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City to require restaurant delivery services to come clean about fees

“If a delivery service is taking what some have alleged is an inordinate amount of the fee ... the average consumer wants to know that,” Mayor Lori Lightfoot said.

Signs for food delivery services GrubHub and Seamless displayed on the door of a restaurant.
Chicago will require third-party food delivery services to itemize receipts for customers beginning May 15.
AP file

Chicago food delivery services will be required to come clean about third-party delivery costs under new rules championed by Mayor Lori Lightfoot to arm consumers with the information they need to vote with their wallets.

“We just had a delivery at my house last night. And there was very little transparency around where the different charges were gonna fall, and who was gonna be bearing it,” Lightfoot said Tuesday.

“That’s information that the consumer has a right to know so they can make choices wisely.”

Aldermen led by Finance Committee Chairman Scott Waguespack (32nd) are pushing for a 5% cap on restaurant deliver service fees to give their hungry residents a break at a time when the only alternative to cooking at home is takeout or delivery from their favorite restaurants.

Lightfoot’s approach is more nuanced. It’s based on the premise that information is power.

Starting Friday, third-party food delivery companies such as Grubhub and DoorDash will be required to “disclose to the customer an itemized cost breakdown of each transaction, including the menu price of the food, any sales or other tax, delivery charge and tip, and any commission or service fee paid by the restaurant to the third-party delivery company,” officials said. Violators will face daily fines ranging from $500 to $10,000.

That way, customers will see how much money is going to the restaurant they want to support while the stay-at-home order has closed dining rooms.

“If a delivery service is taking what some have alleged is an inordinate amount of the fee, making it difficult for restaurants to be able to earn what are already tight margins, the average consumer wants to know that and is gonna act accordingly on the basis of that information,” the mayor said.

The new rules will be permanent and do not require City Council approval. They will apply to “all websites, mobile applications or other internet services that offer or arrange the sale of food or beverages by a restaurant, bar or other food-serving establishments.”

Chicago-based Grubhub charges business owners several fees for its services, including a 20% marketing commission, 10% delivery commission and a 3.05% processing fee, according to its website.

A company spokesperson said Lightfoot’s first-in-the-nation disclosure rule would only confuse consumers, not educate them.

“We support policy and legislation that help restaurants serve their communities, and a path to reopening these businesses must be the focus. These arbitrary disclosure rules, however, will do exactly the opposite of their intent by causing confusion to consumers,” a Grubhub spokesman wrote in an email to the Chicago Sun-Times.

“These efforts by policymakers risk discouraging people from enjoying restaurant meals safely at home and hurt our efforts to support restaurants.”

David London, senior government relations lead for DoorDash, agreed the disclosure mandate goes too far.

“Unfortunately, this unnecessary and overreaching regulation, issued under the guise of the current emergency, will only lead to confusion and hurt restaurants and delivery workers,” London said in a statement.

London noted DoorDash voluntarily cut its commissions by half through May for more than 2,000 Chicago restaurants. He said food delivery has become an “essential service” for Chicago residents and a lifeline for restaurants closed to dine-in customers.

“We will remain focused on serving the restaurants, customers, and Dashers who use our platform as we explore our options and hope to find future opportunities to partner with Chicago and its restaurant community,” London said.

The 5% cap on restaurant delivery services was proposed by Waguespack last month and promptly denounced by DoorDash.

At the time, London said the cap would “make it untenable for delivery apps to cover the cost of doing business.”

Waguespack said Lightfoot’s disclosure mandate is a good start but additional legislation may be necessary.

“We’ll try the transparency executive order, then see how much further we have to go,” Waguespack said. A 5% cap “would help the restaurants and the customers, as it did in several cities in California.”