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Chicago Inches Closer to Capping Grubhub and DoorDash’s Fees

Lobbyists were successful in killing Chicago’s prior proposal as cities like New York and San Francisco instituted limits

Grubhub is Chicago based.
Photo by Smith Collection/Gado/Getty Images

Chicago’s City Council revealed its latest try to cap what Grubhub, Uber Eats, and DoorDash charge restaurants. Council members are proposing at 15-percent cap to limit what third-party couriers charge restaurants for delivery services. Normally, those fees represent a 20 to 30 percent cut of what customers pay restaurants.

“This fee cap is temporary and will be rescinded once businesses are able to safely and viably reopen to indoor dining,” Mayor Lori Lightfoot said during Monday’s City Council meeting.

Third parties who violate the ordinance would be fined between $1,000 to $3,000 daily. The move is seen as vital for restaurants struggling to stay in business, especially as winter inches closer and more Chicagoans order delivery. Chicago has waited as third parties have seen caps in cities like San Francisco and New York where temporary limits were instituted over the summer during the pandemic’s first wave. In Chicago, a proposal for a 5-percent limit was introduced in May and never progressed. Many groups are trying to influence the outcome including the Illinois Restaurant Association, the third parties — represented by Silicon Valley’s tech interests. The City Council widely blames lobbyists for convincing members to kill the first proposal while restaurant owners languished financially during the pandemic.

“It is the intent of the City to protect its vibrant restaurant community during this public health emergency,” the proposal reads.

The new ordinance mirrors language seen in other cities where delivery companies haven’t mounted a legal challenge. Policymakers were debating on when the ordinance would sunset. Making the ordinance permanent would make any proposal more vulnerable to a third-party lawsuit.

This proposal asks the city to lift by the cap by 15 percent until 90 days after the government eases indoor dining restrictions, or when the city or state allow at least a 40-percent dining room capacity. That mirrors New York’s 20-percent cap which went into effect in May.

Ald. (32nd Ward) Scott Wagespack and (19th Ward) Matt O’Shea introduced the new ordinance. Their main worry are marketing fees, a Grubhub specialty. This is the practice of charging restaurants so it will be more visible on searches. That way customers will be more tempted to order from one restaurants over a rival. Under the ordinance, third parties would be limited to 10-percent ordering fee and another 5-percent for marketing or other expense.

O’Shea, in a text to the Sun-Times, echoes a concern from third parties, that limiting what they can charge will prevent them from hiring more drivers. Job growth has been down during the pandemic, particularly in Illinois, according to labor department stats.

The ordinance would go into effect immediately if two-thirds of the councils votes in favor. If not, restaurant owners could wait for a month until the measure takes hold.