Santa Clara County Proposes a New Cap on Food Delivery Fees

South Bay politicians are unveiling proposals to ease the blow to local restaurants which, as of Sunday, were ordered to close the patios that had become a critical part of their business models while indoor dining was outlawed due to the pandemic.

Santa Clara County supervisors Joe Simitian and Cindy Chavez outlined a new proposal to put a temporary cap on commissions and fees charged by third-party delivery businesses like DoorDash, GrubHub and Uber Eats.

“The goal is to protect local restaurants and consumers from price gouging during a pandemic,” said Simitian, who worked as a delivery driver decades ago before finding his way to public office. “Many of these restaurants don’t have the infrastructure to host their own platforms for takeout and delivery, so they are often forced to accept excessive fees and commissions. They simply have no other option.”

His referral comes up for discussion at Tuesday’s Board of Supervisors meeting.

Covid-19 has ravaged the economic landscape in the U.S., with the restaurant industry being hit disproportionately hard. Nearly one in six restaurants in the country have closed permanently, and that number is likely to worsen as restrictions continue to escalate in light of record-breaking coronavirus infection rates, according to a September report by the National Restaurant Association.

Peter Katz, the president and CEO of the Mountain View Chamber of Commerce, has seen firsthand the economic carnage that has been brought on by the pandemic.

“With no outdoor dining permitted for at least another several weeks, the restaurants have been dealt another horrific blow,” he said. “Castro Street (in downtown Mountain View) is normally thriving, but is experiencing devastating losses.”

Due to the latest stay-at-home order, restaurants in the county will be more reliant than ever on takeout and delivery services. Third-party delivery businesses charge restaurants and food establishments up to 30 percent per order, and as much as a 15 percent commission for a customer pick-up ordered through the third-party online platform.

“If rates aren’t capped, owners will have to make the difficult decision to close, as mathematically that can be less than a loss than trying to survive on takeout,” Katz said. “Regardless of the shelter-in-place order, the cap (fee) is the right thing to do. And with the closure of outdoor dining, it’s absolutely necessary.”

The measure also seeks to protect drivers of third-party delivery services, proposing a county-wide ban on a reduction of their wages and withholding their tips to compensate for the imposed caps. Other Bay Area cities and counties have already passed similar cap fee measures, including Alameda and San Mateo counties and the cities of Milpitas, Santa Clara, Santa Cruz, Berkeley, Oakland and San Francisco.

Mayor Sam Liccardo and Councilman Lan Diep proposed their own measure last week—to be heard at Wednesday’s Rules and Open Government Committee—capping third-party business fees at 18 percent, which would include delivery and all processing fees.

In an emailed statement today, Liccardo applauded the county for pushing a similar cap. “We look forward to working with the county to ensure consistency of these laws across jurisdictions,” he said. “As we enter into another stay-at-home order, it’s imperative we support local restaurants that depend critically on food delivery for their survival.”

If approved, the ordinance would last through at least June.

Jenneke deVries, owner of Pizza Bocca Lupo in downtown San Jose, said a fee cap would give small businesses like hers a chance to survive.

This will be a lifeline,” she said. “It’s make or break time.”

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