San Francisco Might Soon Let Restaurants Opt Out of Its Delivery-Fee Cap

In San Francisco, food delivery might soon become a pay-to-play game, despite lawmakers’ best efforts to avoid such a scenario.

Last year, the California city became the first in the nation to institute a permanent delivery-fee cap, with restaurants having to pay at most a 15 percent commission to delivery companies such as DoorDash and Grubhub. Of course, this rankled the companies, and DoorDash and Grubhub sued San Francisco last July. Now the two delivery titans have paused their litigation in hopes that the city will adopt an amended ordinance that’s more favorable to them, according to the San Francisco Chronicle.

The new legislation, which will be considered by the city this week, would keep the 15 percent cap but allow restaurant owners to opt out of it in favor of paying more for better placement on the apps. DoorDash already uses this model in localities without a delivery-fee cap, allowing restaurants to pay a 25 or 30 percent rate to improve their promotion on the app.

“I hope this is a rare win-win-win between the restaurants, the delivery companies and the legislative process,” Laurie Thomas, the executive director of the Golden Gate Restaurant Association, told the Chronicle. “I think there has to be a compromise for a good outcome.”

While many seem excited about the potential for San Francisco to avoid a costly lawsuit with the delivery apps (even DoorDash and Grubhub called the new proposal “reasonable” and “promising” in emails to the Chronicle), not all restaurant owners are on board. Samir Mogannam of the Bay Area’s Beit Rima, which offers delivery via DoorDash, said he’s worried that the deal could allow the apps to exploit restaurants.

“I feel like they’re going to manipulate this,” he told the publication. “I would hope that the city would protect businesses as much as possible.”

Thomas, however, said that the new legislation would clearly outline the terms of the deals, and she doesn’t foresee any loopholes that the delivery apps could use to nickel-and-dime restaurants. As a local restaurant owner herself, behind Terzo and Rose’s Cafe, she’s planning to offer delivery at the basic 15 percent rate.

If the new legislation is passed, DoorDash and Grubhub would need to notify all restaurants with existing contracts about their new options by December 1, with the law going into effect on January 31, 2023. If it isn’t approved, San Francisco might be in for a bumpy ride in its dealings with delivery companies.

Source: Robb Report

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