Portland City Council Approves a 10 Percent Cap on Fees Delivery Apps Charge Restaurants

Portland has joined cities like New York and San Francisco, approving a cap on the amount of money delivery apps can charge restaurants for using their service. Portland City Council approved an ordinance that makes it illegal for apps like Caviar or Postmates to charge more than 10 percent in service fees, also banning third-party delivery services from taking those lost funds out of the delivery drivers’ paychecks. The cap goes down to 5 percent if the order does not involve delivery, like when a customer places a pick-up order through a third-party app.

Delivery apps that violate this ordinance will be charged $500 per violation, accruing for each restaurant unfairly charged each day. The ordinance will stay in effect for 90 days after the state of emergency has ended.

Many restaurant owners have just recently started using delivery apps out of necessity — when Gov. Kate Brown ordered restaurant dining rooms to shut down and issued her Stay Home, Save Lives order, many restaurant owners felt they needed to begin offering delivery to customers unable or unwilling to leave their homes. However, as restaurants struggled with the financial strain of the coronavirus crisis, delivery apps have been charging as much as 30 percent per order to use their service. “If you think about what a restaurant’s profit margin is, it’s 5-ish percent, and that’s if you’re making a profit,” Gabriel Pascuzzi, the owner of Stacked Sandwich Shop and Mama Bird, said. “If they’re taking 20, 30 percent, I’m losing money.”

Commissioner Chloe Eudaly, the Asian Pacific American Network of Oregon, and the Portland Independent Restaurant Alliance developed the ordinance, which commissioners voted on Wednesday; the vote was unanimous. “Restaurants owned by Black, Indigenous, people of color, and immigrants are anchors of their communities,” Jenny Lee, Advocacy Director at APANO, said in a press release. “They are also some of those most at risk of closure—and if they do, they are the most unlikely to return after the pandemic. By passing this ordinance, our city has helped create a viable lifeline for these businesses. These reasonable regulations level the playing field so that restaurants can stay afloat, and we can keep these cultural assets in our community.”

In a letter to city commissioners, DoorDash head of government relations Toney Anaya said that a cap on service fees would “would jeopardize food delivery in Portland, adding that the company had put certain cost-cutting measures in place — not charging delivery fees to restaurants new to the app, for instance, or cutting commissions in half for “mom and pop” restaurants. Most of the cities that have instituted commission caps have set them around 15 or 20 percent, as opposed to 10 percent.

Kalvin Myint, the co-owner of Top Burmese, started his business as a delivery-only restaurant. Now, Myint runs two sit-down businesses, but delivery is more important than ever. In March, he watched his delivery business spike, but because of the 25 to 35 percent taken by delivery apps, the restaurants had to sell more meals to keep things steady. “Right now, the majority of our revenue is coming from delivery,” Myint said. “Once the pandemic’s over, going back to the rate that we had before would be okay. I know they have to run a business, too.”

Jasper Shen, the owner of Chinese restaurant XLB, agrees — he understand that delivery apps need to stay profitable in the long run, but he also thinks that restaurants need to maintain some sort of profitable delivery model to survive. “Even as we open up in these sorts of phases, I don’t know how anyone will be able to exist without any sort of takeout and delivery in the future,” Shen says. “I understand those companies need to make a profit too, but it has to be a two-way street.” Down the line, once coronavirus has dissipated, Shen is comfortable with seeing those service fees rise once again — as long as the extra funds are distributed among the workers, as well. “It’d be great if those companies would provide more benefits for their workers, too,” he says. “That money has to come from somewhere, but to keep those rates at 30 percent and also lock out those drivers from benefits is bull.”

• Full text of ordinance [Official]
• City Council Unanimously Adopts Ordinance Limiting Third-Party Food Delivery Fees [Portland.gov]
• San Francisco Emergency Order Says Delivery Apps Must Cap Restaurant Fees at 15 Percent [ESF]
• City Council Just Passed a Slew of Temporary Restaurant Relief Measures [ENY]