Berkeley limits service fees for third-party food delivery apps

UberEats, Postmates, DoorDash, Caviar and Grubhub can only charge restaurants up to 15% in service fees under a new temporary ordinance.

takeout order on table, food delivery
A customer and food delivery driver (right) wait for their takeout orders. Photo: Pete Rosos

Third-party food delivery services, like UberEats, Postmates, DoorDash, Caviar and Grubhub, will only be allowed to charge restaurants up to 15% in service fees under a new temporary ordinance in the city of Berkeley.

City council approved the rule last Tuesday, effective immediately. Councilmember Rashi Kesarwani authored the ordinance in response to restaurant owners who have seen a drastic decline in revenue since being forced to close dining rooms and are now relying heavily on third-party applications to deliver takeout. Restaurants report they are operating at a loss because of fees from delivery services. UberEats, for example, charges restaurants 27.5% in service fees on the total amount of the sale, according to the ordinance.

On April 10, San Francisco was the first in the country to impose a 15% cap on service fees. Other cities have followed suit in recent weeks, including Seattle, Los Angeles and San Leandro. Jersey City set maximum service fees at 10% and New York City at 20%.

With outdoor dining once again restricted in Berkeley and Alameda County for the time being, delivery may pick up steam. The temporary order expires when the local emergency ends or when dine-in service can continue. The ordinance also limits additional fees for restaurants, like credit card fees, to 5%, to prevent delivery companies from shifting costs.

“The price-gouging that we’re experiencing around the pandemic is really injurious to people, and this is a great, great effort to get our hands around that,” said Councilmember Ben Bartlett, who co-sponsored the ordinance at the council’s June 7 meeting.

While restaurants may get some relief from this new temporary law, the city recommends that diners order directly from restaurants, rather than use third-party apps, to best benefit local food businesses.

There are concerns that with fee caps, customers may have costs passed on to them, or that delivery apps may resist the rules. Many delivery apps have already spoken out against the fee caps in other cities, citing that it will be difficult to pay their employees with the new restrictions. Berkeley’s ordinance prevents companies from reducing compensation for delivery drivers, or taking any portion of their gratuity.

Berkeley’s ordinance says the rule is necessary, in part, because restaurants have already raised prices to account for high service charges and that some residents are unable to afford this increase.

The third-party delivery apps will face legal consequences if they violate the order.

Supriya Yelimeli is Berkeleyside's general assignment reporter. Email: supriya@berkeleyside.com. Twitter: SupriyaYelimeli. Phone: (510) 585-8315.