A measure submitted by Denver City Councilwoman Kendra Black seeks to cap delivery commissions at 15 percent to help restaurants struggling with COVID-19 recovery.

Commissions paid by restaurants to third-party delivery services could soon be temporarily capped at 15 percent. Councilwoman Kendra Black submitted a proposal to the Denver City Council's Finance & Governance Committee last Tuesday, citing economic devastation to local restaurants in the city resulting from COVID-19. According to Black, the restaurant industry is struggling to recover from the impact of COVID-19 shutdowns, resulting in more than 53 Denver restaurants permanently closing and a high rate of job loss that she said will be magnified by upcoming cold weather.

Food delivery has become an increasingly important option during COVID-19 and many restaurants have turned to third-party platforms to fill that need because they do not have their own delivery programs. According to Black, restaurants can pay third-party delivery services up to 35 percent commissions in addition to fees for marketing, which can represent a financial loss for restaurants on some orders.

"Most restaurants feel obligated to partner with third party delivery services because of their established market share and marketing efforts," said a presentation given by Black before the committee. "Third-party delivery platforms charge customers and restaurants fees and commissions that may result in a restaurant losing money on orders."

The measure would require restaurants to opt-in and preclude delivery companies from including restaurants in their platform that do not sign up. In addition, drivers would receive 100 percent of their tips and their pay cannot be decreased to cover cap fees, according to the proposal. Greater transparency would be required in the form of all fees and commissions being itemized on receipts, and additional processing and service fees would not be allowed.

Many localities have moved to cap third-party commissions, Black said, including the state of New Jersey as well as  New York City, San Francisco, Chicago, and Washington, D.C.

The measure, which would expire after four months unless extended, is supported by the Economic Relief & Recovery Council, the Colorado Restaurant Association, Eat Denver, Federal Business Improvement District, and many local restaurants. 

Third-party delivery services, including DoorDash, Uber, and GrubHub, responded to local media questions about the proposed commission cap calling it a form of price fixing and saying it will ultimately hurt customers.

The measure is scheduled to be considered by the full City Council on September 28 and would go into effect October 9 if passed.