Portland Approves 10% Cap On Fees That Food Delivery Apps Can Charge Restuarants (oregonlive.com) 84
An anonymous reader quotes a report from Oregon Live: The Portland City Council voted unanimously Wednesday to make it illegal for third-party food delivery services like DoorDash and Grubhub to collect more than 10% in commission fees from city restaurants amid the coronavirus pandemic. Portland joins other cities, including Seattle, Los Angeles and Philadelphia, that have instituted similar caps in recent months. Those cities have limits at 15%. New Jersey last week put a 10% service fee cap that applies to all restaurants in the state. Food delivery company fees can be as high as 30%.
The new rule also makes it illegal for DoorDash, Uber Eats and other companies to decrease payments to delivery workers in order to make up lost money from restaurant fees, the ordinance said. The city council approved an amendment to the order Wednesday to also include a 5% limit if the delivery service allows a restaurant to transport their own food or if a customer orders through the app and picks up their items at the business. The restrictions would end 90 days after Portland's state of emergency order lifts. No date has been set to lift the order, which has been in place since March 12. Delivery app companies would be liable for up to $500 in civil penalties if the order is violated and the fine would accrue every day and for every restaurant overcharged. The restaurant would have to sue the company involved if they aren't given refunds.
The new rule also makes it illegal for DoorDash, Uber Eats and other companies to decrease payments to delivery workers in order to make up lost money from restaurant fees, the ordinance said. The city council approved an amendment to the order Wednesday to also include a 5% limit if the delivery service allows a restaurant to transport their own food or if a customer orders through the app and picks up their items at the business. The restrictions would end 90 days after Portland's state of emergency order lifts. No date has been set to lift the order, which has been in place since March 12. Delivery app companies would be liable for up to $500 in civil penalties if the order is violated and the fine would accrue every day and for every restaurant overcharged. The restaurant would have to sue the company involved if they aren't given refunds.
How does the business model look anyway? (Score:3)
Re:How does the business model look anyway? (Score:5, Informative)
How does the business model of food delivery look anyway? What it is the real cost for a company like Uber or Doordash?
Afaik they aren't making money and are all delivering below cost.
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Afaik they aren't making money and are all delivering below cost.
A shake-out and consolidation is needed before any of them can be profitable.
If three food-gig companies compete, they are each making a separate trip to each neighborhood with their own driver. After consolidation, one driver can make one trip, with three meals. That will drive down costs.
By dictating prices, the Portland Politburo is likely forcing this consolidation to happen faster.
Re:How does the business model look anyway? (Score:4, Interesting)
Uber in particular has a very limited life, due to the fact it lost $2.9 billion in the first quarter of this year, which is a huge improvement.
Investors are not getting their money back and will run out of patience at some point.
Re: How does the business model look anyway? (Score:2)
Re: How does the business model look anyway? (Score:5, Funny)
Prices will only rise until people feel like it's not worth having it delivered and just go pick it up in person.
... and as long as they are making the trip, they can pick up meals for their neighbors as well for a small fee.
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The old concept of 'sharing' that uber pretended at when they were first setting up.
Re: How does the business model look anyway? (Score:1)
Iâ(TM)m sure once you start regulating, you can regulate that issue away too: no more picking up food at restaurants unless you are a delivery person (because COVID seems like a great excuse).
Why does the government feel it has to regulate private business? FedEx and private couriers can charge $200 for same-day delivery of the same package, but somehow if Uber charges more than $5, we need to regulate?
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prices will rise until competition returns which will force prices back down.
The advantages of scale may prevent competition from re-emerging.
If one company has a large market share, they will have lower unit costs because their drivers can carry multiple meals more often.
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Most pizzas in America are delivered in the driver's vehicle, but Domino's does have its own vehicles. I believe they are subcompact cars now.
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Domino's has quite a history of designing custom vehicles for their delivery drivers:
Tritan A2
https://www.thedrive.com/news/... [thedrive.com]
Myers Motors/Corbin Sparrow "Pizza Butt"
https://en.wikipedia.org/wiki/... [wikipedia.org]
Domino's Deliverator (nice Snow Crash reference)
https://www.fastcompany.com/30... [fastcompany.com]
In my home town they had a whole fleet of 2nd-gen Geo Metros for their drivers... all configured with 3-cyl engines and hatchbacks (and automatics, unfortunately). They all got sold off after 4-5 years so there were white Metros ru
Re:How does the business model look anyway? (Score:5, Informative)
I used to work in pizza delivery. Normally we would take 2 orders, because 1 order wasn't so profitable and 3 orders took so long that the 3rd order might arrive late, unless it was close to the other 2 both geographically and time of order. (This was a suburban town, maybe urban and rural areas are different.)
So as long as enough people are ordering and there's sufficient population density close to each restaurant (Portland's density gives the city an advantage there), there's enough business for everyone. I doubt there will be much consolidation but rather adjustment of delivery areas to maximize profitability.
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The delivery companies are hoping to get popular enough to be able to combine deliveries and reduce costs. If they don't reach that level they will go bust.
It's a popular business model these days, e.g. those bike/scooter rental companies.
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Wha
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What needs to happen is for some of them to throw in the towel and go under. Hopefully sooner rather than later. Because the longer it goes on, the more investor money they lose, and the longer it will take the eventual winners to recoup their losses and repay investors. (If they all don't end up filing for bankruptcy and destroying the entire industry.)
If the VCs pull out, it's going to ramp up costs or end the service in areas that aren't profitable. An alternative, is just let the VCs subsidize the services for as long as they want to. If they decide eventually it isn't worth it, you'll be no worse off then than if they pulled out now.
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Uber already bought PostMates and GrubHub already refused their offer. Even if that wasn't true, Portland's market isn't large enough to matter. And if the companies could make more money by consolidating, they already would be.
Re: How does the business model look anyway? (Score:3)
Food delivery is time sensitive. Restaurants are usually aligned with one delivery company already, so the driver can pickup once and deliver to more than one customer in a particular area. Doing multiple pickups from different restaurants per delivery run is a logistical nightmare and would cause problems with quality of the delivered meals.
It's a problem that volume and consolidation can't really fix. The only way these companies can become sustainable is to increase the amount they take from an order.
Re: How does the business model look anyway? (Score:2)
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Bullshit (Score:4, Interesting)
I live in Seattle. This is total bullshit. Instead of a "service" fee, they just jack of the delivery fee. A ~$15 meal costs ~$30 after all the fees are applied.
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I live in Seattle. This is total bullshit. Instead of a "service" fee, they just jack of the delivery fee. A ~$15 meal costs ~$30 after all the fees are applied.
This.
You'd have to be insane or just want to burn cash to go with most of these delivery apps. Doubling the cost is not worth time saved. Add to that a significant percentage of orders with wrong or missing items, is this really an attractive proposition?
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That depends on what you could otherwise be doing with that time. I'd argue it's worth it for some people, but many, many, many fewer people than who currently use these services.
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I'd argue it's worth it for some people, but many, many, many fewer people than who currently use these services.
So most people are too stupid to decide what their own time is worth, and the politicians on the city council should make that decision for them?
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I'd argue it's worth it for some people, but many, many, many fewer people than who currently use these services.
So most people are too stupid to decide what their own time is worth, and the politicians on the city council should make that decision for them?
This is merely an observational conversation. Most people are too stupid. Period.
You can't fix that, and you certainly don't want a politician to "fix" it, which would likely fuck it up for the rest of us.
Re:Bullshit (Score:4, Funny)
You'd have to be insane or just want to burn cash to go with most of these delivery apps.
But it's so convenient! I can order right from my phone and not have to get my fat ass off the couch.
Doubling the cost is not worth time saved.
I'm just helping out the poor delivery person. They have to make a living too.
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With any luck you can double the cost again with insulin needs!
Re:Bullshit (Score:4, Interesting)
If you have already had a couple drinks and really don't want to cook dinner, this is much cheaper then a DUI. Please don't drink and drive.
Otherwise, yeah delivery of food is not cheap or affordable. You got to pay a delivery fee and a tip to the driver on top of the cost of the food. I pretty much just do carry out or walk to the couple of local spots in my neighborhood.
I am against the city trying to "regulate" the delivery fee. Delivery is not a right for crying out loud. If uber and grubhub want to charge an arm and a leg, let them. If these fees are so out of wack with the cost of doing business (which has zero to do with how much you can make running the business) then surely it will be easy for a competitor to swoop in with lower fees and eat these folks lunch.
So why exactly do we need to have caps on fees for a completely and totally non-essential service? Let the market decide this.
Re:Bullshit (Score:4, Interesting)
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"When you are dead, you don't know that you are dead. It is difficult only for the others. It is the same when you are Stupid "
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Essential Service (Score:3)
It's essential right now. Dine in is closed. It's in the government's interests for every restaurant not to go bankrupt during COVID shutdown.
This price limit is only while there is a state of emergency in place. Once the world returns to normal (well, +90 days) the companies can charge whatever they want again.
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Doubling the cost is not worth time saved
If you make $50 an hour and it takes an hour to go there, order, wait, and come back, then any delivery fee under $50 is worth it.
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Provisio your job is not significantly less enjoyable than your home life.
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Re: Bullshit (Score:2)
Only if you are working during that hour.
If I make $50/hr, but I left work 2 hours ago, having food delivered isn't saying me any money.
Re: Bullshit (Score:2)
It isn't always about "time saved".
You might be home with a sleeping child. You can go hungry, wake up the child, or sneak out and hope nothing happens while you are gone.
Other times, you may be suck, drink, high or otherwise not in a condition to go out yourself.
Other times, you may just be too fucking lazy to go out.
In any case, if I want $20 of food, I may be willing to pay $20 more to get it delivered, for a variety of reasons.
Re:Bullshit (Score:4, Insightful)
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Re:Bullshit (Score:5, Funny)
It's distributed Ubereats.
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This will work until some official claims you are acting as your own unpaid employee and you need to take care of that, with associated income taxes.
Only said half in jest, as there have been a number of incidents where volunteers were attacked for just that thing.
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The Supreme Court has already ruled that the government can prevent people from growing food for their own consumption. If the government wanted it could probably keep you from cleaning your own house, mowing your own lawn, doing your own laundry, cooking your own food, maintaining your own vehicle, etc. After all, you're stealing potential jobs from a marketplace that is desperately needing work.
limits on doing your own (Score:2)
last I heard, Massachusetts still made it illegal to fix your own faucet instead of hiring a union plumber . . . I recall ads years ago for repair pats that noted they couldn't sell there . .
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"DIY DoorDash"
If you posted this as a "lifehack" on your instagram, you could probably monetize it :-)
Re:Bullshit (Score:4, Insightful)
Yes, but at least there will be transparency and the cost will be visible to and paid by the customer. The way delivery companies were gaming it, they charged everyone (including the drivers via withheld tips).
A friend has a small food truck, and generally makes about a 35% gross margin. After paying the delivery companies, he is left with 5%, and all tips end up with the driver (or delivery company).
The current business model does not work for these delivery companies. A driver can make 1.5-2 deliveries per hour maximum.
Re: Bullshit (Score:1)
So go get your own fucking food.
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But that's not how any of this is working, with or without the new regulations. Everything is percentage based. Are you telling me it cost more to drive a $100 order than it does to drive a $15 order, for the same distance, same amount of work, same amount of time?
Government setting prices (Score:3)
Price controls [economist.com]. What can possibly go wrong?
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Anti-gouging laws during disasters are different from other price controls. And your article doesn't discuss, prove or argue why price controls are bad, it assumes they are.
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How is it gouging if you are losing money on every single transaction?
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Price gouging is defined by the price to consumer, not the profitability of the transaction.
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NYC still has rent-control today — introduced in 1943 to protect families of servicemen from "predatory" landlords, while their men are at war...
False. Quoting from the link:
Oh Noes~! Another Uber business model broken (Score:2)
What other industry can the Uber maffia now overcharge?
Maybe grannies diaper delivery ?
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What other industry can the Uber maffia now overcharge?
Maybe grannies diaper delivery ?
This seems to be connected to their state of emergency. I think they're trying to subsidize restaurant owners and protecting delivery workers salaries while letting the third party apps take the hit. There's nothing in the article that suggests overcharging, unless fees up to 30% is considered outrageous.
What is a restuarant? (NT) (Score:2)
Why Percentage? (Score:3)
I learned early on in my side project of video game development that multiplicative modifiers can get out of hand really quickly, but I spot them everywhere. So, my question: Why have a percentage fee when a flat fee would suffice? Do it by volume (bag) or count (pizza) instead.
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Now you have me imagining people ordering au gratin potatoes in feed bags.
Ackshually (Score:2)
Disclosure is important (Score:3)
But disclosure is something that can be mandated. That is anyone ordering food, not for self consumption but for delivering to someone else must disclose the fact to the restaurant and the ultimate customer details.
It should be made legal for restaurants to charge extra for deliver services compared to direct customers.
Such rules might help the restaurants.
Re:Disclosure is important (Score:4, Informative)
It should be made legal for restaurants to charge extra for deliver services
As far as I know, the restaurant can set their price for any circumstance.
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They cannot charge different customers different amounts. They can have special “pick-up” deals, but the prices need to be consistent.
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no change in law needed; they can simply have a policy of not paying commissions for orders. I've seen that around here.
At that point, the delivery service would have to (*gasp*) visibly charge enough to cover the service.
(there may, though, be an advantage to the restaurant in *not* needing as much of a dining area, so some discount for takeout might be in its interest)
Hope this applies to Government also (Score:1)
Price ceilings (Score:2)
Re:Price ceilings (Score:4, Informative)
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Yeah. But then they look like shit for charging the customer $10 to deliver a $15 pizza. So the make part of it by charging the restaurant. Which has to jack up their product price to cover it. Now the restaurant looks greedy.
It was $5 to deliver a $20 pizza ($5 of the price going back to the delivery service).
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Yeah. But then they look like shit for charging the customer $10 to deliver a $15 pizza
Yeah well if the shoe fits, wear it
Wrong way round (Score:5, Informative)
The big problem, in addition to ignorance of side effects of price caps, is that the companies are making themselves very hard to deal with for the restaurants. What's wrong with simply adding their own charge to the price of the food and stop making messes for the restaurants. On top of this, several delivery outfits will pretend that they have a deal going with a restaurant, putting up a slick web menu and a phone number that goes to the delivery company, not the restaurant -- all without the restaurant's permission or even knowledge.
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"Delivery outfits will pretend that they have a deal going with a restaurant, putting up a slick web menu and a phone number that goes to the delivery company, not the restaurant -- all without the restaurant's permission or even knowledge."
This was Grubhub's original business model.
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This isn't about how much a company can charge consumers, it's about how much a delivery company can charge the restaurant.
The delivery company is free to tack on fees to the consumer.
But they are limited as to how much they can charge the restaurant for providing the customer to them.
Personally, I think it should be illegal for delivery companies to charge restaurants anything at all. They are mostly acting as agents in a transaction that does not need to have an agent involved.
Pizza companies figured the
Politicians passing feel-good legislation (Score:1)
It's all a game. Politicians know business is going to pass along these costs but they want an "I'm looking out for the consumer" sound bite for their reelection campaign.
10% or what? (Score:2)
Here's our delivery menu sir. Would you like the $50 pizza or the $75 dollar pizza? The $75 pizza comes with toppings.
How will this affect Instacart, grocery delivery? (Score:1)
Inflated menu prices (Score:2)
How does this work when the restaurants are offering a menu with all the item prices jacked up? Most Deliveroo menus seem to have $2 per item added. Kinda hefty on a $3 taco, or a .50c dipping sauce.
Tip 'em or whip 'em (Score:2)
Totally gonna work. (Score:2)
Free market religion (Score:1)