San Francisco Emergency Order Says Delivery Apps Must Cap Restaurant Fees at 15 Percent

In an emergency order backed by San Francisco’s mayor and two members of its Board of Supervisors, the city says that delivery companies that wish to continue to operate in the city must cap the fees they charge restaurants at 15 percent.

According to an announcement from Mayor London Breed (which can be read in full below), “While some delivery services have waived fees on the customer side, delivery services continue to charge restaurants a commission. These fees typically range from 10% to 30% and can represent a significant portion of a restaurant’s revenue, especially at a time when the vast majority of sales are for delivery. This commission fee can wipe out a restaurant’s entire margin.”

Jeff Cretan, a spokesperson for the mayor, tells Eater SF that the city will begin enforcement on the cap on Monday, and it will last “through the remainder of the local emergency, or until businesses are permitted to reopen for dine-in service, whichever comes first.” The order would apply to delivery apps like Grubhub, Postmates, Uber Eats, and DoorDash and its subsidiary Caviar, and appears to be the first such legislation enacted in the U.S.

This announcement might not be as much of a surprise for users of delivery app Grubhub, which sent an email to users Thursday night railing against the as-yet-unannounced plan from the city.

In an email subject-lined “Do your part to save local restaurants,” the Chicago-based app wrote that “Mayor London Breed wants to impose a limit on a restaurant’s ability to pay for delivery services. This will increase your fees by $5–10 per order and immediately cripple delivery orders, outweighing any potential benefits when takeout is the only option restaurants have to stay open.” The company asked that users of the platform contact the Mayor’s office to oppose the order. (You can see the full email here.)

According to a Grubhub spokesperson who spoke with Eater SF, “An arbitrary cap is exactly the wrong step at exactly the wrong time: not only could it lower pay for struggling delivery workers, it would disrupt an essential supply chain of meals to San Francisco seniors and families at their most vulnerable time.”

It’s a response that Laurie Thomas, the executive director of the Golden Gate Restaurant Association (GGRA), a local lobbying group focused on the needs of Bay Area restaurants, says is “disappointing.” Thomas has been asking delivery apps to halve their commission fees since the Bay Area’s shelter-in-place began, and sees today’s order from the Mayor (which is also backed by Supervisors Ahsha Safaí and Aaron Peskin) as a victory for local restaurants, which have struggled to eke out a profit in this age of dark dining rooms.

Grubhub’s opposition “was not well received” by the San Francisco community, Thomas says, suggesting that as they’re the only major app without close local ties (Postmates, Uber Eats, and DoorDash and subsidiary Caviar are all based in the Bay Area) “they might not truly understand the situation in San Francisco.”

When asked for comment from the Mayor’s office on Grubhub’s email, Cretan didn’t directly address it, but told Eater SF that “Mayor Breed is focused on supporting our small businesses during this challenging time, including our restaurants which are struggling to keep their doors open and their staff employed. We are working directly with restaurants every day to find solutions to help manage this crisis, and capping delivery fees will make a difference for them.”

The San Francisco announcement follows a national announcement from DoorDash, which in a blog post on Thursday announced that it would cut all commission fees for restaurants with five or fewer locations by 50 percent in the U.S., Canada, and Australia. When contacted by Eater SF, a DoorDash spokesperson said that this announcement had been in the works for several weeks, during conversations “with restaurant partners, Dashers [that’s their term for deliver drivers],” and other stakeholders. The DoorDash break announced Thursday is in addition to an earlier commission fee cut for pickup orders placed on the app — since March 17, no commissions have been charged on those orders.

According to a DoorDash spokesperson, this new commission fee break will also begin on Monday, April 13, and will last until at least the end of May, but could be extended past that depending on the state of the industry as the crisis continues.

Here’s Mayor Breed’s announcement on the emergency order:

MAYOR LONDON BREED ANNOUNCES DELIVERY FEE CAP TO SUPPORT SAN FRANCISCO RESTAURANTS DURING COVID-19 PANDEMIC

Third-party delivery providers can charge restaurants no more than 15% commission for food delivery for the duration of the Local Emergency

Mayor London N. Breed, Supervisor Ahsha Safaí, and Supervisor Aaron Peskin today announced a temporary limit on the commission that third-party food delivery companies can charge restaurants during the COVID-19 pandemic. The cap will be in effect through the remainder of the local emergency, or until businesses are permitted to reopen for dine-in service, whichever comes first. This fee cap is part of a broader effort to support small businesses in San Francisco during the COVID-19 pandemic.

Mayor Breed issued this order as part of a Supplement to the Local Emergency Declaration she made on February 25^th. All Supplemental Declarations are available at https://sfmayor.org/mayoral-declarations-regarding-covid-19.

“Restaurants across San Francisco are struggling to stay open. In these tough financial circumstances, every dollar counts and can make the difference between a restaurant staying open, or shuttering. It can make the difference between staying afloat or needing to lay-off staff,” said Mayor Breed. “I want to thank Supervisor Safaí and Supervisor Peskin for working with me to support our local restaurants and help them get through this difficult time.”

“We’ve listened to our restaurants and the struggles they’re facing during this unprecedented time. The high commission fees being charged to our businesses remains unchanged and that cannot continue as every dollar can mean staying open or laying- off more staff,” said Supervisor Ahsha Safaí. “For San Francisco’s rich network of mom and pop restaurants to survive, it’s imperative that we move aggressively. I applaud Mayor Breed for working with us to take swift action.”

“These corporations have refused to adjust their fees and are profiting immensely off a public health crisis while restaurants and their employees are suffering,” said Supervisor Aaron Peskin. “They are trying to undercut responsible regulation in the midst of this emergency, while also denying worker demands for basic safety gear, hazard pay and adequate sick leave. I appreciate the Mayor acting quickly to provide immediate, temporary relief for San Francisco restaurants while we continue to work on more permanent relief.”

Under the City’s Stay Home Public Health Order, restaurants are not permitted to offer dine-in service. In order to stay open, restaurants are offering take-out and delivery, and many restaurants are relying on third-party delivery services to provide that delivery.

While some delivery services have waived fees on the customer-side, delivery services continue to charge restaurants a commission. These fees typically range from 10% to 30% and can represent a significant portion of a restaurant’s revenue, especially at a time when the vast majority of sales are for delivery. This commission fee can wipe out a restaurant’s entire margin.

Mayor Breed’s Order temporarily limits the fee that delivery companies can charge to 15%. This cap on delivery fees is intended to support small businesses during the COVID-19 pandemic, and will be in effect for the duration of the Local Emergency, or until restaurants are allowed to resume in-person dining. While delivery companies provide an important service and support local employment, establishing a cap on commission fees is necessary to help keep restaurants in business.

Restaurants are experiencing significant financial hardship during this time and are seeing a decline in business as a result of COVID-19 and the Stay Home Order. Of the approximately 4,000 restaurants in San Francisco, the Golden Gate Restaurant Association estimates 30% to 50% are still operating and offering food delivery. The California Employment Development Department and U.S. Department of Labor indicate that a large number of the statewide 2.3 million initial unemployment claims since March are service industry workers.

“During this time of crisis, every tool that relieves economic pressure on our San Francisco restaurant community matters,” said Joaquín Torres, Director of the Office of Economic and Workforce Development. “Mayor Breed’s and the City’s leadership provides relief for the restaurants that provide essential services to our communities, jobs for our workforce, and allows this vital part of our economy and culture to function for the ongoing benefit of our city.”

“We are very appreciative of the Mayor taking action to limit the amount delivery companies can charge restaurants to 15% for the duration of the emergency order,” said Laurie Thomas, Executive Director, Golden Gate Restaurant Association. “We have been advocating for this type of relief for the past month and we are appreciative of the progress. This move by the City will help ensure our restaurants who are staying open to deliver much needed food can continue to help keep staff on payroll in addition to giving them a better chance of keeping their doors open.”