery — to a maximum of 5% of the purchase price of each order. And it would require that 100% of delivery tips from customers go to drivers. The restrictions would end 90 days after L.A. lifts its ban on dining inside restaurants.

During the meeting, council members rejected a push by Councilman Bob Blumenfield to limit which restaurants were covered by the fee cap. Blumenfield, who argued that bigger chains had enough leverage to negotiate for better fees for themselves, said the fee limits should apply only to restaurants that had five or fewer locations.

O’Farrell countered that limiting the fee restrictions to smaller businesses might prod delivery apps to drop mom-and-pop restaurants in favor of bigger chains. Blumenfield’s proposal failed on a 4-10 vote.

Many restaurant owners have complained that they have little choice but to fork over significant fees to keep ferrying meals to customers because many diners don’t want to leave their homes during the coronavirus pandemic. One restaurateur called the delivery services “a necessary evil.”

“Even before the madness, it was just a terrible deal no matter how you slice it,” Anca Caliman, co-owner of Lemon Poppy Kitchen in Glassell Park and Parsnip in Highland Park, told The Times.

Although many restaurant owners have enthusiastically backed the proposed law as a crucial lifeline to help them survive — and some have pressed for a lower cap of 10% — others have signed a petition facilitated by Postmates that opposes the plan, arguing that caps would end up hurting restaurants.

City lawyers will now draft the proposed law, which will return to the council for final approval before it can go into effect.