Fee Cap Ordinance May Have Little Impact on Restaurants
Last month, Columbus City Council announced a fee cap for third-party delivery services in an effort to assist restaurants during the pandemic.
At the time, it was promoted and heralded as a way City Council was protecting Columbus’ small businesses and the restaurant community.
“Exorbitant delivery fees being sent to out-of-state corporations just make no sense when our local businesses are fighting so hard to keep up during this pandemic,” said President Pro Tem Brown in a statement from Council. “Capping those fees protects not only the restaurants who feed our residents but also the workers who make them run, by also ensuring delivery driver pay and gratuity is protected under the new fee cap.”
The fee cap was set for 15%, half of the current standard rate of 30%.
However, most local restaurants will not see their fees change whatsoever.
Big Mamma’s Burritos Co-Owner Matt Crumpton is an attorney who represents several restaurants. He contacted DoorDash about receiving a refund for fees exceeding the 15% cap for Big Mamma’s.
“I thought, hey, that’s something they do with minimum wage to help workers. Maybe they can help small businesses against the big, billion-dollar tech company,” he said.
He was told the cap only applied to restaurants that began contracts with them after Nov. 24, the day after the city ordinance was passed by Council.
Crumpton points out that text from the ordinance does imply that it does not apply to businesses with existing contracts. Statute 574.04 of the newly enacted chapter reads, “This chapter shall not be construed or interpreted to interfere with or impair any contracts between eating and drinking establishments and third-party food delivery services that exist as of the effective date of this chapter.”
He emailed the city to confirm whether it is true that the law only applies to contracts after the 24th.
“I did reach out to the City Attorney’s office…for clarification,” said Cathy Collins, support services administrator for the Department of Public Safety, in an email to Crumpton. “Your interpretation is correct. This new legislation will only effect [sic] any new or renewed contracts that are entered into after November 25th, 2020. Prior contracts were grandfathered out of the legislation until the time they are renewed.”
Despite the city’s assurance that renewed contracts entered after the date would apply under the fee cap, Crumpton’s correspondence with DoorDash indicated no such arrangement.
A statement from President Pro Tem Elizabeth Brown was sent to Columbus Underground after inquiring about the legislation.
“While city laws cannot retroactively rescind existing contracts, we did learn directly from independent restaurateurs that many of them aren’t hamstrung by these contracts because they aren’t large enough to sign contracts,” she said. “And we continue to hear from them that the fee cap is working.”
After that, there was public acknowledgment from the city that the law only applies to any food delivery contract entered into or renewed after Nov. 25, in a press release announcing license officers with the Department of Public Safety Division of Support Services are enforcing the ordinance.
“I believed like everybody else that it was real, primarily because similar ordinances have been enacted without a grandfather clause in New York City,” said Crumpton. Cleveland City Council and Cincinnati City Council’s own fee cap ordinances quietly contain the same grandfather clause as the City of Columbus.
Crumpton says this very well may be helpful for new businesses, but there’s also a catch to that as well.
“If you’re a restaurant that hasn’t just started doing third-party delivery yet, then it does help you,” he said. “But just keep this in mind: DoorDash is not required to offer their service. So if it’s not worth it for them to operate at 15%, they can just turn down the contract.”
What cities are ultimately trying to fix is the burdensome fees brought on by a switch to carryout due to the pandemic. Dough Mama recently took to social media to discuss the experiences they have had with third-party delivery services. Owner Perrie Wilkof said that GrubHub, in particular, has changed their rates to 50% without notifying them and even continued to take orders for them after they dropped the service.
“A lot of people don’t understand how it works and that they’re very misleading,” said Wilkof. “You end up paying multiple fees on top of your percentage.”
Wilkof said what Dough Mama has with many of these delivery service apps isn’t exactly a contract. They sign up for a certain amount of time, some for one year, others month-to-month.
“So you’re not exactly locked in, but you are,” she laughed.
She said none of these delivery apps have approached Dough Mama or notified them of any fee changes, so she hasn’t explored what this ordinance could mean for the restaurant, if anything.
“And also they make it very difficult to get in touch with anyone,” she said. “As business owners, these companies take advantage of the fact that people are extremely overwhelmed and busy. And so in many ways, like I assume that this 15% cap, from my experience with all of these different things you try with these companies, that there’s some kind of loophole that it’s ultimately just going to be a waste of my time.”
Crumpton said he generally supports City Council and is appreciative of their efforts, but in this instance he was offended by the implication that this would help small businesses.
“I’m accusing them of being intentionally misleading because if they would have told the truth about what was happening, everyone would have realized that this law doesn’t help anybody at all,” said Crumpton. “To think that you’re going to suddenly get 15% more…money, if you’re on the verge, if you’re like barely making it, that’s a big difference.”
“That false hope has been dangled,” he said.