In an effort to protect local restaurants amid a stricter COVID-19 lockdown, the Santa Clara County Board of Supervisors will consider a temporary cap on third-party food-delivery service fees and commissions Tuesday.
“The goal is to protect local restaurants and consumers from price gouging during a pandemic,” Supervisor Joe Simitian said. “Many of these restaurants don’t have the infrastructure to host their own platforms for takeout and delivery, so they are often forced to accept excessive fees and commissions. They simply have no other option.”
The “no other option” is especially true now since restaurants are required to close their outdoor dining services for at least a few weeks because of the new county health order that went into effect Sunday.
“The biggest share of our COVID-related unemployment really comes from our restaurant industry,” Supervisor Cindy Chavez said. “This has been a tough time and we really are in this together, and we have to look for ways to make sure that everybody gets across the finish line.”
Third-party delivery services like DoorDash, Uber Eats or Grubhub often charge food establishments upwards of 30 percent of the purchase price for delivery and as much as a 15 percent commission for customer pickup ordered through the third-party online platform.
On their websites, delivery service platforms say charges are used to cover the costs from delivery and marketing to business listing and credit card processing, but restaurant owners say those charges cut into a quarter of their profits.
“Since March our main source of revenue has been mainly generated through third-party delivery services, so you almost get slammed with a double whammy here,” said Jenneke de Vries, owner of downtown San Jose’s Pizza Bocca Lupo. “On one side you have the significantly lower revenue and on the other side we lose a quarter (of our profits) right off the bat because that is the fee, we pay for these services right now.”
Supervisors Cindy Chavez and Simitian, who co-sponsored the ordinance, said the fee caps are intended to protect small business owners, their employees and customers from price gouging. But the ordinance is also intended to protect drivers who work for the third-party delivery services by prohibiting cuts to wages or tips of drivers.
“If there are lower fees collected by the company, presumably there is less to share with drivers. I suppose that is an argument,” Simitian said. “But let me just say that before the pandemic, the fees were held at a more modest, and I would argue reasonable level, that didn’t capitalize on the difficult circumstance we are now facing.”
If passed, Santa Clara County would join a long list of counties and cities in the Bay Area that have already made the move to curb delivery fees including San Mateo, Alameda and Marin counties as well as the cities of Oakland, Santa Clara and Santa Cruz.
“We have experiences in other cities, and it has been successful,” said Alexia Penna from the Eureka! Restaurant Group, which has five locations around the Bay Area. “It has been a very difficult time for us, especially recently when we spent too much money weatherizing our patios and having to then limit it to takeout and delivery.”
However, Camille Chijate from Hobee’s California Restaurant in San Jose worries the cuts will impact smaller delivery services that may not survive a delivery cap like Waiter.com, which she has relied on for 20+ years.
“They have a completely different business model, however I fear that they will be lumped in with ‘the big three,'” Chijate said in a letter to the board. “They hire their own drivers, pay their wages, workers comp, payroll taxes, benefits… They have been hit hard by the work from home orders, and could be put out of business by a cap in fees for 6 months. Effectively handling the big three more market share by wiping out competition.”
“I’m sure that there are other regional delivery companies that would experience the same fate. If Waiter.com went away, we would likely go out of business also,” Chijate continued.
There is still not a proposed percentage cut or specific fee that will be capped. If the board moves forward with the idea, the county counsel will work out the details so it can be implemented by Jan. 12.
However, Simitian said he hopes to make it an emergency ordinance so that it takes effect as soon as possible.
The move has gotten support from the Gilroy and Mountain View chambers of commerce, the Silicon Valley Chamber Coalition and dozens of restaurant owners.
The discussion will take place no earlier than 1 p.m. on Tuesday and can be viewed at https://sccgov-org.zoom.us/j/91469570961.