Berkeley City Council caps food app delivery fees amid COVID-19

UberEats food delivery employee walking on sidewalk alongside their bike.
Pixabay/Creative Commons
In response to Berkeley City Council passing an ordinance that temporarily limits food delivery app fee, companies such as UberEats have to change their business models.

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Berkeley City Council unanimously passed an ordinance introduced by Councilmember Rashi Kesarwani to temporarily limit food delivery app fees during its Tuesday meeting.

According to Kesarwani, she introduced the ordinance in response to local restaurant owners’ concerns regarding “excessively high” third-party food delivery app fees.

In response to these concerns, Kesarwani said the ordinance will set a 15% limit on delivery fees, cap other fees at 5% and prohibit apps from reducing tips for food delivery drivers.

According to the ordinance, restaurants have particularly relied on the apps amid the COVID-19 pandemic.

“High fees charged by third-party food delivery apps – as much as 30% per online order – is making it impossible for them to survive during these difficult times,” Kesarwani said in an email.

Grubhub spokesperson Jenna DeMarco said in an email its platform is based on a fee-for-service model in which restaurants can choose to opt into various services, including delivery.

“This fee is entirely optional; a restaurant can choose to hire its own delivery team and pay the associated costs,” DeMarco said in the email.

According to DeMarco, Grubhub currently charges a 10% delivery fee.

DeMarco added that the fee cap will lower order volume to restaurants, increase costs, raise prices for customers and decrease earnings opportunities for drivers.

“We believe that any cap on fees represents an overstep by local officials and would not withstand a legal challenge,” DeMarco said in the email.

Uber spokesperson Ramona Prieto said in an email the fee cap would force UberEats to “radically” change its business model.

DoorDash will face similar changes to its business model in light of the ordinance, according to spokesperson Catherine McCormack, who also said the fee cap could reduce local restaurant sales.

McCormack, who said DoorDash is “disappointed” by the cap, added that commissions help DoorDash cover expenses on behalf of restaurants it works with.

McCormack also said the fee cap could in turn raise the amount customers pay while using the platform.

Alex Knox, executive director of the Telegraph Business Improvement District, however, said he believes local restaurant owners would be relieved by the ordinance.

Knox added that he has been aware of high fees on food delivery apps from the restaurants.

“The businesses need as much support as they can possibly get,” Knox said.

He suggested ordering directly from local restaurants — and not through apps — to prevent being charged delivery fees and to support the businesses amid the current financial strain of COVID-19.

Contact Hanna Lykke at [email protected] and follow her on Twitter at @hannaathearstDC.