Long Beach could impose cap on delivery service fees after outcry from restaurants
Local small businesses that depend on third-party delivery services, such as Grub Hub or DoorDash, say the fees charged to deliver their products though the app-based companies are leaving little profit for them. As a result, Long Beach could soon decide on capping the service fees at 15%, according to Councilwoman Stacy Mungo.
Councilman Rex Richardson, who chairs the Economic Development and Finance committee, said the idea of enacting a cap on the service fees was analyzed Tuesday during a meeting where members of the committee discussed a financing plan to retain restaurants citywide. Richardson had proposed a cap on service fees back in June after it was discussed at a special meeting in April.
The Los Angeles City Council recently passed an ordinance with a 15% cap on the fees. Long Beach, however, doesn’t have any restriction on them at this point, and some businesses are reporting up to 30% in charges.
The issue is taking on new urgency as the surge in COVID-19 infections has prompted more restrictions on indoor and outdoor dining. Right now, delivery and pickup are the only options left for local restaurants. Richardson said he and the rest of the City Council could consider an ordinance capping delivery fees as soon as Dec. 8 as part of the retention plan the committee discussed.
“Many small businesses are on the brink of bankruptcy and have to lay off too many of our neighbors,” Mungo said. “People need help now.”
Ryan Hoover, owner of KC Branaghans in Belmont Shore, said businesses currently face a catch-22 situation when it comes to delivery fees: The cost often doesn’t leave enough profit for the business, but they go out of business if they don’t deliver.
Luis Navarro, owner of Lola’s Mexican Cuisine, The Social List and Portuguese Bend Distillery, said businesses mostly work with margins of 25% to 30%. In his experience, Navarro said the delivery app companies often charge 30% for their services.
“It’s an already thin margin and with delivery, the deliverers make the dollars and the restaurants make the cents,” Navarro said. “What you’re left at is better than nothing, and that’s the nature of the business now.”
Leoh Sandoval, owner of Agues Way in North Long Beach, told the Post that delivery companies charge him 30% in service fees.
But the idea of capping service fees is already getting pushback. A spokesman for GrubHub called the idea “well-intentioned but counterproductive.”
GrubHub said it’s difficult to pinpoint exactly how much it charges for service fees in Long Beach because the percentages are negotiable and vary per business.
A spokeswoman for DoorDash argued that pricing regulations could cause the company to increase costs for customers instead of the restaurants, which could lead to fewer orders.
Both DoorDash and GrubHub added that service-fee caps also hurt the drivers contracted through the app, who conduct the deliveries to make money.
“The caps lower pay for drivers by reducing the number of orders to be delivered,” a statement from GrubHub said, “which severely impacts how many customers and orders we can bring to these restaurants.”
Editor’s note: This story has been updated to include information from Councilman Rex Richardson.
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