CHICAGO (CBS) — A group of aldermen and Mayor Lori Lightfoot are proposing to cap fees charged by food delivery services like Grubhub and DoorDash at 15% while restaurants are limited to less than 40% of normal indoor capacity, in an effort to help the city’s struggling dining industry during the resurgent pandemic.
The proposed ordinance introduced to the City Council on Monday would prohibit third-party food delivery companies from charging a delivery fee of more than 10% of the purchase price of an online order. Marketing fees, commissions, and other costs for use of such services would be capped at an additional 5%.
Ald. Scott Waguespack (32nd), who had proposed a more stringent 5% cap on delivery service fees in April, negotiated the new proposal with Lightfoot and fellow Aldermen Matt O’Shea (19th), Emma Mitts (37th), and Tom Tunney (44th), according to the mayor’s office.
“Earlier in the pandemic, a lot of you saw that our restaurants were being hit exorbitantly with these extra fees from third-party food delivery services,” Waguespack said Monday afternoon.
Restaurants have said fees for such services can top 30%, making it difficult for them to make a profit off delivery.
“With indoor dining closed, and more residents ordering delivery, our bars and restaurants will be more reliant upon third-party delivery services now more than ever,” Lightfoot said Monday afternoon. “This will provide critical temporary relief to eligible small businesses that cannot operate indoors right now.”
Waguespack said far too many restaurants already have gone out of business during the pandemic, and aldermen and the mayor want to do more to throw them a lifeline as cases have recently surged to historic levels, prompting Gov. JB Pritzker to again ban indoor dining in all 11 regions of Illinois.
“When one of our restaurants closes on a block, the whole block loses that liveliness and loses the energy that keeps our neighborhoods going,” he said.
Ald. Tom Tunney (44th), owner of Ann Sather restaurants, said even when operating at 40% capacity, “restaurants are losing money every day unless they have perfected the delivery mechanism, and those historically have been the pizza companies.”
Tunney said the 15% cap on delivery service fees would help provide restaurant owners with a measure of certainty in their bookkeeping.
In addition to the cap on fees, the ordinance would ban third-party delivery companies from charging higher prices for menu items than set by restaurants, require them to provide customers with a way of sending tips directly to restaurants, and prohibit them from cutting their drivers’ pay or garnishing their tips in response to the ordinance.
Violators would face fines of $1,000 to $3,000 per offense.
The requirements would remain in place until indoor dining is allowed at 40% capacity or better for at least 90 days.
The ordinance would take effect immediately upon passage if approved by a two-thirds vote of the City Council. If approved by a simple majority, it would not take effect until the ordinance is formally published in the City Council journal, typically at the next meeting after passage.
The measure is expected to come up for a vote before a joint meeting of the Finance and License committees on Tuesday. If approved in committee, a full City Council vote could come as soon as next Monday.
In a statement, a Grubhub spokesperson called the proposed fee caps “well-intentioned but counter productive at a time when restaurants need more support, visibility, and order volume than ever.”
“They limit how restaurants – especially small and independent establishments – can effectively market themselves to drive demand, which severely impacts how many customers and orders we can bring to these restaurants. The caps lower pay for drivers by reducing the number of orders to be delivered; reducing restaurant orders; increasing costs for diners; disrupting an essential supply chain of meals; and costing jobs, tax revenues and important economic activity.”
Grubhub said its marketing fees are negotiable, and that if a restaurant chooses to use Grubhub drivers, the delivery fee already is 10%.
DoorDash spokeswoman Campbell Matthews said capping its commissions could lead to increased costs for customers, leading to fewer orders for restaurants, and fewer opportunities for its drivers.
“This proposal would also remove options available to restaurants by limiting their ability to opt-in to additional services to help their business. City Council should oppose this ordinance and seek alternative solutions that preserve choice for restaurants and ensure Chicagoans can continue to access safe and affordable food delivery,” Matthews said in an email.
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