City officials argue that the dominance of a few third-party delivery services gives them disproportionate leverage against restaurants. (Courtesy photo)

City officials argue that the dominance of a few third-party delivery services gives them disproportionate leverage against restaurants. (Courtesy photo)

Cap on food delivery app fees may remain until indoor dining allowed at full capacity

Proposal seen as financial relief for restaurants struggling in pandemic

A 15 percent cap on the fees delivery apps charge restaurants per order could remain in place until two months after San Francisco allows indoor dining at 100 percent capacity.

The Board of Supervisors Public Safety and Neighborhood Services Committee unanimously supported legislation Thursday introduced by Supervisor Aaron Peskin that would extend a fee cap imposed at the start of the pandemic until limits on indoor dining capacity are lifted.

The proposal imposes other regulations on the popular food delivery apps like DoorDash, Uber Eats and Grubhub.

It’s meant to give restaurants some financial relief as they struggle to survive the impacts of COVID-19. The fees delivery apps were charging restaurants and other business practices were an issue before the pandemic, but they became heightened when The City shut down to slow the spread of the virus.

Restaurants have been allowed to provide take out and delivery services since March. Later, The City permitted them to offer outdoor dining and freed up public space to use under the Shared Spaces program.

Indoor dining resumed on Sept. 30 at 25 percent capacity or up to 100 people, and The City plans to allow restaurants to expand to 50 percent capacity up to 200 people on Nov. 3.

In April, Mayor London Breed imposed a cap through an emergency order on the food delivery app fees at 15 percent and most recently extended the cap on Sept. 30. It is set to expire when indoor dining is allowed at 50 percent.

Peskin thanked Breed for her emergency orders but said “it’s time for the board to take over from here.”

The legislation is needed because restaurants are struggling to survive while “these food delivery platforms have really done quite well during the pandemic,” Peskin said.

Peskin made some final amendments to the proposal at the committee, after meeting the past two weeks with the Golden Gate Restaurant Association and delivery app companies.

Among the changes was a move to sunset the law 60 days after The City allows indoor dining without limits on capacity. He initially had it sunset after two years.

Chhavi Sahni, director of public policy and partnerships for the Golden Gate Restaurant Association, called the proposal “a solution that will help our restaurant industry survive until we get back to 100 percent indoor dining.”

A DoorDash spokesperson expressed concerns in a statement to the San Francisco Examiner about fee caps.

“Capping commission rates can reduce or even remove the ability for restaurants to choose the services and products that best serve them,” the statement said. “More than ever, restaurants need flexibility to decide how they operate and market their business.”

The spokesperson said that “we remain committed to working with policymakers on solutions that support restaurants, Dashers, and customers.”

The legislation detailed concerns about the practices of the food delivery apps.

“The market dominance of a few third-party food delivery services companies gives these companies disproportionate leverage in contract negotiations with restaurants,” the legislation read. “These companies use this leverage to extract high fees from restaurants – typically totaling 30 percent of an order total – and thereby diminish restaurants’ already-narrow profit margins.”

The delivery apps are also criticized for prohibiting restaurants from charging a higher price for delivery orders online in a way to recoup some of the fees and receiving a telephone order charge even if customer calls don’t result in an order, according to the legislation.

Push back against the food delivery apps led to Gov. Gavin Newsom signing Assembly Bill 2149 last month, the Fair Food Delivery Act authored by Assemblywoman Lorena Gonzalez (D-San Diego), to require food delivery apps to have an agreement in place with a restaurant before they start delivering the food to customers.

Peskin’s proposal incorporates this new state law and adds that a restaurant has the ability to cancel any such agreement with a 72 hour notice.

The legislation also prohibits the apps from restricting restaurant pricing and imposing telephone order charges when no order results from the call.

The Office of Economic and Workforce Development would enforce the law and penalties could result in citations of up to $1,000 per violation.

The full board will vote Nov. 3 on the legislation.

jsabatini@sfexaminer.com

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