Counties and cities throughout Colorado soon can limit fees charged by third-party delivery companies to restaurants, following passage of a bill Wednesday that drew far more opposition than arose when Denver became the first city in the state to pass such a restriction in October.
House Bill 1005 gives authority to local governments to limit the companies’ fees to restaurants, bar such companies from reducing driver pay because of the new law and require the platforms to get eateries’ consent before listing their menus. Sponsored by Rep. Shannon Bird, D-Westminster, the measure was necessary because state law bars counties or what are known as statutory cities from passing laws without the explicit permission of the state, unlike home-rule cities like Denver.
However, the new law, which Gov. Jared Polis is expected to sign, is only applicable during the existing coronavirus public-health emergency period and only when restaurants within interested counties are restricted to allowing 50% or less capacity indoors. Bird and backers of the proposal framed it as a way to help already struggling restaurants from under the burdens of what can be heavy fees imposed by delivery companies at a time when their services are viewed as being practically indispensable.
Fees from the four companies that dominate the delivery market — including Uber Eats, DoorDash and Grubhub — can run as high as 35% for individual restaurants, and Colorado Restaurant Association government affairs director Nick Hoover said that any fee over 20% prevents most restaurants from making any profit on the order. With restaurants dining rooms throughout the Denver metro area currently under closure orders, many are faced with the untenable option of selling food at a loss through these technology platforms or requiring customers to come in to pick up orders while pandemic transmission is on the rise.
“This bill’s going to help a lot of small restaurants in the state of Colorado,” said Hoover, whose organization also led the push for the local ordinance that Denver approved to be in place through early February. “The industry, we’re at a breaking point now. And we have heard from many of our members that this current round of dining-room closures is in many ways having a bigger impact on them than the previous round of dining-room closures.”
Denver’s passage of a 15% cap on delivery fees the companies could charge to restaurants was followed by similar laws from Aurora, Broomfield, Commerce City, Edgewater and Morrison. In some of the cities, notably Denver, there was so little controversy that council members passed the ordinance unanimously without even a word of debate.
Like with the Denver law, third-party delivery companies did not speak against the proposal in the Legislature.
Opposition to HB 1005 came from members of both parties at the Capitol, however; the bill passed the House by a 38-27 margin with all Republicans and three Democrats opposed, and it passed the Senate Wednesday 23-12, with 11 Republicans and one Democrat against. And the reasons cited by opponents were numerous.
Rep. Lori Saine, R-Firestone, argued that reducing the price that delivery companies could charge to restaurants will force them to raise prices elsewhere, pointing to the $2 “Denver fee” that DoorDash recently started charging customers who order from it. That, in turn, will make consumers less likely to use the services and will reduce business to the same restaurants that the bill purports to help, she said.
Sen. Rob Woodward, R-Loveland, said that a fee cap will undercut the business case of local delivery startups like NoCo Nosh that have launched in recent months to take on the national giants, by taking away their ability to offer restaurants lower prices. And several Republicans said the policy amounts to price control and is one more interference by the state in the restaurant sector that its capacity restrictions already have hurt so badly.
“There’s a fundamental flaw to what government is doing at this moment and has been doing and will continue to do,” said Rep. Richard Holtorf, R-Akron, during debate in the House Tuesday. “I think government has meddled enough in the restaurant business. I think we have restricted enough.”