In an unexpected move, more than 20 Los Angeles restaurants, including Canter, Sichuan Impression and Sweetfin, have signed a petition opposing City Council proposals to limit the cost of third-party delivery application.
This is an attitude that is in direct opposition to many other restaurant owners, who have slammed the delivery application for gouging them with a commission fee of up to 30%. Very embarrassing, they said, when the restaurant was paralyzed by the forced closure of their dining room.
This petition comes a few weeks after Los Angeles Council Member Mitch O’Farrell propose a procedure which will set a 15% shipping fee per order during the COVID-19 pandemic; San Francisco and New York have adopted similar actions. The proposal is scheduled to be discussed at a L. City Council meeting on Wednesday.
Restaurant owners who oppose the proposal say that they worry that the commission cap will really hurt their business. That’s because, with revenues reduced from fees, shipping application companies have warned that they might be forced to compensate by cutting services, paying their drivers or increasing costs paid by visitors. In the latter case, visitors might then choose not to order, which in turn will negatively impact the restaurant.
In some cases, shipping applications may choose to leave the Los Angeles market altogether.
“I am writing today to strongly oppose any action that limits the commission agreed by the shipping network company based on my request and restaurant,” the petition said, which also included the signature of Namsan in Koreatown, El Indio Mexicano at Yorba Linda, Fat Sal’s Deli in Hollywood and Hollywood Pizza Cafe. “These companies have been saviors for customers during the COVID-19 response, and changed the system that served to increase uncertainty and concern during the time when I struggled every day for the survival of my business.”
The petition was facilitated by Postmates after “business owners reached out to us to see what they could do to support us,” a Postmates spokesman said. The petition was sent to members and officials of the Los Angeles City Council on Friday, and underlined the complicated nature of the shipping application industry: Restaurant owners feel benefited, visitors complain about the price of delivery being too high and the application company believes they too are barely make money.
Canter Deli’s owner, Marc Canter said he did not see how it was possible to lower costs without money out of other people’s pockets, and expressed concern about the government involved in how companies determine their prices.
“Of course everyone wants a discount, but how?” she says. “Where will they get the money that provides their platform and recruit drivers? This will be the same thing as the government telling Ford Motors that they should start producing cars and produce all $ 3,000 cars from now on. “
Canter said he would only support tariff limits during the pandemic if the government added differences to the shipping application companies. He suggested that the application should track if customers were referred to the application through the restaurant’s website and reduce costs on that occasion.
Sichuan Impression co-owner Kelly Xiao is worried that shipping drivers will see their wages cut, or fewer orders taken, if costs are limited to 15%.
“A 15% fee will definitely help restaurants during this difficult time, but I don’t know how much it costs and profit margins for this shipping application company,” he said. “I appreciate that they offered many job opportunities recently to people who lost their jobs.”
If the tariff limit is approved, Postmates, the most popular third-party booking application in town according to the Second Share data collection site, hinting that it might stop offering delivery as well as many other restaurant services it provides, including data analysis and marketing.
“We have to turn off the ability to even partner with these restaurants,” said Vikrum Aiyer, company vice president for public policy and strategic communication.
Postmates, who negotiate individual costs with restaurants, have more than 35,000 Los Angeles businesses on their platforms and pay show workers $ 30 per hour, according to Aiyer. That brings reported income of $ 400 million in 2018. Aiyer declined to comment on the profit margins of the San Francisco company.
“In 2019 we facilitate sales on behalf of local businesses of around $ 500 million, and one third of that is used to pay workers,” Aiyer said. “Costs must be recovered somewhere. Customer costs can go up or workers’ wages can be cut. “
Timesha Philips, who owns the Phatdaddy burger restaurant in South L.A., has an exclusive shipping contract with Postmates. Last week he reported $ 1,289 in sales and paid Postmates $ 315, a commission fee of nearly 25%. However, Philips signed the petition.
“Lowering the commission will help me, but I have become a small business and I don’t have enough income to be able to contract my own shipping people,” he said. “I get so many orders from applications, especially during COVID-19. If I don’t have a shipping platform to be able to offer my product, I might not even be able to be in business. “
Postmates proposed “restaurant resilience funds” as an alternative to the 15% cost limit. This will require a transaction fee which will be a fixed fee or a percentage on each transaction. The city will decide on a fixed bill amount or percentage, and determine whether the customer or shipping application will be responsible for paying it.
“In our vision, that is what will stick with the customer side,” Aiyer said.
The money from the fee will then be given to the restaurant, although Aiyer does not specify how. Postmates also proposed a model that would allow cities to prioritize certain geographical areas over others when distributing money based on needs. Aiyer said he had held talks with the mayor of West Hollywood regarding the proposal.
“I will support this if there is a real system for determining who needs funds and who does not need funds,” said Sweetfin founder Seth Cohen. “If there is an option for customers to spend an additional 2.5% or 3%, that’s really a negligible amount.”
The poke bowl chain, which also has an exclusive shipping contract with Postmates, has 10 locations in Southern California. Cohen believes the cost of hiring and managing his own shipping fleet will be the same, if not more, expensive than using a third-party application.
Xiao said there are other ways the application can help restaurants.
“They can improve delivery speed, service quality and system security,” he said.
Georgette Powell, who owns Fish Shack Mel at West Adams, recently saw orders soaring at her restaurant. He offered to send through several applications including Uber Eats, Postmates and DoorDash and sent a separate letter to Board Member Herb Wesson on May 5 opposing the cost limit.
“We pay a fair rate to those who keep us alive during these difficult times,” he said. “In 38 years of operations we do not need or request such government intervention.”