UPDATE: Santa Clara City Council caps food delivery fees at 15%

The city of Santa Clara now joins San Francisco, Santa Cruz and Berkeley in capping how much companies like DoorDash and Uber Eats can charge to drop off take out.

Take out has been a saving grace for restaurants across Santa Clara County, which have been shuttered for indoor dining since March 17.

But when city officials checked in with restaurants as part of its Small Business Assistance Program, many complained that high delivery charges— as high as 30% — were creating another revenue hurdle for their cash-strapped operations, especially now in the sixth month of COVID-19 shutdowns.

So, the Santa Clara City Council on Sept. 1 implemented a temporary 15% cap on food delivery services, which will continue as long as restrictive public health orders are in effect. The fees typically appear on receipts alongside other charges.

Assistant City Manager Ruth Shikada said the goal is to not only preserve restaurant jobs and keep dining options open for consumers but also to defend against predatory practices because state anti-gouging laws fail to protect food delivery services.

“We are trying to do what we can to protect our businesses, and to provide an opportunity for people that use delivery apps to have a more transparent process so they can see where their money is going,” Shikada told San José Spotlight ahead of the vote.

Restaurant owner Navin Tekchandani told the council he supported the cap, adding that Silicon Valley consultant and corporate business has almost vanished, rents remain high and delivery is restricted to an eight-mile radius.

“Being in Santa Clara, we are highly dependent on corporate revenue to survive as a fine-dine restaurant, which has almost disappeared,” he said. “It is highly crucial that Uber Eats and DoorDash, which account for 90% of delivery revenue that restaurants are earning right now, should reduce fees. The revenue is already high, so I’m sure they can easily afford it.”

Alongside the cap, the ordinance would make it illegal to reduce driver compensation or tips.

The 15% rate was chosen to not burden third-party platforms with lowballed fees, she said, especially given some delivery services already have reduced services in certain places due to costs.

However, there is potential that delivery costs will now be higher for some customers, or delivery options will be reduced locally.

Councilmember Raj Chahal, who supported the cap, said he thinks that customer fees shouldn’t need to increase, given that delivery demand and business have increased since the pandemic shutdown.

When it comes to enforcing the cap, Shikada said the city wouldn’t be in charge of pursuing damages — meaning restaurants would have to file legal claims themselves.

The cap will end when City Manager Deanna Santana rescinds the local emergency proclamation she made in March at the start of the COVID-19 pandemic.

Contact Katie Lauer at [email protected] or follow @_katielauer on Twitter.