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Additional charges of approximately $ 1 to $ 2 were listed per city. Some people have had a “Denver” charge, others a “Chicago”.
Across the country, people ordering delivery through the service were being charged more, apparently just for living in those places.
The real reason for the new fees? In these cities, local governments have adopted temporary caps that limit the amount that third-party delivery platforms can charge restaurants to help struggling businesses. In an attempt to recoup those losses, DoorDash has implemented new customer fees in cities that have adopted caps, including Chicago, Cleveland, Denver, Oakland, Philadelphia, Portland, Seattle, St. Louis and a handful of others. (Customers can find the explanation by clicking on the charge line before placing their order).
DoorDash isn’t the only one to add fees. Uber Eats has been applying similar customer fees since the summer in Portland, where the cap is 10% per order.
And over the next few weeks, Uber Eats plans to add fees in more than a dozen markets, including Chicago, Minneapolis, Boston, Washington and Oregon. The fees are $ 2 on average.
Account with high commission fees
Before the pandemic, many restaurants avoided third-party delivery services, like DoorDash, Uber Eats, or Grubhub. These platforms can charge a commission fee of up to 30% per order, which can leave restaurants in the red.
But now, with dining rooms completely closed or open with limited capacity, many restaurateurs feel pressured to offer delivery or go out of business. With less money coming in, the pain of those high commission fees is even greater.
In an effort to help restaurants, a number of municipalities have passed commission caps. Temporary limits, usually around 15%, will eventually expire – in some cases after full recovery from meals indoors for two or three months, in other cases on a specific date. Some cities that have adopted temporary fee caps have already extended them.
Delivery services have taken different approaches to caps
DoorDash argues that the fees it receives from restaurants cover its own costs. If they can’t get them from restaurants, they have to charge customers instead, according to the company.
“Running our platform, paying and insuring Dashers, and providing high quality service can be costly, which is why in many markets, where local governments have adopted pricing regulations, we have started to charge customers a little extra, ”a DoorDash spokesperson said to CNN Business in an emailed statement.
Uber echoed a similar sentiment.
“In order to maintain a reliable delivery market, we are instituting several temporary local charges in certain US markets,” said a spokesperson for Uber Eats. “The fees Uber Eats collect from merchants and consumers on transactions funds our services, including app maintenance, consumer support, security, and most importantly, payment to delivery people.”
Unlike its competitors, Grubhub, which merged with Seamless in 2013, does not add explicit fees in cities that have commission caps in place, according to a company spokesperson. Instead, it uses the actions of its rivals to try and lure people to its monthly subscription service, Grubhub +, which costs $ 9.99 per month. In December, he announced that he would offer three months free to people who join the service in Chicago and New York.
The cost of higher fees
Some restaurant advocates fear the higher fees will deter customers. “We oppose any additional charges that might deter customers from ordering,” said Sam Toia, president and CEO of the Illinois Restaurant Association.
There are good reasons to be afraid.
“Consumers are really reluctant to incur additional charges and costs” on delivery, said Jill Failla, senior foodservice analyst at Mintel. “Third-party companies need to be really aware of this barrier related to consumer fees and need to be very careful about what they are trying to convey to the consumer.”
That doesn’t mean they won’t end up charging more for delivery, she said.
So far, some restaurateurs say they haven’t seen any slowdown in orders because of the new fees.
“I haven’t seen a significant change in our percentage sales to third parties,” said Ruth Jones, chief financial officer of Maria Empanada, a small Colorado-based empanada chain.
Commission caps have been helpful, Jones said. But once they go, restaurants will have to deal with those higher commission charges again. When this happens, they may need to start charging customer fees themselves. “Many restaurants are adding delivery charges to use third parties,” she said. “We have to keep trying to make money as a business, so we have to make choices that make sense of the third party.
This is especially the case in an environment where restaurants are struggling to survive.
“Restaurant recovery will require above average revenue and margin growth for a period of time, which will unfortunately lead to higher prices for consumers,” said David Henkes, senior director of Technomic. “Ordering for delivery has and will continue to become more expensive.”
– Sara O’Brien of CNN Business contributed to this report.
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