After initially allowing them to collect their full fees during the summer and early fall, Chicago’s city council on Monday finally approved a 15 percent fee cap for what third party delivery companies — like Grubhub, DoorDash, and Uber Eats — can charge restaurants. Chicago’s new limit goes into effect immediately and matches the limits lawmakers in large cities like San Francisco and New York adopted earlier this year.
Companies who violate the ordinance, and charged more than 15 percent, can be fined between $1,000 to $3,000 each day. The cap is a temporary one, and the city plans to lift it after the pandemic is over.
Restaurant owners have been waiting for the city to take action even before COVID-19 reached America. The council considered a stricter 5-percent limit in May, as the owners of restaurants like Parachute and Roots Handmade Pizz, shared their struggles in working with third parties with the city council. However, the council never voted on the measure.
Restaurants’ frustration mounted Saturday night when DoorDash experienced global technical difficulties that cancelled orders without notifying restaurants. Parachute owner Beverly Kim, in a conversation with Eater Chicago, wondered if the outage costs her hundreds of dollars on a busy weekend night. The outage also affected Tock, the Chicago-based company co-founded by the co-owner of Alinea that uses DoorDash integration for delivery. A DoorDash spokesperson apologized in a statement and offered refunds for customers.
While customers laud the convenience of online ordering, restaurant owners feel the current market conditions force them to use third parties. If restaurants aren’t listed on these ordering platforms diners are using, customers will likely order for a competitor. This environment makes restaurant owners feel they don’t have leverage and that they have no choice but to pay companies 20 to 30 percent of what they charge to customers.
A 15-percent cap aims to limit marketing fees, which are costs separate from delivery fees. The structure is complicated, but in same cases it’s money restaurants pay so customers can more easily find them in searches, so customers will pick them instead of ordering from a competitor.
During Monday’s City Council meeting, Ald. (42nd Ward) Brendan Reilly said some third parties were involved in price gouging and that COVID-19 exposed their unethical behaviors. “It’s my hope this will provide much-needed relief for restaurants that in some ways have been taken advantage of,” Reilly said during the meeting.
Mayor Lori Lightfoot thanked the Illinois Restaurant Association and commented how restaurants have been one of the sectors hit hardest during the pandemic. “We will continue to work on ways to support them and this is one important step forward,” she said.
As the state has suspended indoor dining and with winter approaching, delivery is now the primary source of income for restaurants struggling through the pandemic. For restaurants with dining rooms, even the most robust takeout business won’t substitute for the money that on-premise dining brings.
That was again apparent over the weekend in Humboldt Park, were Cafe Marie-Jeanne is poised to serve its final meal on Monday. Long lines spanned blocks along Augusta Avenue outside the restaurant with customers who kept the restaurant busy in its final days. Still, owner Mike Simmons tells the Tribune, “If we were open six days a week and were as busy as we were today, it would still be a fraction of what we were doing with a dining room.”
Caps in other cities haven’t been legally challenged by the delivery companies. Still, reps from DoorDash and Grubhub have objected to the limits. They’ve argued fee caps limit what they can pay their couriers who are designated as third-party contractors. Aldermen have said that company lobbyists stymied an earlier proposal for a 30-percent cap.
While DoorDash and Grubhub have come out against the cap, Chowbus, a third-party carrier that specializes in deliveries in Chinatown, supports the measure.
“Chowbus was built on a business model that’s sustainable long-term for the independent restaurants, drivers, and diners we serve,” a Chowbus statement reads. “This means Chowbus fees are already much lower than the 30-35 percent fees of many other platforms that have drawn the city’s attention. Particularly for independent restaurants, Chicago’s new fee limit could be a much-needed lifeline during this very difficult time.”
DoorDash provided this statement, attributed to Campbell Matthews, the company’s head of public affairs communications. The company says the ordinance will cause higher food costs: “DoorDash has always supported restaurants. Pricing regulations like this one could cause us to increase costs for customers, which could lead to fewer orders for local restaurants and fewer earning opportunities for Dashers. This legislation also removes options available to restaurants by limiting their ability to opt-in to additional services to help their business. We remain focused on solutions that preserve choice and ensure Chicagoans can continue to access safe and affordable food delivery.”
Grubhub spokesperson also provided comment voicing its opposition to the measure. They write that restaurants which can afford the fees will be angry that the cap won’t let them purchase additional services:
“As the pandemic continues, Chicago’s restaurants need more support, visibility and order volume than ever. Today the City Council instead chose to limit how local restaurants across Chicago can effectively market themselves to drive demand, which severely impacts how many customers and orders we can bring to these restaurants. The lower order volume also impacts drivers’ pay because there is less work available.
We’ve heard directly from many restaurant partners across the nation about the detrimental effects of fee caps. Namely, we hear about their frustration with the inability to increase marketing services beyond what is allowed under the cap. As a result, a number of other cities have allowed their restaurants to choose to increase their marketing services above what is allowed by a fee cap. Chicago however chose to prevent its independent restaurants from selecting the level of marketing support appropriate for their business.”
Again, the cap is a temporary measure, even though some restaurants owners would like to see it stick. Earlier this month in San Francisco, one city official floated the idea of making the cap permanent there.