Denver council considering price cap for Grubhub, other food delivery companies

The Denver City Council is considering a cap on the fees delivery companies can charge restaurants as the coronavirus continues to batter the industry.

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Leven Deli Co. sandwich artist Ian Curtis serves up a chicken hoagie sandwich for a customer at the deli Sept. 25, 2020.

With diminished capacity and social distancing requirements, restaurants are able to serve far fewer customers in-house than before the pandemic, and they’ve leaned on delivery to supplement lost revenue.

But many must rely on third-party delivery companies like Grubhub, DoorDash and Postmates, which can charge restaurants up to 40% of the total bill, Councilwoman Kendra Black said during a committee meeting earlier this month. Her proposal would cap that commission fee at 15% to help struggling restaurants recover some of their lost profit margin.

“That’ll provide immediate relief,” said Mike McKibbin, district manager for Brothers BBQ, a locally owned chain with eight Denver metro locations. “And it would obviously allow us to do things that can only help our business grow and help retain employees.”

Cities including San Francisco, Seattle and New York City have launched similar measures, capping commission fees at between 15% and 20%. Grubhub has pushed back, petitioning to end those caps and even defying the new regulations at times.

Grubhub also opposes the caps in Denver, said spokesperson Katie Norris.

“We believe fee caps are the wrong way to support restaurants, as they will negatively impact restaurants’ order volume and increase costs for diners,” she said.

The council will take its first of two votes on the price cap Monday.

The relief can’t come soon enough, McKibbin said, because patios will begin to close or customers will be less likely to want to eat outside as the weather turns cooler, making delivery orders all the more important. He estimated about a quarter of his restaurants’ business comes through those third-party vendors and that will increase in the winter.

At Leven Deli Co. in Capitol Hill, delivery through third-party companies took over about 10% of the business when the pandemic first hit, said owner Anthony Lygizos. He said those large companies aren’t the enemy but they do create an expensive intermediary between customers and restaurants like his.

“There’s no pride; there’s no care; there’s no training,” Lygizos said. “I get it, everyone needs a job, but you’re just blowing up that buffer.”

Lygizos said he has increased some of his prices when customers order through third-party vendors to compensate for the expensive fees. A price cap would mean fewer costs to pass on to customers in the future, he said.

Chris Fuselier,owner of the Blake Street Tavern, 2301 Blake St., said the delivery companies might be able to make up the lost revenue from an increase in volume.

Fuselier said he canceled his third-party partnerships before the pandemic hit because they were too expensive but if council approves the price cap, he’ll likely sign up again.

The fees hit the local, family businesses the hardest, Fuselier said. Chain restaurants often have enough leverage to negotiate lower prices with the third-party delivery companies, but smaller restaurants do not.