Chicago May Cap DoorDash and Grubhub Restaurant Fees at 15 Percent

After a failed attempt to cap fees that companies like Grubhub, DoorDash, and Uber Eats charge restaurants, Chicago’s City Council could try again later this month. An April ordinance that would have limited what third-party delivery services charge restaurants to 5 percent never made it out of committee. But now there’s news that the same alderman who introduced that measure will propose a 15-percent cap later this month to the council.

Ald. (32nd Ward) Scott Waguespack tells Crain’s his new ordinance would cap fees at 5 percent for marketing and 10 percent for delivery. That 15 percent would bring Chicago in line with San Francisco and New York, which imposed limits earlier this year. As Crain’s notes, Grubhub would be affected more than others, as the company charges higher marketing fees — that practice of restaurants paying the company money so it can appear more prominently in searches. This is a ploy to entice customers to select a restaurant over rivals.

This is the city’s latest attempt to throw restaurants a lifeline during the pandemic that has kept customers away from dining rooms. The state’s indoor dining ban, which went into effect on October 30, further complicates the matter, as does colder weather which makes outdoor dining unfeasible. Expanded patio dining — including blocking off streets to automobiles to allow restaurants to set up tables and chairs — has helped. At a Tuesday budget hearing, Business Affairs and Consumer Protection Commissioner Rosa Escareno told the City Council that she hopes aldermen will allow extended outdoor dining “all of next year,” according to Alex Nitkin of the Daily Line. During the same meeting, Ald. (42nd Ward) Brendan Reilly questioned why the state allows casinos to operate indoors while banning indoor service for restaurants and bars.

“It seems we’re applying rules haphazardly and arbitrarily. It’s OK for some industries to pack the room but not others,” Reilly said, according to Nitkin.

While the council tries to sort through answers, winter approaches with chillier temperatures. The season is when Chicagoans order more food deliveries and third-party services see added revenues. But as another wave of COVID-19 hits Chicago, restaurant owners argue that they can’t afford to give up the customary 20 to 30 percent of what they charge customers.

Even pre-pandemic, the relationship with third parties was tenuous for local restaurant owners. National chains like McDonald’s and Taco Bell have deeper pockets and can afford the fees — they’ve embraced third parties as another way to charge customers. For smaller operations, local restaurants have shared nightmare stories of unethical business practices where companies set up websites impersonating restaurants without their knowledge.

Last week, Mayor Lori Lightfoot said that she expected the city would cap fees sometime in November. This would give restaurant owners better peace of mind before freezing temperatures arrive in December and January.