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COVID-19

As cities move to cap delivery app fees, some restaurants worry

Meghan McCarty Carino May 19, 2020
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An Uber Eats delivery person in April. Some delivery companies say a decrease in fees they charge restaurants would be passed on to consumers. Pascal Guyot/AFP via Getty Images
COVID-19

As cities move to cap delivery app fees, some restaurants worry

Meghan McCarty Carino May 19, 2020
Heard on:
An Uber Eats delivery person in April. Some delivery companies say a decrease in fees they charge restaurants would be passed on to consumers. Pascal Guyot/AFP via Getty Images
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COPY

Los Angeles is the latest in a slew of cities to consider putting a cap on the fees third-party delivery apps, like Postmates and Uber Eats, charge restaurants. Restaurants pay fees as high as 30% of an order, which has become a sticking point for these hard-hit businesses. As San Francisco, New York, and Washington, D.C., have already done, Los Angeles is proposing to cap those restaurant fees at 15%.

But the Los Angeles Times reports dozens of local restaurants are not on board with the idea. They signed a petition opposing the proposed ordinance out of concern it could do more harm than good.

For restaurants, delivery apps are a necessary evil, said Darren Tristano, a restaurant industry consultant with Foodservice Results.

“You know, you hate to pay the cost, but once you’re starting to see the results, it’s kind of hard to stop,” he said.

In the pandemic, the services have become a lifeline for restaurants, so it’s understandable some would worry about rocking the boat.

And R.J. Hottovy, a consumer strategist for Morningstar, says most delivery apps, like a lot of tech companies, are still struggling to reach profitability.

“You have to build a base before you can start to collectively monetize that,” he said. “I think that’s kind of the struggle that a lot of the third-party delivery apps are going through at this point.”

Some delivery companies have argued any decrease in fees they’re allowed to charge to restaurants would instead be passed on to consumers, who might turn away from ordering.

But according to Amanda Topper, with market research firm Mintel, 40% of respondents in a recent survey thought diners should pay the extra fees, and nearly two-thirds agree the fees for restaurants are too high.

“There is some sort of agreement there that consumers are willing to kind of foot the bill here,” Topper said.

The delivery companies have also suggested cuts to fees could be passed on to drivers. But that could make it hard to attract enough of them, said Rebecca Givan, an associate professor of management and labor relations at Rutgers.

Deliveries have already become more time consuming because of social distancing rules, so she says drivers, who are independent gig workers without benefits or a minimum wage, are already often effectively making less.

“It’s going to be hard to squeeze the drivers more than they’re already being squeezed,” she said. “Many of them are already barely covering their expenses.”

Some restaurants fear the apps might pull out entirely from cities that vote to cap fees. But with more and more places going in that direction, Grubhub, Postmates and others might have little choice but to accept lower fees if they want a bite of the biggest markets.

COVID-19 Economy FAQs

What’s the outlook for vaccine supply?

Chief executives of America’s COVID-19 vaccine makers promised in congressional testimony to deliver the doses promised to the U.S. government by summer. The projections of confidence come after months of supply chain challenges and companies falling short of year-end projections for 2020. What changed? In part, drugmakers that normally compete are now actually helping one another. This has helped solve several supply chain issues, but not all of them.

How has the pandemic changed scientific research?

Over the past year, while some scientists turned their attention to COVID-19 and creating vaccines to fight it, most others had to pause their research — and re-imagine how to do it. Social distancing, limited lab capacity — “It’s less fun, I have to say. Like, for me the big part of the science is discussing the science with other people, getting excited about projects,” said Isabella Rauch, an immunologist at Oregon Health & Science University in Portland. Funding is also a big question for many.

What happened to all of the hazard pay essential workers were getting at the beginning of the pandemic?

Almost a year ago, when the pandemic began, essential workers were hailed as heroes. Back then, many companies gave hazard pay, an extra $2 or so per hour, for coming in to work. That quietly went away for most of them last summer. Without federal action, it’s mostly been up to local governments to create programs and mandates. They’ve helped compensate front-line workers, but they haven’t been perfect. “The solutions are small. They’re piecemeal,” said Molly Kinder at the Brookings Institution’s Metropolitan Policy Program. “You’re seeing these innovative pop-ups because we have failed overall to do something systematically.”

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