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Los Angeles Aims to Cap Restaurant Delivery Apps' Service Fees

Currently, some restaurants are being charged up to 30% or more for each order, and customers must pay their own service charges, O'Farrell said.

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The Los Angeles City Council Wednesday directed the city attorney to draft an ordinance that would limit delivery service apps from charging restaurants more than 15% of a total order.

"... The pandemic has laid bare the vulnerabilities of restaurants having to rely on delivery app services,'' Councilman Mitch O'Farrell said.

"Restaurants went from having a fraction of their sales for delivery to between 70% and 90% of their current sales per delivery, making them even more reliant on the services and completely at the mercy of these third party delivery apps."

Currently, some restaurants are being charged up to 30% or more for each order, and customers must pay their own service charges, O'Farrell said.

Other fees for services in addition to delivery, per O'Farrell's motion, would be capped at 5%. O'Farrell's proposal would also require all tips from customers be given to the drivers.

Councilman Bob Blumenfield said he agreed with the 15% cap but that certain restaurants could be exempt from it. Gowever the council rejected his proposal to limit the cap to restaurant chains with five or fewer locations.

"I just don't know and I question whether we need to have the cap for the larger (restaurant chains)," Blumenfield said.

O'Farrell said he would be willing to discuss different restaurant fees in the future, but for now, the eateries that are dependent on delivery service must be served.

"So what I'd like to do really is approve the instructions for an emergency ordinance as amended today, and then we can talk about all the other things that are unrelated to the pandemic,'' O'Farrell said. "As I mentioned before, the price gouging of the delivery apps is nothing new. It just became a reality apparent during the pandemic."

The City Attorney's Office will draft the ordinance for future consideration by the City Council.

Copyright CNS - City News Service
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