Two members of Indianapolis City-County Council on Monday will introduce a proposal to temporarily limit fees charged by food-delivery services, in hopes of helping local restaurants pocket more revenue during the pandemic.
The proposed ordinance, co-authored by councilors Keith Potts, D-District 2, and John Barth, D-District 7, would impose several restrictions on third-party delivery services such as UberEats, GrubHub and DoorDash.
The measure would forbid such companies from charging customers more than 15% of an order purchase price, charging eateries more than 5% to be listed on their service or up-charging for menu items. It would also prevent the companies from reducing pay to delivery drivers because of fee limits instituted by the proposal.
“We’re trying to do something proactive to further support our restaurants during the public health emergency, when they’re struggling with not being able to have [full] capacity, and not being able to function at their full level,” Barth told IBJ. “We want to make sure that they’re getting a fair deal from these third-party entities.”
In a statement responding to the proposal, DoorDash said it “has always supported restaurants. Pricing regulations could cause us to increase costs for customers, which could lead to fewer orders for local restaurants and fewer earning opportunities for Dashers,” what the company calls its delivery drivers.
“Pricing regulations can also remove options available to restaurants by limiting their ability to opt-in to additional services to help their business,” the statement said. “We remain focused on working with policymakers to reach solutions that better support restaurants, customers, and Dashers.”
Representatives of Uber Eats and GrubHub did not immediately respond to IBJ questions.
The council proposal comes after hundreds of local restaurants saw their delivery orders skyrocket starting last March, when Indianapolis Mayor Joe Hogsett announced a stay-at-home order for Marion County at the beginning of the COVID-19 pandemic. In the 11 months since, restaurants have operated at a reduced seating capacity and relied on delivery or carryout to serve a large portion of their customers.
Most locally owned restaurants generally don’t have the means to provide their own delivery services, Barth said. So they turn to using third-party providers, but the fees “make it incredibly hard to do business,” he said.
The proposal would be enforced by the city’s Department of Business and Neighborhood Services, with a $500 fee for each violation. Multiple violations on a single day would count as one violation. The proposal would sunset 90 days after either the public health emergency is rescinded or restaurants can operate at 100% capacity.
Barth said he’s hopeful for bipartisan council support for the ordinance.
“In times of crisis like we’re going through, government is who we look to, to start making the changes and taking the actions that are needed,” he said.
Other major cities such as New York, Los Angeles, Baltimore and Seattle have instituted similar measures. Those ordinances were considered as Barth and Potts were drafting the language for their proposal. They also consulted with multiple restaurant owners and the Indiana Restaurant & Lodging Association, which supports the effort.
The delivery fees “eat into the profitability of each meal, to the point where [restaurants] aren’t making any dollars on those deliveries in many cases,” said Patrick Tamm, president of the Indiana Restaurant & Lodging Association. “We have to make sure those [fees] are in the best interest of the customer and the restaurant as well.”
He said the group will continue working with City-County Council as needed to fine-tune the proposal’s language.
In a statement, Potts said his focus in backing the proposal is to help local restaurants that “have been incredibly resourceful and creative in finding ways to stay open and keep feeding their customers since the pandemic began.” He added the city’s economic recovery is dependent upon small businesses like restaurants surviving.
Martha Hoover, owner of restaurant group Patachou Inc., said she supports “any effort the City-County Council gives restaurants to help them survive right now,” but added the proposal is not quite “as aggressive” as she might prefer.
Hoover said third-party delivery companies often “double-dip,” charging fees to both restaurants and the customer for the same order. Some localities have either banned this practice or implemented harsher penalties than the Indianapolis proposal.
Barth said councilors worked with representatives of the Mayor’s Office to create a proposal that “strikes a balance” between the needs of restaurants and delivery services.
“We were trying to find the common ground between what restaurants need to have some reasonable margin to survive and what these third-party entities need to operate,” he said.
Hoover said she has continued to use delivery services despite their costs because they are necessary to reach customers who are not dining out because of the pandemic. She said her company has lost earnings because of food-delivery fees, although she declined to provide specifics.
“It’s very easy for these services to claim that they are coming to the rescue of the industry, and that they are here to offer a means to replace sales, but it’s actually not true,” she said. “These services may add to cash flow, but they do not add to profit.”
The longtime local restaurateur said she’d like the industry to be more heavily regulated, and she said the council’s proposal should remain in effect permanently, rather than end with the public health order.
Barth said keeping the regulations in place after the pandemic is “a conversation we will continue to have with our local businesses,” but said he isn’t sure what will be needed by restaurants once they’re able to operate at full capacity again.
“I think anytime you get an industry that is allowed to exert usurious fees … without any governmental control, you have a problem,” Hoover said. “So, eventually this is going to be handled at a legislative level. I don’t expect the third-party delivery industry to regulate itself.”