SAN JOSE (CBS SF) – Santa Clara County and South Bay’s largest city, San Jose, both approved caps on food delivery fees Tuesday to help protect fragile small businesses following COVID-19.
The district’s temporary ordinance limits delivery charges for third-party delivery services such as Uber Eats or DoorDash to 15 percent of the purchase price for orders and to 10 percent for pick-up / take-out orders from a restaurant.
The emergency ordinance comes into force on Saturday and expires as soon as restaurants can resume operations indoors or at the district’s discretion.
“Unfortunately, the current pandemic offers an opportunity to reduce prices,” said supervisor Joe Simitian. “That is the problem we are addressing.”
With restaurants forced to shut down both indoor and outdoor operations earlier this month, they had to rely on pickup and delivery orders to hold their own for the next year.
While third-party delivery services are an essential part of fulfilling those orders, fees and commissions can be over 30 percent of the order and a quarter of the restaurant’s profit.
“These fees are a huge cost,” Jennifer Verner, Grandpa! Management Group Business Operations Manager said in a letter to the county. “In some cases we pay 30 percent for delivery, and when you factor in labor costs and COGs (cost of goods), we often barely break even.”
Most restaurants do not have the infrastructure to support their own deliveries and have spent a lot of money weathering their outdoor seating and welcoming guests since the pandemic began.
Ryan Summers, owner of Good Karma in downtown San Jose, said he had seen doors closed for many local restaurants due to the additional costs and other pandemic-related impact.
“Small downtown businesses feel abandoned during this crisis, but this endorsement is certainly a positive step in sustaining the downtown economy, which is frankly in its final stages,” Summers said during the San Jose City Council meeting .
Councilor Raul Peralez, who represents downtown, said many more businesses would go under without the cap.
However, Simitian, who proposed and supported the cap at the county level, said he was concerned about how the cap will affect consumers.
“What worries me is the shift in fees,” said Simitian. “If someone can’t make extra money in one place, they just move the extra money to another payer – in this case the consumer.”
DoorDash spokesman Campbell Mathews expressed a similar sentiment.
“We remain concerned that pricing policies could lead to higher costs for customers, which could result in fewer orders for local restaurants and less earning potential for dashers,” Mathews said in a statement.
In a blog post, DoorDash said it uses commissions to pay driver fees, do background checks, and offer auto insurance, among other things, and works directly with restaurants to ensure both parties are complete.
It is also pointed out that access to DoorDash’s large consumer base also provides exposure for restaurants – which is badly needed.
“We agree that restaurants now need to be supported more than ever, which is why we offer so many services and products for restaurant partners,” says the blog post. “We hear from our partners that we have a choice of how to use our platform is critical. And therefore, limiting the options available to restaurants is not the answer. “
The district attorney will come up with a report in January setting out how the regulation will affect consumers and setting safeguards for them.
The district ordinance applies to all 15 cities and unincorporated areas of the district. However, cities can set a more restrictive cap if they so choose.
The San Jose regulation also limits delivery to 15 percent, but unlike the county, it limits delivery to total charges – including shipping and handling fees – of 18 percent. However, chains of four or more restaurants or grocery stores do not qualify for the limit.
Santa Clara Counties and San Jose join a long list of multiple Bay Area jurisdictions that have imposed similar caps, including counties of San Mateo, Alameda, and Marin, and the cities of Oakland, Santa Clara, and Santa Cruz.
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