On June 22, San Francisco became the first city in America with a permanent cap on the fees that third-party delivery companies can impose on restaurants. The measure caps the fees that these companies can charge restaurants at 15%.
Other major cities imposed similar pandemic-evoked regulations, but so far, SF is the only one that made it permanent.
Mayor London Breed issued an emergency order in April last year that temporarily capped fees, but the resolution passed in June makes the cap permanent. This came as a huge relief to restaurants that had been paying up to 30% in commissions to delivery app companies. These fees put an enormous strain on small restaurants trying to keep up with the ever-increasing charges. Customers were also affected by higher prices.
The initial goal of this cap was to limit the skyrocketing fees, which could have led to the detriment of restaurants in the face of pandemic lockdowns.
However, even with this regulation, profit opportunities for food delivery companies still exist. For example, they can charge marketing fees. To regulate this, SF lawmakers have already introduced several amendments to the resolution that will:
- Separate agreements for marketing fees, allowing restaurants to choose between several marketing exposure options;
- Prevent food apps and other third-party delivery companies from forcing restaurants into marketing deals;
- Cap a credit card processing fee at 3%.
The fact is, if no action was taken, meal delivery services that don’t depend on mobile apps like DoorDash and Grubhub for deliveries could’ve had a privileged position in the SF restoration market.
Lawmakers also took into account the stats showing that even before the pandemic, 34% of American consumers between 18–24 ordered food online from restaurants and other food companies that didn’t provide their own delivery.
Hence, they took this preventive action for the customers as well.
