Toronto city council has decided to ask the province to put a temporary cap on commissions charged by food delivery service companies.
Such a cap would help restaurants struggling to stay in business during the pandemic, according to Coun. Michael Ford, who proposed the motion that was seconded by Toronto Mayor John Tory. Council unanimously approved the motion at a Wednesday meeting.
The city said it doesn’t have the power to regulate food delivery services, such as Uber Eats, SkipTheDishes and DoorDash, or cap the fees that they charge. The companies charge up to 30 per cent on each bill.
Ford, who represents Ward 1, Etobicoke North, said in a statement on Wednesday that the motion sends a “strong message” that the city is serious about supporting Toronto small businesses.
“COVID-19 has had huge financial implications on many sectors in our economy, but the restaurant and hospitality industry has been particularly impacted,” Ford said.
“I have heard from many restaurant owners that their margins are razor thin due to high commission fees, sometimes as high as 30 per cent, from food delivery service companies,” he added.
“This is simply unsustainable at a time when diner volumes are down 90 per cent compared to last year and layoffs in the sector are projected to be in the tens of thousands.”
Ford said restaurant owners have told the city that they are under “tremendous pressure” due to the high commission fees charged by food delivery service apps.
“During these difficult times, where small businesses are struggling to keep their doors open, this is one critical piece of the puzzle in supporting our local ‘mom-and-pop’ restaurants.”
In the motion presented to council, Ford said diner and takeout volumes have dropped substantially, and according to a recent study, layoffs in the restaurant industry will be in the tens of thousands in Toronto.
“Over the past week alone, overall diner volumes in Toronto were down almost 90 per cent compared to the same time last year,” the summary reads.
Mayor says food delivery firms need to do their part
Tory, who deemed the motion to be urgent, said the city has been urging food delivery services to help restaurants to ensure they stay in business.
“While some companies have stepped up to help, we have heard from restaurants that more needs to be done right now,” Tory said.
The mayor said a 30-per-cent commission off the top of orders makes it difficult for restaurants to stay afloat. Food delivery services need to do their part, he said.
“These companies, as a matter of good corporate citizenship, but also as a matter of just good business, should be doing something to help their customers, at least in the short term while there are shut downs going on,” Tory said.
‘Solutions must be sustainable for all sides,’ Uber says
Uber responded to the vote by saying third-party delivery companies are working to provide additional support to restaurants.
“It’s no secret that Uber Eats and other third party delivery companies operate at a negative margin so solutions must be sustainable for all sides of the marketplace, including restaurants, customers, and delivery people,” the statement reads.
Uber said it has announced three new measures for restaurants: a new 15 per cent delivery-only option to access Uber Eats delivery people discounted to 7.5 per cent until the end of the year; a zero per cent pickup extended until March 31, 2021, allowing customers to order and pick up their meals directly from the restaurant with no fees; a $15-million investment to increase demand from local customers.
At least one restaurant is welcoming the move by council.
Darien List, owner of Beach Hill Smokehouse in the city’s east end, said the commissions charged by food delivery services are affecting the profit of restaurants.
“It really hurts our bottom line,” List said. “We’re trying to keep everyone employed, doors open, lights on. I think the food apps really need to reconsider their percentages in our profit margins.”
The food delivery service apps need to be regulated, he said.
“Let’s just make sure that we regulate these guys and let them know that they are heavily impacting our bottom line and we’re all in this together. Let’s get to the other side of this as a whole and not let one industry really profit from the environment that we’re in today.”
James Rilett, the vice president for Central Canada with Restaurants Canada, said the rates charged by the food delivery services are exorbitant.
“They are hard to justify and they take the money right out of the pockets of people that need it most,” Rilett said.
“We’ve seen a lot of operators simply close down because they can’t afford to pay those delivery fees. The math just doesn’t work.”
Up to 40% of restaurants could close by next spring
Restaurants Canada estimates that, without much needed support, up to 40 per cent of independent restaurants might go out of business in the country beyond March 2021.
It said the impact is often the greatest among small businesses that are family owned and operated.
Some American cities, including Chicago, Los Angeles and New York City, have implemented temporary caps on fees charged by food delivery service apps. Los Angeles, for example, has capped the fees charged by delivery app companies to no more than 15 per cent of the cost of the order.