The Denver City Council imposed a temporary cap on commission fees for third-party food delivery companies, such as Grubhub and Uber Eats, which can reach as high as 30% of an order.
The council approved the proposal in a unanimous 13-0 vote Monday night in a move meant to ease the burden on local restaurants during the pandemic.
“Restaurants are a really important part of our culture, our neighborhoods and our economy. And as we know, they're really suffering today with decreased capacity, fewer people going out and cold weather on the way,” District 4 Councilwoman Kendra Black, who pushed the proposal, said in September.
Some restaurants, particularly chains and national chains, are able to negotiate a better deal, Black said, “so it’s really the little guys who are paying the highest rate, and it does really hurt them.”
Under new rules, commission fees are capped at 15%, on par with legislation passed elsewhere, including Chicago, New York City, Seattle, and Washington, D.C. Black’s legislation also ensures that 100% of the tips go to the driver, and that delivery companies be barred from tacking on extra processing or service fees.
The cap limit will remain in place until Feb. 9, at which time the council can decide to extend it, pending the forecast of the pandemic.
The measure is backed by the Colorado Restaurant Association, the city’s coronavirus-era Economic Relief and Recovery Council, Eat Denver and others.
Black also met with representatives from Grubhub, Uber Eats, DoorDash and Postmates when crafting the bill.
A spokeswoman for Grubhub said in a statement that the company appreciated Denver City Council’s “collaborative approach” but maintained that “fee caps are the wrong way to support restaurants, as it will negatively impact restaurants’ order volume and increase their costs. As a result, delivery workers would have fewer work opportunities and lower earnings.”
In a statement, Uber Eats said that “regulating the commissions that fund our marketplace forces us to radically alter the way we do business and ultimately hurt those that we’re trying to help the most: customers, small businesses and delivery people.”
For restauranteurs like Gedion Fanta, who owns Abyssinia Ethiopian Restaurant and Bar on East Colfax Avenue, the cap comes as a lifeline.
“Nowadays, no one comes to eat,” he told the Denver Gazette. “There is nobody. People are still scared.”
At his restaurant, Grubhub and DoorDash are making about three times as much on commission fees as they were pre-pandemic with an influx of people eating takeout.
But now, with more money going into his business’ pockets, he can use it to help pay his staff.
“That would be unbelievable,” he said.