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File Number: 20-337 <br />different factors, including the service package that the business signed, whether the order is placed on <br />the delivery company or individual business’ website, whether delivery or pick up is selected, the <br />distance of delivery, and whether the restaurant is receiving additional promotion or services. Total fees <br />paid by restaurants typically range from 20%-30%. <br />Fees that companies charge restaurants typically include: <br />- Service Fee - average 15% <br />o Sometimes called a marketing or commission fee, this is the fee that the delivery <br />company charges for the service of the transaction. This is typically a percentage of the <br />sale, which is utilized to cover the company’s direct costs, overhead, and profit. If a <br />restaurant selects a package with additional marketing or data sharing, their fee will be <br />higher. <br />- Delivery Fee - average 10% <br />o Both the restaurant and customer pay a delivery fee to go toward drivers’ wages; these <br />vary based on delivery length and order size. <br />- Credit Card Fee - average 3% <br />o Fee to cover credit card company’s processing fee and delivery company’s fraud/loss <br />protection <br />Fees that customers pay include taxes and delivery fees, as well as optional gratuity. <br />ANALYSIS <br />In response to the high service fees and resulting impact on local restaurants, cities in California and <br />the United States have put limits on the fees that food delivery companies may charge in an effort to <br />ease the burden on restaurants and other food businesses. <br />The City Attorney reviewed the matter and determined that the City, during the local emergency <br />because of the novel coronavirus pandemic, may place a temporary limit on the fees charged by <br />third-party food delivery companies. Under California Government Code Section 8634 and San Leandro <br />Municipal Code Section 3-4-130(a), the City Manager, acting as Director of Emergency Services, is <br />empowered upon the proclamation of a local emergency to make and issue rules and regulations on <br />matters reasonably related to the protection of life and property affected by such emergency. <br />Clearly, San Leandro residents who are currently in the specific risk groups (persons 65 years of age or <br />older, immunocompromised, or who have specific health risks such as respiratory disease, asthma, or <br />heart conditions) will most likely in the future rely upon food delivery, not to mention those who care for <br />such individuals, or do not want to contract the virus. Therefore, based on the City Manager’s broad <br />authority during a local emergency, the precedence set by other jurisdictions, the baseless threats of <br />litigation from the food delivery app industry, and San Leandro’s market size, the threat of legal <br />challenge to such a policy is low. However, based on staff conversations with the food delivery app <br />businesses, if such a fee extended into when public health orders removed prohibitions on indoor <br />dining, legal risks would increase. There is an obvious balance of such risks against continuing harm to <br />local businesses wrought by high fees. <br />City and San Leandro Chamber of Commerce staff have reached out to restaurant and other food <br />businesses to gain feedback on their experience with food delivery companies and their fees. The <br />businesses find that the delivery company fees are onerous and make it hard for them to make a profit. <br />However, they also find that the delivery service is valuable and are generally not considering cancelling. <br />Many find the delivery companies to be a necessary part of doing business and keeping their business <br />alive during the shelter-in-place. Some also noted that they understand that part of what they are paying <br />for is the marketing of their businesses and keeping customers ordering, with the hope that delivery <br />Page 2 City of San Leandro Printed on 7/15/2020 <br />357