Food News

Restaurants Report Third-Party Delivery Apps Violating Portland’s Cap On Fees

Grubhub and Postmates have been accused of charging restaurants more than the 10 percent commission fee allowed by the new city ordinance.

By Katherine Chew Hamilton July 21, 2020

PIRA has called for restaurants to boycott Grubhub after reports that the third-party delivery service was charging restaurants in excess of the 10 percent cap allowed by the city's new ordinance.

A group of Portland independent restaurants is calling for a boycott of one of the biggest delivery apps in the business. The call for a boycott was spurred by restaurateurs who reported that Grubhub and Postmates were continuing to charge restaurants commission fees in excess of those allowed by the city’s landmark cap on commission fees, which passed less than two weeks ago. 

That cap is part of an ordinance, effective immediately as of July 8, that limits the commission fees that third-party delivery services can chargeCommission fees, which had typically ranged from 20 percent to 30 percent of the order, are now limited to 10 percent for delivery orders and 5 percent for non-delivery orders. But early reports from restaurants state that Grubhub has tacked on a 20 percent “marketing commission” in addition to a 10 percent delivery commission, and that Postmates, too, is violating the new ordinance. 

The ordinance was developed by the Portland Independent Restaurant Alliance (PIRA), the Asian Pacific American Network of Oregon (APANO), and city commissioner Chloe Eudaly. The cap is temporary, lasting for the duration of Governor Brown’s state of emergency due to the pandemic, and continuing for 90 days after the state of emergency is lifted. Delivery apps that violate the cap can be fined up to $500 per violation, and violations accrue daily for each restaurant charged fees in violation of the ordinance. According to PIRA, it’s the lowest cap of its kind in the country, and is meant to help restaurants hang on to more of their often slim profit margins during a time when many of them are struggling.  

Katy Connors, director of operations at Hat Yai and PIRA member, contacted Grubhub last week stating that the marketing fee was out of compliance with the ordinance, and asking Grubhub to refund restaurants the additional 20 percent commission fee they had been charged.

Connors contends that under the ordinance, the commission cap applies to all commissions, whether for delivery or marketing. That means that total commissions cannot exceed 10 percent of the total purchase price of the order. 

Amy Healy, public affairs director at Grubhub, disagreed, saying that the ordinance did not exclude marketing commissions. “The language of the ordinance does not place any cap on marketing fees that Portland restaurants choose to pay Grubhub and that are unrelated to our order and delivery services," she said in an email to PIRA.

Via Instagram, PIRA called for restaurants to boycott Grubhub until the company complied with the commission cap and reimbursed restaurants that had been overcharged. Other delivery apps, including Caviar, DoorDash, and Uber Eats were complying with the 10 percent cap, the post noted. 

But restaurants reported to PIRA that Postmates was also continuing to charge commission fees of 20 percent to 30 percent, even though the ordinance calls for an immediate cap. When PIRA contacted Postmates asking for immediate compliance with the ordinance, the response from Postmates dated July 20 read, “We are working with the Portland municipality to understand the details of this new policy and the specifics of its implementation.” (Portland Monthly reached out to Postmates and Grubhub for comment and had not received responses as of publication.)

A screenshot of a Grubhub receipt provided to PIRA.

Image: Courtesy PIRA

Since the cap’s implementation on July 8, Connors estimates PIRA has received 20 to 30 reports from restaurants, including Bhuna, Van Hanh Vegetarian Restaurant, Please Louise, The Boiling Bowl, Biba CHamoru Kitchen, and Tea Bar, claiming that Grubhub and Postmates have violated the cap. Commission fees, especially when combined with promotional coupons, can mean that a restaurant keeps a meager percentage of the order’s total value. One receipt provided to PIRA showed that after commission fees and a $6 promotional coupon were subtracted from a Grubhub order, the restaurant only kept $6.60—or less than 35 percent—of a $19.00 order.  

High commission fees like these can be especially harmful to BIPOC-owned restaurants. Connors observes that Grubhub, in particular, has a high proportion of BIPOC-owned restaurants on its app. And as Jenny Lee, advocacy director for the Asian Pacific American Network of Oregon, noted when interviewed prior to the passage of the ordinance, larger, well-known, and often white-owned restaurants can sometimes negotiate with delivery apps for lower fees. Many BIPOC-owned restaurants, on the other hand, don’t have that bargaining power.  

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