NEWARK — Following the lead of many other Bay Area cities, the Newark City Council has voted unanimously to cap the fees food delivery apps charge to restaurants, hoping to slow the bleeding on local businesses hit hard by the coronavirus pandemic restrictions.
“We’re in a war. And the victims of the war, for a lot of that is our restaurants,” Mayor Al Nagy said of the pandemic at a council meeting Thursday night.
Effective immediately, all third party food delivery services such DoorDash, GrubHub, and Uber Eats, must limit the fees they charge restaurants in Newark to a maximum of 15 percent per order.
The cap will stay in effect until the council ends the state of local emergency it declared in March.
The vote to approve the rule was 4-0. Councilwoman Maria Collazo recused herself from the vote because she owns the Mexico Tortilla Factory in Newark.
City staff reports said prior to the ordinance going into effect, the companies running the apps were routinely charging businesses 25 percent or more of each order in fees, with DoorDash charging up to 33 percent in some cases.
Roman Espinoza, the owner of Cal Eats Fresh Mexican Grill on Cedar Boulevard, said in an interview Friday the cap imposed by the city will offer some welcome relief.
“It’s definitely affecting the bottom line,” he said of the high fees charged by delivery apps.
The roughly 30 percent per order he was being charged was a cost he was able to offset with other dine-in and direct take-out business prior to the pandemic, since only about 20 percent of his orders came through the apps, he said.
And for a restaurant like his that has only been open for six years, he looked at the apps more as a way to gain potential new customers in the area.
“The way they present it to you is, ‘We’re going to put you in front of millions of customers,’” he said.
But due to pandemic restrictions on dining, including recent Alameda County health orders that have restricted restaurants to delivery and take-out only, business from the apps now make up “80 to 90 percent” of his orders, and the fees take a big bite out of his profits.
“At this point, if you don’t have a personal delivery that you offer from the store level, you have to use these third party apps. We’re kind of pressured into this situation unfortunately,” Espinoza said.
The fees have only worsened a situation caused by pandemic restrictions in a year where he was forced to cut half his staff.
“I just have to put in a lot more hours,” he said.
“These are typically smaller operations, mom-and-pop type operations who hire local people to work in those restaurants,” Nagy said at the meeting of who the cap is intended to help.
“We don’t like to interfere with the free enterprise system, but in some cases you have to do that. And I think this is one of those times when we have to do that, just to protect our businesses.”
City staff estimated the cap could save restaurants they surveyed between $375 and $750 per week. Espinoza said that kind of savings could help his business through the pandemic, and provide more profit to help pay the wages of the minimal employees he has on right now, or his rent.
Delivery companies found violating the cap in Newark could be cited by the city, and restaurants would be able to file a civil action against them if they choose to, city staff said.
Within the first 14 days of the order going into effect, there will be no penalty for violations, as long as the overcharge above the cap limit is refunded within 15 days, the city said.
Many other cities in the region, state, and nation have already enacted similar caps, including Fremont, Hayward, San Leandro, San Francisco, Los Angeles, and New York City. San Jose and Santa Clara County officials are considering approving caps soon.
City staff reports said some delivery service companies have raised concerns about the caps, claiming they could reduce restaurant marketing services leading to reduced sales, and lower driver tips.
They also raised the possibility they could be forced to leave a market like Newark altogether due to loss of revenue.
“We are trying to save our businesses to make sure that they’ll be here and save your businesses,” Councilman Mike Bucci said, echoing city staff’s viewpoint.
“I feel like this is a no-brainer. And we’re certainly not going to leave our restaurants at a competitive disadvantage to Fremont. That’s not going to happen,” Bucci said with a chuckle.
DoorDash did not immediately respond to a request for comment.
As he prepared for opening his business for service Friday morning, Espinoza struck an optimistic tone.
“We’re hopeful to be busy,” he said.