Pacific Grove caps food delivery fees

The temporary ordinance makes it illegal to charge a restaurant more than 15% of the cost of the dish.

MONTEREY >> On the same night that Monterey hosted a forum on capping food delivery costs charged to restaurants, Pacific Grove went ahead and passed a temporary ordinance making it illegal to charge a restaurant more than 15% of the cost of the dish.

DoorDash has said it is opposed to the action Pacific Grove has taken and that Monterey is considering. The debate is important because for restaurants, any little drop in costs could mean the difference between staying open or closing. An untold number of eateries along the Monterey Peninsula employing many service workers have closed — some permanently.

“After nearly 11 months of economic impacts from the COVID-19 pandemic … restaurants are now subjected to even more restrictive rules of operation that will leave them dependent on food-delivery apps for their survival,” wrote Pacific Grove City Manager Ben Harvey in a report to the City Council on Thursday.

Third-party food delivery services like DoorDash refer to the cap as “price controls,” reducing the commission from in some cases 30% of the price of a meal charged to restaurants down to 15%. Still, it is a move gaining momentum throughout the country, especially in the greater Bay Area.

Cities such as San Jose, Santa Clara, Fremont, Berkeley, San Francisco and Santa Cruz have already instituted 15% caps. Frank Geisler, the chief executive of the Monterey Peninsula Chamber of Commerce, said during Thursday’s forum that he is a strong supporter of free-market capitalism and is ideologically opposed to government getting in between businesses and consumers.

But he also said restaurants are suffering dramatic losses and that it’s now time for action.

“One does not say to a dying patient to take an aspirin and come back in two weeks,” Geisler said. “It’s time for urgent measures and a cap on third-party fees is a measure the government must take.”

And Pacific Grove did exactly that on Thursday by passing an urgency ordinance capping commissions at 15% on a temporary basis. The ordinance will sunset 90 days after the prohibition on indoor dining has been lifted by the state. So while the ordinances state a strict end date to the cap, that wasn’t good enough for some critics.

At Monterey’s forum, DoorDash representative Chad Horrell said cities won’t honor the sunset clause.

“The caps are only supposed to

be temporary but then six months down the road it’s permanent,” he said during the forum. He offered no evidence that any city would not honor the temporary status of the caps.

Horrell also said the amount his company’s delivery people earn is in the “high 20s,” presumably per hour. But the company’s website frames its compensation differently.

“Base pay from DoorDash to Dashers (DoorDash’s name for delivery people) ranges from $2$10+ per delivery depending on the estimated duration, distance and desirability of the order,” according to DoorDash’s website. “Deliveries that are expected to take more time, that require Dashers to travel a longer distance, and that are less popular with Dashers have higher base pay.”

During the forum, Horrell also talked about the importance of the livelihoods of their delivery people without directly linking livelihoods to delivery caps.

“Facing economic hardship, many of our dashers are trying to earn supplemental income to support their families,” he said. He did not explain how caps would threaten their delivery people’s supplementary income. He did say that capping commission fees at 15% would deny the company any profit.

“And even with a 15% cap it’s important to understand that it does not in any way cover the cost of the delivery service,” he said.

San Mateo-based Second Measure, a business analytics firm, reported that in 2019 DoorDash was responsible for 45% of meal delivery sales globally, while Uber Eats and Grubhub battled it out for second place.

DoorDash, in documents filed with the U.S. Security and Exchange Commission for its initial public stock offering, reported revenue of $1.92 billion for the first nine months of 2020, up more than three times from the same period a year earlier.

“Their huge sales is coming at the expense of small businesses,” Geisler said.