Denver, Colo. is the latest U.S. city to introduce mandatory caps on the commission fees third-party delivery services charge restaurants. The Denver City Council this week unanimously approved a 15 percent cap on the amount for delivery per transaction.
It’s the most recent development in an ongoing battle between delivery services like Grubhub and DoorDash and restaurants, regulators, and industry advocates. Delivery services, which normally charge as high as 30 percent per transaction in commission fees, argue that capping these fees undermine services’ ability to effectively operate. (A huge part of delivery services’ revenue comes from commission fees.) Advocates of the fees say the high percentages hurt the smallest restaurants most, and are predatory at a time when many independent businesses have little choice but to use delivery services to fulfill the uptick in off-premises orders.
Fee caps were first introduced this past spring, just as the pandemic was intensifying and restaurants were closing dining rooms. San Francisco, Chicago, and NYC were among the first U.S. cities to introduce caps. Since then, more than a dozen other cities around the country have joined in, and as the number of COVID-19 cases has ebbed and flowed, some have even extended their caps. At the beginning of September, NYC and Los Angeles both extended their fee caps, while Alameda County and the city of Santa Clara, Calif. implemented them for the first time.
For now, Denver’s caps are set to expire on Feb. 9, though given the uncertain trajectory of both the coronavirus and indoor dining, that could change. Many cities have said fee caps will remain in place as long as emergency orders do, and Denver may yet renew its own deadline.
Nor did Denver’s attempt to regulate third-party delivery stop at fee caps. This week’s ordinance also bans delivery services from adding non-partnered restaurants to their sites. Previously, Grubhub et al. listed restaurants on their platforms regardless of whether the service had an actual contract with the eating establishment. It’s an understatement to say the practice has received some bad press, and California has even gone as far as to outlaw the practice across the state.
Denver may be the latest city to crack down on third-party delivery practices, but it won’t be the last. With more dining rooms closing permanently and virtual restaurants and ghost kitchens now the most popular kid on the block, regulations will multiply over time, rather than go away. With or without a pandemic, the fight for or against the third-party delivery model has only just started.