Food Delivery Commission Caps
Get the latest on permanent legislation, ongoing short-term ordinances, and who has dropped foood delivery commission caps entirely.
It’s no secret that the restaurant industry was hit hard by the COVID-19 pandemic. Many city and state governments introduced temporary commission caps for restaurant delivery services (RDS) to protect restaurant profits. Standard commission rates are usually around 20-30%, but most caps set the limit at 15%.
Needless to say, these temporary caps were met with mixed reviews. But many RDSs found creative ways to make up for that lost revenue, such as delivery surcharges.
The pandemic is largely in the rearview mirror, and restaurants are back in full swing. But the conversation on food delivery commission caps is far from over. Here’s a brief update on what’s going on.
Some cities have ended their commission fee caps.
Many large U.S. cities announced temporary commission fee caps at some point during the COVID-19 pandemic. But as of early 2023, most of these caps have ended.
San Jose introduced a cap in late 2020 and did not reinstate it when the cap expired in May 2021. Both Denver and Las Vegas ended their limits on commission fees in 2022. Back in 2020, San Francisco was among the very first cities to introduce a commission fee cap. The city dropped their cap in January of 2023.
At this point, virtually zero temporary commission fee caps are still in effect.
Some cities have instituted permanent commission fee caps.
On January 4, 2023, Portland City Council voted unanimously in favor of a permanent limit on RDS fees. The ordinance limits delivery commissions to 15% and takeout commissions to 4%. According to a press release from the city, the goal of the ordinance is to ensure fair and transparent business practices. The ordinance also strives to protect restaurants and food carts from “unreasonably high commissions.”
New York City announced its own permanent commission fee cap in mid 2021, which will renew every two years. However, council members have banded together to “loosen the limits” of the original ordinance. Their proposed bill will allow RDSs to charge additional fees to restaurants for things like in-app visibility. Big-name RDSs and some restaurants have spoken in favor of the new bill.
But the bill has some very strong opponents. Andrew Rigie, executive director of the NYC Hospitality Alliance, has repeatedly spoken out against RDS commissions. Time will tell if the new bill passes.
These caps are not limited to the United States. As of late 2022, British Columbia (B.C.) has implemented a province-wide cap on RDS fees. The Food Delivery Service Fee Act prohibits an RDS from charging more than 20% in fees. That breaks down to 15% of the total food coast and 5% for “other fees.”
Other cities may have similar laws in the works.
Some pandemic-era laws are still in effect.
While most temporary commission caps are long gone, some other short-term ordinances related to food delivery are still going strong. The state of Massachusetts is still allowing restaurants to sell mixed drinks to go, with some conditions:
- The restaurant must have a liquor license, and the customer must be at least 21 years old.
- All mixed drinks must be sold in sealed containers.
- Customers are limited to 64 ounces of mixed drinks per order, and that order must include at least one food item.
- RDS drivers have to put mixed drinks in the trunk or backseat for delivery.
The law will expire on April 1, 2023. Some organizations are hoping the law will become permanent, while others are eager to see it end.
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