Cap on food delivery fees being considered in Santa Clara County

With a new shelter-in-place order in place until Jan. 4, Santa Clara County officials are hoping to help struggling restaurant owners by capping fees and commissions charged by food-delivery companies.

Supervisors Joe Simitian and Cindy Chavez on Dec. 8 plan to ask county staff to look into drafting a proposal modeled after other Bay Area counties and cities, including the city of Santa Clara, that have set caps.

Many restaurants will have to rely on delivery services to continue their operations, as both indoor and outdoor dining are now off limits in Santa Clara County. The cap would target third-party apps including DoorDash, Uber Eats and Grubhub that, in the beginning of the pandemic, were commonly collecting up to 30% on each order.

The supervisors say they also want to ensure third-party delivery drivers will not have their tips or wages garnished or withheld by the parent companies.

“The biggest share of our COVID-related unemployment really comes from our restaurant industry,” Chavez said. “This has been a tough time and we really are in this together, and we have to look for ways to make sure that everybody gets across the finish line.”

Simitian — who himself is a former delivery driver — said the bottom line is to help restaurants, employees, consumers and drivers through these challenging times.

“We’re looking at both the delivery charges as well as the listing fees, marketing fees, pick-up fees — there’s a whole range of fees here, so that part will require a careful eye,” he said.

In announcing the idea Dec. 7, Simitian and Chavez were joined by Mark Turner, president and CEO of the Gilroy Chamber of Commerce and chair of the Silicon Valley Chamber Coalition, Peter Katz, president and CEO of the Mountain View Chamber of Commerce, Alexia Penna, director of marketing of Eureka! Restaurant Group, and Jenneke deVries, owner of Pizza Bocca Lupo in downtown San Jose.

“More than ever, restaurants will need the services of Uber Eats and others,” Turner said. “Restaurateurs are making extreme sacrifices during these times, and they should not be subject to overwhelming, outside fees.”

Katz said Castro Street, downtown Mountain View’s main promenade, has seen its 80 restaurants struggling throughout the pandemic, with some going dormant or closing their doors for good.

“With no outdoor dining permitted for at least the next several weeks, our restaurants have been dealt yet another severe blow in what has already been a horrific eight months,” Katz said.

DeVries and her husband have owned Pizza Bocca Lupo in San Pedro Square Market for nine years, and said 2019 was their best. However, with the pandemic, their main source of revenue has been generated through third-party delivery services.

“On the one side you have significantly lower revenue and on the other side we’re losing a quarter right off the bat because of the fees we pay,” said deVries. “It’s unsustainable at this time for small businesses — it’s going to be difficult to survive.”

Simitian and Chavez were contacted by the cities of Sunnyvale and Mountain View asking for a county policy on delivery fees.

San Jose Mayor Sam Liccardo and Councilmember Lan Diep are also pushing for a proposed fee cap.

“We look forward to working with the county to ensure consistency of these laws across jurisdictions. 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,” Liccardo said.

Capping delivery fees was one of a handful of recommendations from a task force led by Councilmember Raul Peralez to revive downtown businesses. The suggestion came from a group of more than 55 San Jose businesses.

“In a time when every dollar helps, the overall fees can amount to a substantial impact forcing food-service providers to raise their prices,” Peralez said in calling for the cap Nov. 24.

Owner Vee Meharu of Vintage Wine Bar and Vintage Wine Merchants in Santana Row said the latest shelter-in-place order will force them to close because they are unable to offer to-go or home delivery.

“The only way our customers can support restaurants (like ours) is to dine out,” he said. “But, eventually, we’re going to have a number of employees without jobs.”

Manager Hagos Tekle of Mudai Ethiopian told San José Spotlight he is paying nearly 30% for commissions with DoorDash, Uber Eats and Grubhub, a nearly 5% increase since before the pandemic.

“Right now, our sole income is dependent on promotional marketing — you have to sign on to every proposal (companies like Uber Eats and DoorDash) have to make your traffic higher,” he said. “If the app comes in, you have 25% to 30% just out the window.”

With the pandemic lingering and the future uncertain, Tekle said he’s concerned for what the future many hold.

“At this point, we’re stretched thin — we cannot put any more money to promote who we are,” he said. “Even if customers can come to pick up our food through our website, that would help us to keep 100% of what the order is.”

Representatives of food delivery companies did not respond to requests for comment.

As of Dec. 6, Santa Clara County has reported 39,193 COVID-19 cases and 504 deaths.

Contact Grace Stetson at [email protected] and follow her @grace_m_stetson on Twitter.