In a bid to help local restaurants, the Spokane City Council wants to limit how much food delivery companies can charge — and local food delivery startups support it

click to enlarge In a bid to help local restaurants, the Spokane City Council wants to limit how much food delivery companies can charge — and local food delivery startups support it
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Local food delivery companies support a cap on service fees.

During the depths of the pandemic, the very idea of getting food delivered to your door transformed.

Suddenly, it wasn't a symbol of laziness or lack of culinary talent. It was social responsibility. Ordering food to be delivered made you something of a hero, a champion of small businesses, an epidemiologically conscious foodie-philanthropist.

But Anthony Anton, president of the Washington Hospitality Association, says that when his wife ordered food delivery the other day, he got "really upset with her."

"I'm the restaurant guy. I'm a small business person," he says. "I said, 'I appreciate the intent, but they just lost money selling to us.'"

Behind the scenes during the early months of the pandemic, every time you ordered on GrubHub, DoorDash, Uber Eats or PostMates, a massive chunk of your bill — sometimes as much as 30 percent — went to the delivery service, not the restaurant. And that didn't include the delivery charge that the company tacks on. The restaurant had to either dramatically jack up prices on food delivery or lose money on every sale.

Despite the up-charge, many restaurants saw the amount of food getting delivered grow significantly.

"During the pandemic it really did help. That's how we survived," says Adam Hegsted, owner of Spokane restaurants like de España, Gilded Unicorn, Yards Bruncheon and Baba. "Even though we weren't making a profit, we were able to keep our doors open and keep working."

But in November 2020, Washington Gov. Jay Inslee used his emergency powers to help out restaurants: He capped food delivery charges at only 15 percent of the order, saying in a statement that "we all must sacrifice during these uniquely challenging times to both support our businesses and slow the spread of COVID."

The cap lasted less than a year. By the end of June 2021, Inslee eased his COVID restrictions on indoor dining and lifted that 15 percent cap.

Now, the Spokane City Council — following the example of cities like Seattle and Portland — is considering bringing a version of that cap back. Spokane's version wouldn't stop Uber Eats or GrubHub from charging additional fees for other services, like advertising or website placement. The city's cap would apply only to the food delivery itself.

"We're just saying, to protect our local businesses, you have to offer a 15 percent option," says City Council member Zack Zappone, the ordinance's co-sponsor. The council plans to vote on the proposal on Dec. 5.

But companies like GrubHub have fought to stop these caps from being reimposed — including in court. They claim that their delivery services help restaurants succeed by helping them advertise.

"Permanent price controls eliminate our ability to offer many of these services to restaurants, because the cost to our business would become too high," GrubHub states on its website.

Restaurants could definitely use some help, says Anton of the hospitality association.

They're already cracking under the strain of leftover debt from the pandemic, not to mention the supply chain problems, and skyrocketing labor costs amid a post-pandemic worker shortage.

The restaurant industry is extremely supportive of Spokane's proposed ordinance, Anton says.

"A lot of times major corporations are the ones that get their way," he says. "This one's going to help the small mom-and-pops and local Spokane restaurants."

Zappone says major delivery services have argued to him that they already offer a 15 percent option, so the ordinance is unnecessary. But if that's true, Zappone says that a lot of restaurateurs don't know about that option.

That includes Hegsted, the owner of seven local restaurants. He says his restaurants are being charged 20 to 30 percent for the service, and if he wanted a premium placement on the service's website they'd charge him more.

Anton says the negotiations with these companies can be even more confusing for, say, restaurant owners "who are chasing a dream" but don't speak English as their first language.

Zappone says his ordinance would offer clarity — and a bit of ammunition.

"You can go to Uber and say, 'My city says I don't have to pay more than 15 percent,'" Zappone says.

Yet some local conservatives and business groups — including Greater Spokane Inc., the local chamber of commerce — oppose the measure, wary of the unintended consequences that can come from trying to force the market to behave nicely.

"A lot of times major corporations are the ones that get their way. This one's going to help the small mom-and-pops and local Spokane restaurants."

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"Like all price controls, the proposed fee cap will inevitably lead to higher fees for customers, fewer orders for restaurants, and fewer earnings opportunities for delivery drivers," says a letter Greater Spokane Inc. wrote to Zappone. "The City's price control would also permanently rewrite private contracts between delivery platforms and restaurants that unfairly favors one industry over another."

Council member Jonathan Bingle says restaurant owners' frustrations are genuine but he "can't support a price cap" any more than he would demand that restaurants provide a "$6 burger option." Bingle suggests that local restaurants band together to support a local competitor of GrubHub that offers lower prices.

Yet two local delivery startups — Treehouse Deliveries and Eagle Bites — actually support the ordinance, even though it doesn't make exceptions for their businesses.

Eagle Bites delivery startup owner Derek Baziotis, who also owns Bene's restaurant in Cheney and works for the hospitality association, says he's "a very pro open-market guy." But he sees this as more about protecting businesses than impeding them.

Treehouse owner Neil Holford says he's only charging 15 percent at the most right now, so the ordinance wouldn't hurt him.

"There's not a lot of overhead when you're running an independent shop," says Holford.

The big guys aren't trying to undercut him on cost — their power comes from their national reach and name recognition. Unlike Uber Eats or GrubHub, Holford thinks it's "unethical" to charge restaurants more.

In some cases, it doesn't matter whether a restaurant partners with big delivery services or not. The companies will deliver from the restaurants anyway, sometimes posting out-of-date menus on their website.

"They will call in an order, and say it's a to-go order," Hegsted says. "Then they give a credit card and charge the customer."

Yet restaurants get the brunt of customer anger if the order goes wrong. Zappone's ordinance would ban this kind of workaround too, requiring delivery services to actually sign an agreement before delivering on their behalf.

Yet for all the frustrations that a restaurateur like Hegsted can have with companies like DoorDash or UberEats, Hegsted readily admits they're "nice to have."

In fact, he's used them plenty of times himself.

"I am aware I'm getting charged more money," Hegsted says. "As a consumer, I still like it." ♦

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About The Author

Daniel Walters

A lifelong Spokane native, Daniel Walters was a staff reporter for the Inlander from 2009 to 2023. He reported on a wide swath of topics, including business, education, real estate development, land use, and other stories throughout North Idaho and Spokane County.His work investigated deep flaws in the Washington...