Food delivery fees capped at 15% throughout Santa Clara County

Santa Clara County and San Jose officials voted separately but unanimously Dec. 15 to cap food delivery fees to help businesses retain income during the pandemic.

Delivery service fees charged by third-party delivery companies such as Uber Eats, DoorDash, GrubHub, Postmates and others will be capped at 15% of the value of an order.

San Jose’s cap takes effect immediately and expires June 20 while the county’s cap takes effect Dec. 19.

The county’s cap will apply to all Santa Clara County cities and unincorporated areas, except where a city has its own more restrictive cap.

The county cap is an emergency measure, and lasts only as long as the county’s public health emergency orders are in place, or when restaurant capacities are limited due to emergency public health orders, whichever is lifted sooner.

“This will help the restaurant industry tread water over the next several weeks by reducing their expenses of delivering food to people who are choosing to stay at home rather than exposing themselves to COVID-19,” said Santa Clara County Supervisor Mike Wasserman. “Everyone is giving up a little something during these times, and it’s the way for the majority of us to get through this.”

Delivery apps have been a lifeline for many restaurants as restrictions on indoor and outdoor dining tighten to stem the spread of COVID-19. But having to pay a steady stream of delivery fees can put even more burden on businesses already struggling to survive.

San Jose Mayor Sam Liccardo and Councilmember Lan Diep insisted their city act immediately on its own fee cap in case the county failed to uphold its restriction.

Ryan Summers, owner of Good Karma cafe and Pizza Flora in downtown San Jose, said the cap will be of great help.

“Restaurants are hemorrhaging money without indoor and now outdoor seating. We’re seeing doors closing permanently everyday,” Summers told councilmembers Dec. 15. “Downtown small businesses feel abandoned during this crisis but this bit of advocacy is certainly a positive step toward sustaining the downtown economy.”

A spokesperson for Uber said the company has been trying to drive demand to local restaurants during the pandemic but warned that fee cuts could negatively impact businesses in other ways.

“Regulating the commissions that fund our marketplace forces us to radically alter the way we do business and ultimately hurt those that we’re trying to help the most: customers, small businesses and delivery people,” a spokesperson for Uber said.

Uber said it has seen orders decline in other cities that have issued fee caps.

The fees go toward paying insurance costs, securing personal protective equipment for delivery people, marketing efforts and managing orders, according to the spokesperson.

DoorDash said regulations could result in higher costs for customers, fewer earning opportunities for delivery employees and fewer orders for restaurants.

Supervisor Joe Simitian warned delivery companies he would be watching to make sure they didn’t transfer burdensome cost increases to drivers or customers as a result of the cap on fees.

“I want to be fair to all parties, but I will just say and we will keep an eye on this,” Simitian said. “If we see what I call ‘fee shifting’ again, then folks can’t be surprised that we come back (and) …have to tighten (the ordinance) that much more. I want to make sure that everyone in the industry is on notice that their fate is in their own hands.”

Food delivery fees can cost resturants up to 30% per order. While the city is looking to slash that number, Diep and Liccardo cautioned against setting caps too low, as it might cause some delivery companies to not serve residents who live in “long haul destinations” such as Evergreen, Alviso or Almaden.

“DoorDash has always supported restaurants and shares the goal of making it easier for them to adapt and survive these challenging times,” a DoorDash spokesperson said. “We thank the mayor’s office for taking a thoughtful and collaborative approach, and are committed to doing everything we can to support restaurants in San Jose and around the country.”

Jennifer Echeverri, owner of Cuban restaurant Habana Cuba in San Jose, said she didn’t mind paying the 30% fee when third-party delivery made up only 20% of her sales. But now she is losing a third of what she makes in fees, as 95% of orders go through apps such as Uber and DoorDash. She said she would like to see the cap lowered to 10% but will settle for 15%.

“They don’t care about us,” Echeverri said before the council’s vote. “They’re making billions of dollars right now and if they did care, they’d drop it to 15%. They’re banking on our suffering.”

DoorDash partnered with San Jose last month to give winterization grants to local businesses. Echeverri said she was awarded a $5,000 DoorDash grant but has yet to see the money.

Many business owners who did receive funds purchased tents and outdoor heaters, which they cannot use now because both indoor and outdoor dining have been banned until Jan. 4.

San Jose’s downtown business task force — a group of more than 55 local businesses led by Councilmember Raul Peralez — also pushed for a fee cap.

Other cities including Santa Clara, Chicago and the state of Washington have approved similar fee caps.

Reporter Madelyn Reese contributed to this report.

Contact Carly Wipf at [email protected] or follow @CarlyChristineW on Twitter.