Restaurateurs call on Sacramento to implement temporary cap on third-party delivery fees

CATEGORIES: RestaurantDelivery
PUBLISHED: September 29, 2020

SACRAMENTO, Calif. — Region Restaurants, a local trade association representing the locally owned independent restaurant industry, called on Sacramento leaders to temporarily cap third-party delivery fees at 15% within city limits.

In a May 8 letter addressed to Mayor Darrell Steinberg and the Sacramento City Council, Region Restaurants states that these "excessively high" third-party delivery commissions are adding "undue financial stress" to local restaurants who are already struggling to stay afloat.

A city official told ABC10 in an email that's unclear if the mayor or any other city council members have received or read the letter.

Third-party delivery systems, like DoorDash and Grubhub, charge restaurants a delivery fee for their services.

However, due to the impacts of COVID-19, restaurants in the area are struggling to pay skyrocketing commissions to these apps and provide the necessary delivery services they need to stay open.

As of late, "these fees range up to 50% which comprises a significant portion of the restaurants revenue," writes Joshua Wood on behalf of the trade association.

Wood tells ABC10 that they've had several reports of fees that are "way too high." Within the very next minute, he receives notice from a restaurant that says they were quoted at 35%.

"We want the third-party delivery services to make a profit, even a good one," Wood said. "But, there is obvious and ethical difference between a profit and profiteering by price gauging during a pandemic.

High fees have constricted businesses already suffering from financial hardship due to stay-at-home orders preventing dine-in customers. The coronavirus has necessitated delivery services for many restaurants.

"Due to the pandemic, a vast majority of their sales come from deliveries, which means these commissions could wipe out a restaurant’s entire profit margin," Wood writes. "We, as a community, need protective measures against these commission fees for our incredibly vulnerable restaurants and their employees during this time of crisis."

Other jurisdictions have already adopted identical policies. San Francisco, for instance, was the first city to adopt a temporary cap on third-party delivery fees at no more than 15%. Washington D.C. and Seattle quickly followed, with still more cities contemplating passing similar measures.

As such, the association is calling on the city of Sacramento to enact a temporary cap on delivery fees from third-party services (this would not include restaurants that have their own, in-house delivery services).

By capping those fees at 15%, Region Restaurants believes that local eateries will be alleviated of some of their financial stress.

"This cap will bolster Sacramento’s economy by keeping restaurant operations running and generating revenue for the region so when this pandemic tests the City’s economic stability, we can weather these uncertain times," Wood writes.