The Seattle City Council voted Tuesday to permanently implement a 15% cap on the fees that services such as Uber Eats, DoorDash, Grubhub, and others charge restaurants for food delivery.
The cap has been in place since April 2020, when it was implemented as part of an emergency order at the onset of the pandemic. It was meant to mitigate the financial hardship that small businesses faced under shutdown orders, as delivery orders increased.
Without the limitation, some delivery companies reportedly charged restaurants fees as high as 30% prior to the pandemic.
The new legislation, sponsored by Councilmembers Dan Strauss and Alex Pedersen, has a provision allowing delivery services to charge more if restaurants purchase additional, non-delivery services, such as marketing and consulting.
San Francisco approved a similar exception last month, amending its law to enable higher fees in such situations. San Francisco had faced a lawsuit from Grubhub after making its 15% fee cap permanent in June 2021. Grubhub and other companies also sued New York City after it passed a permanent delivery fee cap last year.
“We know that capping food delivery fees during the pandemic benefited both our smallest businesses and consumers,” Strauss said prior to the vote, adding that it “remains a good foundation for long-term recovery.”
Delivery services contacted by GeekWire were generally accepting of Seattle’s new law, with the opt-out provision, even if they weren’t happy about the legislative process.
Uber for example, said in a statement that the company “hoped for a more collaborative approach from the City Council.” However, the statement added, Uber supports “permanent delivery fee language that allows restaurants to have the flexibility in selecting the services that best suit their business and sets up restaurant owners for success in an increasingly competitive industry while paying for the services they actually need.”
Cities “are recognizing that restaurants need more choices, not fewer, and adjusting their pandemic-era price controls accordingly,” a Grubhub spokesperson said, adding that Seattle’s ordinance will “preserve every restaurant’s ability to select crucial services to help grow their businesses, including marketing, advertising, consulting, and delivery.”
According to an analysis by Seattle City Council staff, the provision could help prevent food delivery platforms from passing costs on to consumers. Food platforms added surcharges of $1.00 to $2.50 to consumer bills after a nationwide wave of similar temporary fee caps, according to the analysis.
DoorDash supported the provision but cautioned, “Price controls can lead to increased costs for customers, fewer orders for local restaurants and fewer earning opportunities for Dashers. We’re eager to engage with policymakers to find solutions that better support restaurants, customers, and Dashers.”
Restaurants generally have narrow profit margins of 10% or lower and increasingly rely on food delivery to stay in business, according to a council presentation. They also have limited bargaining power to negotiate lower fees.
In May, the Seattle council also passed legislation setting minimum wage and other protections for gig workers who fulfill orders for on-demand service providers.
When the pandemic began, many restaurants embraced the delivery companies as a way to sell food while their restaurants remained empty but problems ranging from fees to uneven service soon became an issue. For example, some restaurants complained that the delivery companies scraped menus and posted them on their own apps without first asking managers or owners.
In response, the Seattle City Council last year placed new limits that would require delivery services to have agreements with restaurants before allowing their users to order food for takeout.