Lightfoot to unveil restaurant relief package

UPDATE: Lightfoot unveils sweeping pandemic relief package for businesses, consumers

Third-party food delivery services that thrived during the pandemic would be required to collect and remit Chicago’s restaurant tax — while a cap on their delivery fees is extended through Dec. 31 — under a restaurant rescue plan proposed by Mayor Lori Lightfoot.

Two months ago, Aldermen Michael Rodriguez (22nd) and Byron Sigcho-Lopez (25th) proposed a $40 million relief program to reimburse liquor license holders for the 90 days they were shut down and offered partial refunds for days they operated at limited capacity or with shortened hours.

The plan Lightfoot plans to introduce at Wednesday’s City Council meeting isn’t nearly that costly or comprehensive. But it will provide some relief for restaurants that have spent more than a year either shut down or with indoor capacity and operating hours severely limited.

• The cap on restaurant delivery fees that expired on April 17 would be extended through Dec. 31, according to Illinois Restaurant Association President Sam Toia.

• Third-party delivery services would be required to collect and remit Chicago’s restaurant tax — 0.5% citywide (1.5% within the restaurant district created to bankroll McCormick Place) — or be held liable for the tax, plus interest and penalties.

• The city would streamline licensing and permitting, and relax restrictions on sidewalk sandwich boards that make it easier for restaurants to advertise their specials.

The cap prohibits third-party delivery services from charging restaurants “any combination of fees, commissions or costs” for delivery “greater than 15 percent of the food dispensing establishment’s monthly net sales processed through” the delivery service.

“Sure, the big restaurant groups downtown can work out a nice deal with these third-party delivery services. But a restaurant in Lincoln Square or Jefferson Park or Little Village doesn’t have the power to do that. And they get charged up to 27% of the bill [that] goes to the third-party apps. So it’s just killing the small restaurants in the neighborhoods,” Toia said.

Pat Nabong/Sun-Times

Noting that Chicago restaurants are still limited to 75% capacity, Toia said, “The cap should be permanent. That’s what some restaurants — especially in the neighborhoods — have asked.”

GrubHub spokesman Grant Klinzman reacted angrily to the proposed cap extension.

“We are disappointed the Mayor is again trying to pass another arbitrary price control, more than a month after the last one expired. The proposed new price control would not only violate state and federal laws, it would also fail to provide the support Chicago’s restaurants need right now,” Klinzman wrote in an email to the Sun-Times.

“Arbitrary fee caps impact how many orders restaurants receive by limiting the services they can contract for with companies like Grubhub to drive more visibility and business. Fewer orders means less work opportunities for drivers and increased costs for diners.”

A spokesperson for DoorDash added, “Price controls lead to fewer orders for restaurants and lost earnings for Dashers.”

DoorDash has already proposed a “new pricing structure... enabling local restaurants to choose a pricing plan with a delivery commission rate as low as 15% with the ability to add additional services and options.”

“City Council should look to solutions that would actually make a long-term difference for small businesses, like direct funding,” the spokesman said.

Last month, Finance Committee Chairman Scott Waguespack (32nd) introduced what he called a “table-setting” cap extension ordinance with no specific expiration date.

Tuesday, Waguespack agreed with Toia the cap should be made permanent as part of a broader relief package.

“Restaurants need a lot of assistance right now across the board — whether it’s to get more people in the door or level the playing field with these third-party delivery companies and make sure that, as they come out of COVID, they’re on solid ground,” Waguespack said.

“A lot of aldermen were just talking about, what can we do to improve their ability to step out of COVID? That’s where we’re at. She’s trying to find any way she can to help em and give ’em anything they need.”

Toia described the process of collecting and remitting the city’s restaurant tax as a finger-pointing mess.

“You have restaurants thinking they’ve got to pay the tax. Third-party [delivery services] think they’ve got to pay the tax. There’s been some [instances] where both third-party and restaurants are paying it. That is costing the restaurants double,” Toia said.

“This ordinance is to un-cluster this and make sure everyone understands who remits the tax to the city. And that will be the third-party delivery folks.”

Toia said he has no way of knowing whether the city is getting shortchanged by restaurant delivery services that pocket the tax applied to all restaurant meals.

“Or are restaurants getting shortchanged because they’re paying it themselves and paying it to the third-party as well?” he said.

“I don’t know. It’s just a cluster right now. The city is trying to uncluster it.”

Klinzman said the company supports the mayor’s restaurant tax ordinance, adding: “It matches our current tax policies.”