Cities consider putting fee caps on delivery apps

**Embargo: Minneapolis - St. Paul, MN** Restaurants relying on delivery apps to reach customers say it's cutting into their bottom line. (WCCO)

MINNEAPOLIS – Restaurants relying on delivery apps to reach customers say it’s cutting into their bottom line.

Now, some cities are putting caps on the fees the apps charge businesses.

Red Cow in Minneapolis’s North Loop neighborhood heats up during the dinner rush, as staff shuffle burger orders out to waiting customers and delivery drivers. Beverage director Ian Lowther says they’re busy now, but in a “very different way.”

“Before it was kind of spaced out, and now everything’s kind of compacted in a few hours,” Lowther said.

He said delivery orders have doubled compared to pre-pandemic days, a service they offer through the app Bite Squad. It’s one of several apps that restaurants are relying on, even if it comes at a price.

“So not only is there a delivery fee, there’s a processing fee, there’s a dispatch fee. I don’t know, it seems like there’s a new fee every day,” Lowther said.

Delivery app Grub Hub charges up to 30% or more in fees based on the order price. The fees aren’t charged to the customer, but the restaurant.

On a $100 order, that means the restaurant would only net $70. That fact bothers customer John Kerr.

“I didn’t know so much was actually being taken off from the food that I’m ordering for the service that the restaurant themselves are providing,” Kerr said. “So yeah, it does create a hesitation to continue to use those apps.”

Last month, San Francisco’s mayor put a 15% cap on those fees. A similar change is being considered in New York City.

Right now, Minneapolis and St. Paul are not considering a fee cap, although one Minneapolis councilor did tell WCCO the fees are “outrageous.”

Despite the costs, Lowther knows a delivery app might be a customer’s only option.

“Maybe they can’t leave the house, maybe their immunocompromised or something. So there’s a space for it,” he said.

Kerr thinks the delivery apps should change how they operate.

“The apps have a benefit, they have a place,” Kerr said. “They need to strike the right balance and support the restaurants, which is what I really care about.”

WCCO reached out to Bite Squad, DoorDash and Grubhub for comment regarding cities putting a cap on fees. We only heard back from a DoorDash spokesperson, who gave this statement:

DoorDash knows that we have a special responsibility to our community during this unprecedented time, which is why last month we began providing a robust package of an estimated $100 million in commission relief and marketing investments nationwide –including cutting commissions in half for 150,000 local restaurants throughout the United States, Canada and Australia through the end of May. We’re disappointed that, in the midst of this crisis and when food delivery is an essential service, elected officials are choosing to impose arbitrary caps without an understanding of the services restaurants receive in exchange for the amount they have agreed to pay. Unfortunately, caps will eventually make our services less affordable and accessible to customers, reducing sales for restaurants and earnings for Dashers at a time when access to work is more important than ever.