L.A. Caps Grubhub, Postmates, Other Delivery Apps Service Charges At 15%

Rachel Uranga

Rachel Uranga is dot.LA's Managing Editor, News. She is a former Mexico-based market correspondent at Reuters and has worked for several Southern California news outlets, including the Los Angeles Business Journal and the Los Angeles Daily News. She has covered everything from IPOs to immigration. Uranga is a graduate of the Columbia School of Journalism and California State University Northridge. A Los Angeles native, she lives with her husband, son and their felines.

grubhub, uber eats, doordash, postmates

The Los Angeles City Council capped service charges third-party delivery services like Postmates, Grubhub, Uber Eats can pass on to restaurants at 15% of the purchase price during the pandemic following similar moves in San Francisco, Seattle and other major cities.

Restaurants have long complained about charges from the popular apps as high as 30% are eating away at their business, and those worries have grown during the pandemic, as owners find themselves relying more heavily on the services.


Even as dine-in restaurants slowly reopen, many are still devastated by the months-long closure. During that time, those that managed to stay afloat could only offer customers carry out and pick up services in order to keep business alive.

"Any arbitrary cap – regardless of the duration – will lower order volume to locally-owned restaurants, increase costs for small business owners, and raise costs on customers. Delivery workers would have fewer work opportunities and lower earnings," said Jenna DeMarco, a spokesperson for GrubHub in an email. "We also believe that any cap on fees represents an overstep by local officials and would not withstand a legal challenge."

Chris Webb, the CEO of ChowNow, an online order platform that offers restaurants a flat fee, said restauranteurs have long been frustrated with the fees.

"What we are hearing from a lot of restaurants," he said. "' We cannot afford to stay in business and take around 30% commissions consistently. It's driving us out of business and now this (pandemic) is the motivator for us to move.'"

He said he saw business skyrocket as many restaurant owners shifted away from delivery services that relied on percentage-based fees and to his flat-fee model. Webb said he was signing up as many as 2,000 restaurants a month.

The effort to cap the services was driven in part by pressure from the United Food and Commercial Worker Union Local 770, which is organizing the drivers. The order, which must still be signed by Mayor Eric Garcetti, also prevents the apps from taking tips from drivers.

"This smart policy will prohibit these companies from taking tips from drivers and gouging restaurants with fees," said John Grant, president of UFCW 770 in a statement."Food delivery drivers are essential workers who provide meals for the residents of our City, especially to seniors and others who are sheltering at home or under quarantine."

https://twitter.com/racheluranga
rachel@dot.la

Subscribe to our newsletter to catch every headline.

This Week in ‘Raises’: Measurabl Snags $93M, Selva Ventures Grabs $34M

Decerry Donato

Decerry Donato is a reporter at dot.LA. Prior to that, she was an editorial fellow at the company. Decerry received her bachelor's degree in literary journalism from the University of California, Irvine. She continues to write stories to inform the community about issues or events that take place in the L.A. area. On the weekends, she can be found hiking in the Angeles National forest or sifting through racks at your local thrift store.

Raises
Image by Joshua Letona

A local data management platform company lands fresh funding to help commercial real estate owners reduce carbon footprint, while one Los Angeles-based venture firm closes its second fund to accelerate the growth of emerging companies across health, wellness, beauty and personal care.

***

Read moreShow less

McKinsey & Company Launches InLA Accelerator To Help Underrepresented Founders Tackle Startup Challenges

Decerry Donato

Decerry Donato is a reporter at dot.LA. Prior to that, she was an editorial fellow at the company. Decerry received her bachelor's degree in literary journalism from the University of California, Irvine. She continues to write stories to inform the community about issues or events that take place in the L.A. area. On the weekends, she can be found hiking in the Angeles National forest or sifting through racks at your local thrift store.

McKinsey & Company Launches InLA Accelerator To Help Underrepresented Founders Tackle Startup Challenges
InLA

In 2022, female founders saw a 28% decline in overall U.S. funding, while Black-led startups saw a 38% decline in total capital received. In an effort to increase funding for minority-led startups, global venture firm McKinsey & Company is launching InLA, an accelerator program for underrepresented founders.

“This effort is something that the firm has been really excited about for a long time,” Engagement Manager Elkhyn Rivas Rodriguez said. “There's obviously a meaningful and growing startup community out here and just from a diversity standpoint, LA is incredibly diverse and multi-ethnic and multicultural. So we think that there will be a really great pool of potential companies to partner with.”

Read moreShow less

LA Tech ‘Moves’: CarbonCapture Taps Automotive Manufacturing Veteran

Decerry Donato

Decerry Donato is a reporter at dot.LA. Prior to that, she was an editorial fellow at the company. Decerry received her bachelor's degree in literary journalism from the University of California, Irvine. She continues to write stories to inform the community about issues or events that take place in the L.A. area. On the weekends, she can be found hiking in the Angeles National forest or sifting through racks at your local thrift store.

LA Tech ‘Moves’: CarbonCapture Taps Automotive Manufacturing Veteran
LA Tech ‘Moves’:

“Moves,” our roundup of job changes in L.A. tech, is presented by Interchange.LA, dot.LA's recruiting and career platform connecting Southern California's most exciting companies with top tech talent. Create a free Interchange.LA profile here—and if you're looking for ways to supercharge your recruiting efforts, find out more about Interchange.LA's white-glove recruiting service by emailing Sharmineh O’Farrill Lewis (sharmineh@dot.la). Please send job changes and personnel moves to moves@dot.la.

***

Read moreShow less
RELATEDEDITOR'S PICKS
LA TECH JOBS
interchangeLA
Trending