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To Help Restaurants' Bottom Lines, City Council Passes Bill To Limit Third-Party Delivery Fees

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The Baltimore City Council unanimously passed a bill Monday night that halves the service fees third-party delivery apps like GrubHub can charge restaurants, hoping to aid businesses that have stayed afloat on takeout orders during the pandemic.

Mayor Brandon Scott has said he will sign the bill into law; it will go into effect immediately.

Third-party delivery companies typically charge restaurants about a third of an order’s cost to deliver it to a customer’s door. The bill caps those fees at 15%.  

Restaurants have relied on takeout orders throughout the pandemic, as customers stay home and regulations on dine-in services shift according to COVID-19 trends. City restaurants were able to reopen for dine-in services last week, a month after Scott barred indoor and outdoor dining. Those services are limited: indoor dining is capped at 25% capacity, while outdoor dining is capped at 50% capacity. 

The bill also aims to prevent delivery companies from passing the fees to customers and gig workers. It forbids companies from charging customers prices higher than those listed by  restaurants and bans the garnishing of drivers’ tips.

Lawmakers enacted a special rule to pass the legislation, introduced by Councilman Eric Costello, through both second and third readers Monday night. It is the first bill to pass out of the all-Democratic council under the leadership of Council President Nick Mosby.  

The legislation is temporary and would expire 90 days after Gov. Hogan’s state of emergency order is lifted. 

Suraj Bhatt, the owner of the Remington eatery Sweet 27, resisted listing his restaurant on third-party delivery apps in the early days of the pandemic. 

“But soon I realized, just like many other businesses, if you don't do that, you will be done for,” he said. “Nobody wanted to walk inside the restaurant, even for takeout.” 

Bhatt said he’s grateful that third-party delivery apps create jobs and allow his restaurant to serve more customers  — his business would be “dead in the water” otherwise, even after receiving financial aid from the federal and state governments.

“But I think the commission is way too high,” he said.

The restaurant’s weekly GrubHub orders amount to about $2,500, making the delivery company’s cut, which he says is 35%, about $875. Halving that cut, Bhatt said, would allow him to hire another person or expand his menu.

“This is going to help restaurants,” Bhatt said. “Not only that, it will also help customers, because I know that small businessmen like me have had no other option than raising prices in order to make the 35% cut.”

Delivery companies have vehemently decried the fee cap, which has appeared in cities across the country, including Washington, D.C. and San Francisco. 

Michele Blackwell, a spokeswoman for Uber, said the company’s UberEats delivery service drives demand for independent local restaurants.

“Regulating the commissions that fund our marketplace forces us to radically alter the way we do business and ultimately hurt those that we’re trying to help the most: customers, small businesses and delivery people,” she said.

The city’s law department has maintained that the cap is within the authority of the City Council.  The bill is “necessary to protect the health, safety and welfare of the city,” chief solicitor Elena DiPietro wrote in an opinion. 

During the meeting, Councilman Robert Stokes, the chair of the Education and Youth Committee requested a hearing on the city’s plan to return to in-person schooling. Question. 

Last week, Gov. Larry Hogan called on schools statewide to reopen by March 1. The city system is planning a mid-February reopening for students in kindergarten through second grade. The Baltimore Teachers Union has argued to delay reopening until all teachers have been fully vaccinated.

“The idea of this hearing is to give the teachers a platform so we can hear their concerns about returning to in-person school,” Stokes said. “We have to have this dialogue so we can let the teachers know that we support them wholeheartedly about their cautions.”

The hearing will call for Baltimore City Schools CEO Sonja Santelises to answer questions about safety precautions and vaccines. Representatives from the Baltimore City Fire Department, Health Department, and Department of Housing and Community Development will be invited to comment on the adequacy of those plans.