San Francisco, California voted this week to permanently cap the fees delivery services charge restaurants at 15 percent. The San Francisco Board of Supervisors unanimously approved a resolution.
The 15 percent fee cap was first introduced in April 2020, when Mayor London Breed issued an emergency order that dictated the limits of what third-party delivery services like DoorDash could charge restaurants in commission fees. The cap was in response to a two-fold problem. Historically, delivery services have charged restaurants (in S.F. and everywhere else) commission fees that can run as high as 30 percent per transaction for being on their marketplaces. Said fees became even more problematic once the COVID-19 pandemic shut cities down and restaurants were left with no way to reach customers save through these delivery platforms.
The original fee cap was set to expire on August 15, 60 days after restaurants were allowed to reopen dining rooms at 100 percent capacity. The new resolution will permanently cap commission fees at 15 percent.
This week’s resolution marks the first time ever a city has passed a permanent cap on commission fees. Certain amendments are still up in the air, including one that would allow delivery services to charge “marketing fees.”
It’s also unclear how this resolution will change existing moves by delivery services, which have already introduced initiatives that look to be their own answer to the commission fee debate. Most notably, DoorDash introduced tiered commission plans in April that start with commission fees at 15 percent. However, that tier covers only the smallest delivery radius and has the highest cost to customers, who would ultimately have to shoulder the cost burden.
DoorDash and others have said these fee caps ultimately lower order volumes and hurt the drivers and couriers doing the last mile of food delivery, and that fee caps in certain markets mean customers will wind up paying more for their food.
San Francisco was one of the early movers when it came to capping fees. Dozens of other cities followed, though the cap percentage varies from 5 percent (Chicago) up to 20 percent (NYC). Many of those caps have now expired, though NYC is also considering a permanent cap.