San Francisco approves delivery fee cap exception for third-party delivery platforms

Joanna Fantozzi

A little over one year after the city of San Francisco passed a permanent 15% delivery fee cap — and was subsequently sued by Grubhub and DoorDash for the “ill-conceived” law — the city is now backing off the stringent law. The San Francisco Board of Supervisors voted to create an exception to the original legislation for delivery companies that offer 15% pricing as an option for customers, with additional charges for “marketing and other promotional activities.”

The bill is headed to Mayor London Breed’s desk next, and once it is signed, Grubhub and DoorDash are expected to drop the lawsuit.

“Delivery companies will still be required to provide core services to all restaurants at the 15% level, including the listing on their service’s platforms, websites and mobile applications, and the delivery of food and/or beverages from the establishment,” the Golden Gate Restaurant Association explained in a newsletter.

If third-party delivery companies offer basic delivery services for the maximum 15% delivery fees, then they can offer other perks like SEO, advertising, consulting and credit card processing for higher fees.

Last year, the major third-party delivery companies began offering new pricing models and options for restaurants, beginning with DoorDash which announced tiered pricing last April starting at 15% delivery fees and going up to 30%, with the lowest tier charging customers higher delivery fees instead. Uber Eats and Postmates followed up with an almost identical pricing structure in September 2021, but the “Lite” model comes with 15% commission fees but does not come with ad spend or benefits from Uber Eats pass members. Grubhub also launched a commission-free direct-ordering platform in Sept. 2021 aimed at enticing independent restaurants.

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Both Grubhub and DoorDash are satisfied with this compromise between all parties. Grubhub has agreed to drop the lawsuit once it is signed, and DoorDash has agreed to drop the lawsuit once it goes into effect, which would be in January if it is signed by the mayor. Both companies hope that this latest compromise with the city of San Francisco will lead to other cities following suit, like New York City, which currently is being sued by all three third-party delivery platforms for its similar delivery fee cap legislation.

“Restaurants need more choices, not fewer, and this solution preserves their ability to opt into important services including marketing, advertising, consulting and delivery,” Grubhub said in a statement sent to Nation’s Restaurant News.  “San Francisco is the latest of more than 25 cities across the country this year rolling back pandemic-era price controls that increase delivery fees for consumers, leading to a reduction in orders for both restaurants and couriers - and strictly limit what restaurants can do to promote their businesses.”

Related:DoorDash and Grubhub are suing San Francisco over the city’s permanent delivery fee cap

“DoorDash will always advocate for workable policy solutions that support local businesses, and the amendments to the price control legislation in San Francisco are a promising step in supporting merchants across the city,” the company said in a statement sent to Nation’s Restaurant News. “We look forward to continuing our work with the Board of Supervisors to find solutions that better serve restaurants, Dashers, and customers.”

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