In cities from San Francisco to Denver, Uber Eats and DoorDash are no longer hindered by commission fee caps

The commission fee caps that food delivery companies levied against restaurants during the pandemic have started to be lifted in a number of US cities. Food delivery services like Uber Eats, DoorDash and Grubhub imposed fees of up to 30% per order when lockdown measures closed restaurants across the nation. Although restaurants welcomed the lifeline, they objected to the high fees, which led some cities to cap the fees at 15%. Cities are letting the fee caps expire because sales are now back to where they were before the pandemic.

The first city to adopt fee cap legislation was San Francisco, and it went into effect in 2022. On Jan. 31, 2022, the city removed the 15% commission cap, enabling food delivery services to charge restaurants the 15% to 30% commission rates that were common in other cities. The city of Denver did not extend the temporary commission cap after it expired at the end of 2021. The city of San Jose had capped delivery fees in December 2020, but the Economic Development office said there are currently no plans to do so.

The food delivery businesses that have been working to turn a profit will gain from these changes. Given that the proceeds from each transaction are divided among the restaurant, the food delivery service and the employee, the price of food delivery is high. The fee caps, however, have been a point of contention between restaurants and food delivery services. Restaurant owners have pushed for fee caps to stay in place despite the companies' claims that doing so would force them to raise the service fee they bill end users.

The fight between restaurants and food delivery services is shifting back in favor of the latter. To placate restaurant owners, food delivery services had to introduce a tiered commission pricing model and include alcohol delivery in their apps. Nevertheless, the cities' decision to lift the fee caps will undoubtedly help the financial performance of food delivery apps given the relaxation of lockdown measures and the return of restaurant sales to pre-pandemic levels.