As cities move to cap delivery app fees, some restaurants worry
Share Now on:
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
Pfizer said early data show its coronavirus vaccine is effective. So what’s next?
In the last few months, Pfizer and its partner BioNTech have shared other details of the process including trial blueprints, the breakdown of the subjects and ethnicities and whether they’re taking money from the government. They’re being especially transparent in order to try to temper public skepticism about this vaccine process. The next big test, said Jennifer Miller at the Yale School of Medicine, comes when drug companies release their data, “so that other scientists who the public trust can go in, replicate findings, and communicate them to the public. And hopefully build appropriate trust in a vaccine.”
How is President-elect Joe Biden planning to address the COVID-19 pandemic and the economic turmoil it’s created?
On Nov. 9, President-Elect Joe Biden announced three co-chairs of his new COVID-19 task force. But what kind of effect might this task force have during this transition time, before Biden takes office? “The transition team can do a lot to amplify and reinforce the messages of scientists and public health experts,” said Dr. Kelly Moore, associate director for the Immunization Action Coalition. Moore said Biden’s COVID task force can also “start talking to state leaders and other experts about exactly what they need to equip them to roll out the vaccines effectively.”
What does slower retail sales growth in October mean for the economy?
It is a truism that we repeat time and again at Marketplace: As goes the U.S. consumer, so goes the U.S. economy. And recently, we’ve been seeing plenty of signs of weakness in the consumer economy. Retail sales were up three-tenths of a percent in October, but the gain was weaker than expected and much weaker than September’s. John Leer, an economist at Morning Consult, said a lack of new fiscal stimulus from Congress is dampening consumers’ appetite to spend. So is the pandemic.
As a nonprofit news organization, our future depends on listeners like you who believe in the power of public service journalism.
Your investment in Marketplace helps us remain paywall-free and ensures everyone has access to trustworthy, unbiased news and information, regardless of their ability to pay.
Donate today — in any amount — to become a Marketplace Investor. Now more than ever, your commitment makes a difference.