Cities Are Beginning To Cap Food Delivery App Commission Percentages

Cities across America are finally beginning to implement delivery app commission caps in an effort to protect restaurant profits, which have continued to falter during the coronavirus pandemic. Eater reports that last Thursday Jersey City signed an executive order that put a 10% cap on all commissions to third-party delivery apps like Uber Eats, DoorDash, Grubhub, and the like, joining the cities of Washington D.C., Seattle, and San Francisco, which have put similar caps in place over the past month. Boston, Chicago, and New York are all considering following suit, which could create a domino effect nationwide.

Currently, third-party delivery apps take up to a 30-percent commission on orders and their existence poses a bit of a blessing and curse for local restaurants. On one hand, third party delivery apps open up a business to a considerable amount of customers (especially now) by offering delivery and increasing their range of service, options that restaurants often don’t have the infrastructure to manage or the workforce to spare. On the other hand, the fees connected to delivery can quickly become exorbitant, benefitting the apps more than the restaurants themselves.

As you might expect, the third-party apps are pushing back on the caps arguing that such restrictions hurt delivery drivers and may drive up costs to the customer. In a joint letter to a member of the D.C. City Council ahead of the city’s cap, DoorDash, Grubhub, Postmates, and Uber Eats argued that “Delivery people — who are currently relying on on-demand work opportunities to earn an income — would have fewer work opportunities and lower earnings” as a result of a 10% cap.

Speaking to Eater SF, a spokesman for Grubhub explained that a cap would affect “struggling delivery workers… seniors and families at their most vulnerable time” and alerted customers that a cap would “immediately cripple delivery orders” and wind up costing consumers more.

And yet… in quarter one of this year alone, which spans from January to March, Grubhub saw record revenues of $363 million, an increase of 12 percent compared to the same time last year. Nationwide, orders were up by 20% in the month of April, with some markets seeing an increase as high as 100%. According to Buzzfeed, in that same earnings report, Grubhub called the COVID pandemic a “net tailwind for our growth metrics.”