Denver City Council To Consider Cap On Fees For Third-Party Restaurant Delivery Companies

DENVER (CBS4) – Denver City Council will soon decide whether to cap the fees restaurants pay to use third-party food delivery companies, such as Grubhub and DoorDash. It's a move many other major American cities have already made to help restaurants struggling through the pandemic.

Councilwoman Kendra Black is the sponsor of the bill, which was heard by the Finance & Governance Committee on Tuesday. If passed by the full city council, it would cap commission fees paid by restaurants at 15% for four months.

"Not only does it cap the fees at about 15%, but it also requires that restaurants have to opt into the platform," Black said.

According to Black, the proposal would also protect the tips and wages of drivers, as well as require itemized receipts showing all fees and commissions paid. Companies could not charge commission fees on phone calls that don't result in a sale, and restaurants would be able to file complaints online.

"Someone will evaluate complaints and see if they're legitimate, and if so, they'll reach out to the delivery companies and see if they can address them," Black said. "If they don't, we can audit them."

Karen LuKanic, owner of Chef Zorbas in the Congress Park neighborhood, is supportive of the proposed cap on fees. With renovations underway and limited seating outside, her restaurant is more reliant on takeout and delivery than ever before.

"Takeout and delivery is now a good 50% of our business, where it was about 15," LuKanic said.

According to LuKanic, that business model is not always profitable though. She showed CBS4 several statements from third-party delivery company Grubhub, which showed commission payments over the past three months as high as 29%.

"They take anywhere from, I would say at the lowest, 25%, 25-30%," LuKanic said. "We're a small operator, we don't have a lot of clout like a McDonalds or Panera may, so we're probably paying some of the higher rates."

LuKanic tells CBS4 the proposed measure won't fix every problem, but it will provide some relief. She said the most helpful thing would be for customers to order takeout and delivery straight from the websites of local restaurants, rather than through a delivery service.

"Underneath the water we're pedaling as fast as we are possibly can, and it's gotten to the point where a lot of us feel like we're going to get sucked under," she said.

Councilwoman Black said she and other members with Denver Economic Development and Opportunity met with representatives of Grubhub, Uber Eats, DoorDash and Postmates. CBS4 reached out to all four companies about the proposed change within the City and County of Denver and received responses from two companies.

"Commission caps are a form of price fixing that can have many unintended consequences, and we're eager to continue working with Denver City Council to find a solution that ensures affordable delivery for residents, flexible work opportunities for Dashers, and more revenue for restaurants," a representative for DoorDash said.

A spokesperson for Uber also responded to CBS4, saying, "regulating the commissions that fund our marketplace forces us to radically alter the way we do business and ultimately hurt those that we're trying to help the most: customers, small businesses and delivery people."

A spokesperson for Grubhub also responded to CBS4's inquiries saying its drivers have always received 100% of tips, and the company is supportive of a provision allowing restaurants to opt into the service, "however, we believe fee caps are the wrong way to support restaurants, as it will negatively impact restaurants' order volume and increase their costs. As a result, delivery workers would have fewer work opportunities and lower earnings."

City council will hold its first vote on the bill on Sept. 28, Black said. If passed at the following week's council meeting, the changes would go into effect on Oct. 9.