DoorDash Creates ‘Chicago Fee’ in Response to City’s Third-Party Cap

Last week, DoorDash customers in Chicago began seeing a new charge added to their delivery and takeout orders. Below the subtotal, the third-party ordering service had affixed a $1.50 “Chicago Fee,” offering this explanation: “Chicago has temporarily capped the fees that we may charge local restaurants. To continue to offer you convenient delivery while ensuring that Dashers are active and earning, you will now see a charge added to Chicago orders.”

The move is seen as a way to recoup money lost from the cap. On November 23, Chicago’s City Council signed off on a 15 percent cap for third-party ordering services, companies that include DoorDash, Grubhub, and Uber Eats. The council had introduced a proposal for a 30 percent cap back in May, but that plan never progressed. Proponents say caps protect restaurants struggling to survive during a pandemic that has halted on-premise dining. Several restaurateurs spoke to the City Council in May, sharing bad experiences in working with third parties. In some cases, companies would create fake websites with outdated menu prices and other information that fooled customers into thinking the third parties and restaurants were working together. Restaurant owners were miffed.

Ald. (32nd Ward) Scott Waguespack was one of the cap ordinance’s chief sponsors and he’s been outspoken about stopping unethical behavior like what restaurants described. While DoorDash’s new fee charges customers instead of restaurants, the alderman wasn’t happy.

“The ordinance intent was to stop the price gouging by these companies,” Waguespack tells Eater Chicago. “If you find it’s being done on all bills: then it’s a disgraceful DoorDash fee, and an evasion of the ordinance in order to pad their contemplated IPO valuation of $3 billion. Their fee just piles more of the pandemic pain on restaurants and customers.”

On Monday, DoorDash announced an initial public offering of $102 per share and that the San Francisco-based company had already raised $3.4 billion. The company shared a statement when asked about the Chicago Fee:

During this unprecedented time, providing the best possible service for our community is critically important. In select cities where lawmakers have imposed price regulations that limit our ability to work with restaurant partners, DoorDash is considering various measures to offset their unintended consequences. In some cases, this means charging customers an additional fee when they order from restaurants in their city to help ensure that we can continue to offer them convenient delivery while helping to ensure that Dashers are active and earning and that merchants can access the services to help drive volume as dine-in remains limited.

DoorDash has instituted a $2 fee in Las Vegas’s Clark County and another fee in Fresno, California. Both locales have caps. In other parts of California that have caps, Uber Eats refuses to deliver claiming caps make it too costly to service certain areas.

Restaurant owners tell Eater Chicago that they’re not surprised by DoorDash’s fee, as their trust in many third parties has diminished during the pandemic which has forced them to rely on takeout and delivery to stay in operation. Though restaurants don’t have to pay the Chicago Fee, owners wonder if it will lead loyal customers away from their regular ordering habits.

A Grubhub spokesperson says the company isn’t looking to institute its own fee to compensate for the cap. The feeling is these fees can impact driver tips. The company has maintained that caps will hinder customers, driving down order volumes for independent restaurants, thus giving drivers less work. An additional fee would amplify that effect, the spokesperson said. Grubhub has taken criticism for commissions. Before the cap, those fees to restaurants ranged from 15 to 30 percent. Conscious of that criticism, management has unveiled direct order links. Customers can use these links order food and restaurants won’t be charged commissions. Earlier this year at a news conference at Chicago’s City Hall with Mayor Lori Lightfoot, Grubhub announced it would be temporarily waiving some fees for restaurants. The move was criticized for a clumsy rollout. While it’s too early for Grubhub to say how the Chicago cap is impacted them, during the first three quarters of 2020, the Chicago-based company reported a 36 percent increase in revenue while processing $6.3 billion of food orders.

Some third parties charge restaurants less than 15 percent. For example, Tock — the platform cofounded by Alinea Group’s Nick Kokonas — charges restaurants 3 percent commission. After being associated with Grubhub at the March news conference, Lightfoot appeared with Tock CTO and cofounder Brian Fitzpatrick at a May news conference where the city lauded Tock for helping restaurants during the pandemic.

• Chicago Finally Implements Fee Caps for Grubhub and DoorDash [Eater Chicago]
• DoorDash Now Charges Customers a $2 Clark County Fee [Eater Vegas]
• Grubhub offers restaurants new ways to receive orders—without paying commission fees [CNBC]
• DoorDash IPO will make its CEO a billionaire — here’s how his immigrant parents inspired his success [CNBC]