Chicago’s 15 percent commission cap on what delivery companies charge restaurants expired last weekend, and while there aren’t reports of DoorDash, Grubhub, and Uber Eats raising fees to pre-pandemic levels, an alderman has proposed extending the policy through at least the fall.
Last year, as Gov. J.B. Pritzker suspended indoor dining during the start of the pandemic in March, restaurant owners spoke out about how commissions paid to third-party delivery companies could doom their businesses. After lobbyists battled the City Council as cities like San Francisco, New York, and D.C. took the lead in adopting fee caps, Chicago lawmakers in November instituted at 15 percent limit.
Council members did not include a date to when the cap would expire as researchers weren’t close to engineering a vaccine, and the severity of the pandemic wasn’t known. They settled on language sunsetting the cap when indoor dining capacity reached 40 percent for 60 consecutive days. Chicago’s dining capacity limit is currently at 50 percent or 50 people per room.
On Wednesday, as first reported by the Sun-Times, Ald. (32nd Ward) Scott Waguespack submitted a draft ordinance to extend the 15 percent cap to the fall. The alderman cites ongoing financial challenges facing restaurants as reasons for the extension.
“It is the intent of the City of Chicago to protect its vibrant restaurant community from excessive price gouging beyond the pandemic!, and at all times,” the proposed ordinance reads.
Waguespack wasn’t immediately reached for comment.
For restaurants part of larger companies — particularly fast food spots — the customary 30 percent commissions third parties normally charge is less impactful. The proposed ordinance does not limit what companies can charge chains as defined as restaurants with 10 or more locations. National brands like McDonald’s, and even local groups like Lettuce Entertain You Enterprises — with more than 130 restaurants — can afford the fees.
However, the apps place these bigger companies on the same platform as smaller restaurants, and as COVID-19 made takeout and delivery the industry’s primary sources of income, smaller restaurants were at a competitive disadvantage.
A spokesperson for Chicago-based Grubhub says the company will keep “commission rates low for the coming months”:
We’ve worked hard to help restaurants attract and retain customers during these challenging times, and we’ll keep working to earn their business and support them through the recovery and beyond. And we recognize the challenges Chicago’s restaurants face aren’t over, which is why we are keeping commission rates low for the coming months.
“Over the last year we’ve devoted millions of dollars to direct support for restaurants across Chicago, including $10,000 direct grants to restaurants and zero delivery fees all winter long to generate more orders. And we’re just getting started. We’re actively working to develop innovative new tools to deliver support for independent restaurants and connect them with even more local diners.”
Meanwhile, a DoorDash spokesperson didn’t comment directly on the Chicago proposal. DoorDash instituted a $1.50 “Chicago Fee” to customers to compensate for the council’s cap. A spokesperson on Wednesday pointed toward a general statement:
DoorDash has always supported restaurants. Pricing regulations like this one could cause us to increase costs for customers, which could lead to fewer orders for local restaurants and fewer earning opportunities for Dashers. This legislation also removes options available to restaurants by limiting their ability to opt-in to additional services to help their business. We remain focused on solutions that preserve choice and ensure consumers can continue to access safe and affordable food delivery.
Much of the apprehension restaurant owners have surrounding the businesses extend beyond fees, but also what they call unethical practices. Restaurant owners have shared their frustrations over delivery companies misrepresenting themselves online by posting outdated menus and pricing without the consent of restaurants.
Despite warnings from city officials to cease such practices, third parties continue to engage. Earlier this week, Lacey Irby, the co-owner of Dear Margaret — a Canadian-French restaurant that opened in January in Lakeview — shared a story of how Grubhub and its subsidiary Seamless created ordering pages for her restaurant on their platforms without her consent. Irby says she spent 45 minutes on hold on the phone waiting to tell a rep to take down the pages. Her restaurant is exclusively listed on Tock.
“I don’t even understand how an order could have gone through, but I have heard of this spammy behavior before, so hopefully we have caught it before these companies cause real harm,” Irby writes.