Commission fee mistakes were spotted after a San Francisco fried chicken restaurant pointed out a possible error on his invoice; the city has imposed temporary fee caps during the pandemic.
DoorDash is refunding money to a handful of restaurants in San Francisco who were mistakenly overcharged on commission fees, which the city recently capped temporarily at 15%
"We have corrected a separate error affecting fewer than 10 out of over a thousand of our San Francisco restaurant partners and will be issuing reimbursements to these restaurants,” the delivery company said in a statement sent to Nation's Restaurant News.
The mistake was caught by DoorDash after a San Francisco restaurateur posted an image on Twitter showing his DoorDash invoice. A line item on the third-party delivery invoice suggested that his restaurant was still being charged a 30% commission fee.
However, the restaurant rep later posted a retraction. While the invoice did say 30% under the commission rate, the actual rate charged was 15%.
In the process of investigating the alleged mistake, DoorDash discovered errors in fee charges made to other restaurants.
The San Francisco-based delivery company is reviewing commission charges in other cities with fee caps to ensure inadvertent accounting mistakes have not occurred.
Third-party delivery fees, which hover around 30%, have been a controversial subject among delivery companies and the restaurants they serve. The coronavirus pandemic has heightened the pain point as delivery, drive-thru and carryout orders became the only source of revenue for restaurants when dining rooms shut down at the onset of the crisis.
Restaurant industry advocacy groups have put pressure on third-party delivery companies such as Grubhub, DoorDash and Uber Eats to reduce profit-hurting commission fees during the COVID-19 crisis. That’s led to some cities enacting temporary caps on commission fees including Los Angeles, New York City, San Francisco, Washington D.C. and Seattle. Most caps hover at 15%.
In New York City, the cap is split into two categories: a 5% cap for transmitting the order through the app, often referred to as the “marketplace” by delivery companies, and a 15% cap on last-mile delivery.
DoorDash and other third-party delivery companies have previously stated they would comply to temporary commission caps.
However, these delivery players argue that fees pay for a combination of fixed costs, and tailored marketing that helps drive order volume. Grubhub has stated that caps are especially harmful to independent restaurants because they won’t be able to market themselves as aggressively as national chains on delivery platforms.
The pandemic has led to a surge in delivery orders. Before the pandemic, delivery represented 3% of all restaurant orders. It’s now grown to 7% of orders, according to the latest market research from The NPD Group.
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Contact Nancy Luna at [email protected]
Follow her on Twitter: @fastfoodmaven
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