Profiteering in a pandemic

The Rind is one of many Sacramento restaurants relying on third-party delivery services to stay in business. (Photo courtesy of Region Restaurants)

Essay: Struggling restaurants are being gouged by greedy delivery services. Sacramento should cap their fees.

By Dylan Hubka and Joshua Wood

Due to COVID-19, the locally owned, independent restaurants that make Sacramento the Farm-to-Fork Capital of America are facing the worst economic crisis in the history of the industry.

The heart-wrenching result is the permanent closure after closure of the staple restaurants that defined our region. For those restaurants still trying to survive, they have been forced to rely on third-party food delivery services such as DoorDash, Grubhub or Uber Eats.

But the record profits of this new monopoly were too difficult to resist, so these services drastically raised fees on restaurants, with reports of some being charged as much as 57% on orders. This is why cities across the country have temporarily capped third-party delivery service fees at 15%. The city of Sacramento needs to do the same.

“There is an obvious and ethical difference between a profit and profiteering by price gouging during a pandemic.”

Now, let’s be crystal clear: As a trade association representing restaurants, we believe in free enterprise. But we are not in a time of free enterprise or even a normal crisis. We are addressing a once-in-a-century pandemic with a series of necessary government mandates that have resulted in crushed livelihoods.

We want third-party delivery services to make a profit, even a good one. But there is an obvious and ethical difference between a profit and profiteering by price gouging during a pandemic.

By enacting a commission cap for these delivery services, Sacramento restaurants and the community will directly benefit. Delivery services will continue to receive a fair and respectable source of revenue, while restaurants can maintain their meager profits. A limit on fees could save hundreds of restaurants and save thousands of jobs, bolstering Sacramento’s economy.

Dylan Hubka is policy director of Region Restaurants, a trade association of local independent restaurants affiliated with the Sacramento Region Business Association.

The good news is that we don’t have to reinvent a solution. Sacramento is not the only city facing this dilemma. Los Angeles, San Francisco, Santa Cruz, Boston, Seattle and other cities are also seeing their restaurants struggle to survive. Like Sacramento, they have had third-party delivery services take advantage of their restaurants. However, these cities have not accepted these predatory business practices.

To protect the financial well-being of their restaurants, each city has enacted or is considering a 15% cap on third-party delivery service commissions. These cities’ swift actions can and be a clear example of what Sacramento should do.

We considered asking for a 10% cap. After all, delivery services are taking advantage of our restaurants during these heartbreaking times. But the fees, in their own right, are not bad. We understand the need for these companies to be profitable and hope they can be long-term. However, having these fees go unchecked during a global pandemic is unfair and callous toward restaurants.

A 15% cap on third-party delivery services is fair. It will greatly strengthen our restaurants that are facing an uncertain financial future. Sacramento needs to act quickly, unless officials are willing to allow the Farm to Fork Capital to set down its “fork” forever.

Joshua Woods is executive director of Region Restaurants

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1 Comment on "Profiteering in a pandemic"

  1. Moody Foodie | May 14, 2020 at 9:22 am | Reply

    Honestly, I think all of these delivery services should be charging a flat fee, and get no more than one dollar per transaction during the pandemic. The rest of the money should go to a) the restaurant making the food (via the cost of menu items) and b) the delivery driver (via tip). A third-party provider shouldn’t be getting rich while local businesses and the locals who are doing all the work for them are getting laid off or having their tips confiscated by the third-party service they’re working for. We all know these delivery services don’t pay their drivers well, and don’t profit-share with restaurants, so cutting the middle man down to size is key to keeping the food industry moving.

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