Food delivery services in US under fire over high commission rates

NEW YORK: Meal delivery services became essential during the Covid-19 pandemic, when millions of Americans were under lockdown and restaurants were shut to visitors.

But these days, the platforms are increasingly finding themselves under fire, with politicians seeking to regulate the industry and restaurateurs accusing the likes of DoorDash, Grubhub and Uber Eats of freeloading.

And they are looking for ways to do without them.

In just the first nine months of this year, DoorDash has likely filled over one billion orders, most of them in the US, where the company is the market leader.

But Mr Mathieu Palombino, founder of the New York-based pizza chain Motorino, calls the boost provided by delivery apps a "big illusion" because more orders do not bring bigger profits to restaurants.

"When you receive 30 or 40 orders a day, you are happy. But the problem is that it does not translate into profits," Mr Palombino told AFP.


Food delivery services can charge restaurants fees of up to 30 per cent of the bill for a meal, according to their websites.

To address that problem, in August, the New York City Council passed a law, capping third-party delivery fees at 15 per cent.

"Small businesses should not be pressured into accepting these fees in order to remain viable and competitive," said New York City councilman Francisco Moya, who initiated the Bill.

A similar law was passed in San Francisco in June.

Food delivery giants have challenged the laws in courts, and some analysts think they have a point.

"We believe DoorDash will have a strong legal case against the permanent fee caps," Bank of America said in a research note last month.

DoorDash, Grubhub and Uber Eats argue that the cap is unconstitutional and that restaurants are free to negotiate their commissions with delivery platforms.

According to DoorDash, restaurants that used its platform during the pandemic had a survival rate eight times higher than the industry average. - AFP