Food delivery charges to be capped

FREMONT >> Following the lead of several major cities, Fremont will cap the fees food delivery services charge restaurants during the pandemic, aiming to help keep afloat local eateries that have taken a major hit since COVID-19 upended daily life.

The Fremont City Council on Tuesday voted unanimously to direct City Manager Mark Danaj to work up an executive order limiting the fees third-party delivery services can impose on restaurants to 15%.

Fees can typically range as high as 30%, and with delivery services becoming one of the few ways for customers to get food from restaurants during the pandemic, the fees have become overly burdensome to restaurants’ bottom lines, managers and owners say.

Councilman Yang Shao was absent during the council meeting Tuesday, and Councilwoman Teresa Keng recused herself from the vote because she owns a cafe in the city.

It’s unclear how soon the new executive order will be issued, but the council asked Danaj to move on it urgently, and Geneva Bosques, a city spokeswoman, said that Danaj asked the City Attorney’s Office to begin work on it right away.

Restaurateurs in the city say the cap would be a welcome change.

“That makes me feel excited because … we would actually start making a little bit of money,” Patty Segura, the manager of Fremont institution El Patio Original restaurant, said Tuesday.

Segura said before the pandemic, the restaurant didn’t mind paying high fees to delivery companies like DoorDash, Grubhub, Uber Eats and Postmates because the cost was seen more as an advertising investment to raise the profile of the restaurant in the area — not a key business driver.

“But now, in the pandemic, people are all using DoorDash. This is the only way to do it right now, when people are trying to stay home and not have contact. So it’s not really fair anymore,” she said.

Before COVID-19, DoorDash offered to give the restaurant better placement on the app if it agreed to increase its fees from 25 to 30%, Segura said, and the restaurant went along.

“I could see them trying to create their business that way before,” Segura said of the increased fees, “but now it’s more like they’re getting rich off the pandemic, basically.”

Fremont City Councilman Raj Salwan said he has heard from many restaurant owners in the city who are hamstrung by COVID-19 safety regulations that make delivery the most viable option to keep their doors open, but they are forced to pay the high fees from delivery apps.

“That definitely eats up their margins,” Salwan said. “A good business makes 5 to 10% profit, and if you take away such a large chunk, it definitely hurts the bottom line.”

DoorDash said in an emailed statement Tuesday that fees help pay for “a variety of business costs” it incurs while trying to provide restaurants with delivery logistics, marketing services and technology assistance.

“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,” a statement from a DoorDash spokesperson said.

Similar caps have been adopted in Los Angeles, San Francisco, Berkeley, San Leandro and New York City, among other cities.

“We’re disappointed that, in the midst of this crisis and when food delivery is more essential than ever, we’ve seen arbitrary caps imposed that can have the unintended consequence of reducing sales for restaurants when they in fact need them most,” the statement said.

DoorDash for much of April and all of May also cut its commission fees in half for more than 150,000 restaurants throughout the United States, Canada and Australia, as long as the restaurants had less than five locations.

Postmates, in an emailed statement, said caps that cities are instituting have “real consequences that undermine our ability to operate, fund relief efforts and benefit programs for merchants, couriers and customers, and kills the whole industry’s ability to provide the services restaurants need to stay open during this national emergency.”

But Salwan said he’s confident the delivery service companies will be OK in the long term, even if more cities enact caps such as the one he suggested for Fremont.

“Many of these big companies are funded by Wall Street and large hedge funds and investment banks, so they can take the hit in the short term and it won’t affect their returns. But the mom and pop business owner is going to be hit hard because they don’t have that cushion and they can’t lose money,” Salwan said.

“We want them to be able to squeak out a profit.”

Matt Senekeremian, a spokesman for the Fremont Chamber of Commerce, called the cap a “lifeline” for local restaurants during the council meeting.

“Normally, the chamber would not endorse government involvement in business-to-business agreements, but it represents the unprecedented circumstances that we are in as we try to protect our local restaurants from closing,” he said.

Gary Singh, the owner of Chaat Bhavan in Fremont, which has cut its staff significantly, said delivery makes up about 70% of what business he has left during the pandemic.