County Executive, Council Investigating Food Delivery App Fees

Montgomery County Executive Marc Elrich and the County Council are investigating the county’s ability to force lower fees charged to restaurants by food delivery apps, such as Uber Eats, Grubhub, and DoorDash.

Despite the fact that these apps frequently promote free or low delivery expenses, the commissions they charge restaurants are far higher, normally adding up to 20 to 40 percent or a greater amount of each order. Customers are usually unaware of these significant fees, and consequently don’t know to look for alternative ways to help their favorite eateries.

A recent report from nonprofit Washington Consumers’ Checkbook provided details on the impact the fees have on restaurants and patrons. Because of the COVID-19 pandemic, orders placed for delivery through apps have increased dramatically. The report asserts that major delivery platforms Uber Eats, Grubhub, and DoorDash have achieved dominance by acquiring their competitors, and many restaurants, often lacking delivery staff of their own, have turned to the apps to compensate for their loss of dine-in revenue.

According to a county press release, the report sheds light on this complicated issue and provides guidance for consumers and restaurant owners. For example:

  • Checkbook created illustrative orders for eight restaurants using a variety of delivery services and found the three largest services—Grubhub, DoorDash and Uber Eats—took a huge cut of each order. On average, Checkbook estimates that fees charged by these three companies were 38 percent of total order costs.
  • Restaurants may be required to pay extra fees to receive better placement in companies’ search results.
  • Consumers wishing to support their favorite restaurants should order directly from the restaurants. By using a restaurant’s own phone number, website or app, people can ensure their money goes to the eatery. But Checkbook says to make sure to use the restaurant’s real phone number: Grubhub sets up proxy phone numbers for restaurants so that it can capture its commission even for phone orders.
  • If you want to order via an app, ChowNow charges restaurants low fees, compared with the other services Checkbook compared.
  • Do not be fooled by cheap or “free” delivery. To tantalize first-timers, apps often offer deals. But those consumer savings often are charged back to the restaurant.

“Our restaurants and food establishments have been hit hard by the COVID-19 pandemic; necessary efforts to protect the public health have been difficult for restaurants,” said Montgomery County Executive Marc Elrich in a press release. “Many residents have been eager to support their local restaurants by getting take-out and delivery. I don’t think they realize how much some of these delivery services charge the restaurants, and I think that this is an important step – to let customers know that the restaurants may be paying way too much to these companies. Numerous states and local governments continue to craft creative legislation to address nationwide issues related to food delivery apps. While we explore legislative remedies, I believe Montgomery County is best served by full disclosure and knowledge.”

Bethesda Beat reported yesterday that Rockville City Council in June sent letters to DoorDash, Grubhub, Postmates, and UberEats, asking the companies to cap their commission rates at 15%. Those companies charge fees of up to 30%.

In April, County Councilmember Andrew Friedson and Duck Duck Goose owner Ashish Alfred released a video called #DitchTheApps, encouraging diners to order directly from restaurants:

During this difficult time for the restaurant industry, help support the people who support and serve us by ordering directly from them. #DitchTheApps so our cooks, service workers, and restaurateurs can keep the lights on.

Washington D.C. enacted C. Code §48-641 earlier this year which requires, during a declared public health emergency, the registration of the third-party delivery platform, caps commission fees to restaurants at 15 percent, forbids reducing driver compensation to comply with the cap, and requires clear and conspicuous disclosures of the commission, fee or payment structure charged to consumers.

“Food delivery apps come with a side order of confusion and lack of transparency,” said Montgomery County Office of Consumer Protection Director Eric Friedman. “Small restaurants may feel forced to pay steep fees and commissions in order to stay in business. Full disclosure is essential to ensure integrity in the marketplace.”

“Take away and home delivery at Vapiano restaurants: poster and e-bike of food delivery service Lieferando” by verchmarco is licensed under CC BY 2.0

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