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Seattle Caps Third Party Delivery Fees by Vendors at 15%
Seattle has become the latest major city to cap third party delivery fees to restaurants during the current pandemic emergency. Seattle Mayor Jenny Durkan, Council President Lorena González, and Councilmember Lisa Herbold announced a new emergency order to cap third-party commissions at 15% on restaurant delivery and take-out orders. The cap applies to third party, app-based delivery fees by vendors such as DoorDash, GrubHub, Uber Eats and others.
“The hospitality community is the hardest hit industry in this pandemic. Washington restaurants have lost an estimated 193,000 jobs in this crisis, according to the National Restaurant Association. When restaurants were ordered to close dining rooms, many Seattle restaurants shifted to takeout and delivery to continue to operate, rather than close their doors,” says Linda Di Lello Morton, President of the Seattle Restaurant Alliance. “We appreciate the actions of the Mayor and Council to limit the fees charged by third-party delivery companies during this emergency, which can be as high as 30% per commission. Restaurants operate on thin margins of an average of 4% and many were struggling in Seattle prior to the pandemic. This relief measure is one of many that are needed to help our restaurants survive so we can return employees to work and resume serving our community when restrictions are lifted.”
“We know that so many of our small businesses are hurting because of the COVID-19 pandemic, and that delivery services have been a lifeline for our restaurants during this unprecedented time. Unfortunately, some third-party delivery services are charging exorbitant commission fees, which exacerbates the financial hardship many restaurants are already experiencing,” said Mayor Durkan. “This commission cap will be critical to ensuring that delivery and takeout remain viable options and don’t cause increased financial hardship.”
To protect delivery drivers who typically work as independent contractors, the order requires that 100 percent of tips go to the drivers. The proposal includes provisions to make clear that it is illegal for a third-party platform to reduce driver compensation rates as a result of the order going into effect for the duration of the order.
As a result of the emergency order, many dine-in restaurants have pivoted to take-out and delivery to continue operations and provide food orders to customers. In a difficult climate, some restaurants must rely solely on delivery and takeout services for revenue; using the third-party delivery services to meet customer need and keep staff safe. Fees can be as high as 30 percent, which can eliminate a significant amount, if not all, of a restaurant’s profit at a time when the vast majority of their sales are for delivery.
The proposal follows San Francisco’s cap on app-based third-party delivery services. Services provide food delivery by charging restaurants a flat service charge or fee, depending upon the vendor. Many services also charge for customer pick-up orders when ordered through a third-party site. Add in credit card processing fees, order processing charges, and restaurants see any revenues dwindle rapidly. Additionally, some vendors charge a commission on every sale.
The emergency order has been approved by the city council and is effective immediately. The order will remain in place as long as the ‘Stay Home, Stay Healthy’ order is in effect or until restaurants are allowed to offer full dine-in service in Seattle. Violating the 15 percent commission cap is a misdemeanor offense and would be prosecuted by the Seattle City Attorney’s Office. Read the Mayor’s press release here and review the emergency order here.