Seattle caps fees delivery companies charge restaurants at 15% to ease financial duress
Seattle is capping the fees that services like UberEats charge restaurants at 15% in an effort to mitigate the financial hardship that the food industry is enduring under Washington state’s shutdown order.
Seattle Mayor Jenny Durkan implemented the cap via emergency order Friday, along with Seattle City Council members Lorena González and Lisa Herbold.
New York, Chicago, San Francisco, Los Angeles, and other cities around the country are considering capping delivery fees as restaurants struggle to survive under widespread lockdowns.
“We know that so many of our small businesses are hurting because of the COVID-19 pandemic, and that delivery services have been a lifeline for our restaurants during this unprecedented time,” Durkan said in a statement. “Unfortunately, some third-party delivery services are charging exorbitant commission fees, which exacerbates the financial hardship many restaurants are already experiencing.”
The fee cap will remain in place until restaurants are allowed to re-open. The emergency order also requires 100% of tips to go to delivery drivers.
Prior to the order, UberEats charged restaurants a 30% commission fee, which Uber says is necessary to cover operating costs and maintain the app. That’s comparable to what DoorDash and Grubhub charge, though those companies have reduced fees in response to the pandemic. UberEats has responded to the crisis by waiving the fees that delivery customers pay and allowing them to provide donations to restaurants through the app.
“We support efforts to help the hospitality industry, which is why we’ve focused the majority of our efforts on driving demand to independent local restaurants, which we know is a key concern of our partners during these unprecedented times,” an Uber spokesperson said in a statement. “Regulating the commissions that fund our marketplace — particularly during these unprecedented times — would force us to radically alter the way we do business, set a far-reaching precedent in a highly competitive market, and could ultimately hurt those that we’re trying to help the most: customers, small businesses and delivery people.”
Restaurant delivery services — like restaurants themselves — operate on tough margins. It remains to be seen whether tech companies that deliver food can turn a dependable profit. The coronavirus and related shutdown orders spotlight vulnerabilities in the gig economy industry, like so many other parts of our food delivery supply chain.
But Durkan says the cap is necessary to protect the restaurants in Seattle, many of which warn they may never recover.
“This commission cap will be critical to ensuring that delivery and takeout remain viable options and don’t cause increased financial hardship,” she said. “At the City, we’re doing everything we can locally to support our small businesses during this unprecedented moment in history.”