Chicago Now Requires Food Delivery Apps to Disclose Every Single Fee to Users

With dining rooms still closed in most states, many of us are lamenting the sky-high fees of delivery apps—and they aren't helping restaurants, either.
May 14, 2020, 12:22pm
food delivery apps
Photo: Getty Images

A couple of weeks ago, a Chicago-area pizzaiolo and food truck owner posted a truly terrifying photo on Facebook: a screenshot of a local restaurant's itemized monthly statement from Grubhub. "Stop believing you are supporting your community by ordering from a third party delivery company," Giuseppe Badalamenti wrote. "Out of almost $1,100 of orders, Your Restaurant you are trying to support receives not even $400."

Yeah, his math was right. According to the statement, the unnamed restaurant—one that had hired Badalamenti as a consultant—had 46 orders through Grubhub during the month of March. The prepaid total for the orders was $1,042.63, but after the delivery service deducted two different kinds of commissions, its processing fees, promotional fees, and adjustments on seven of those orders, it only paid the restaurant $376.54.

After Badalamenti's post made its way around the internet, and collected several hundred angry-reacts on Facebook, Grubhub released a statement suggesting that the restaurant owner shouldn't have been surprised by some of those 'promotion' charges, because they were for services he or she had signed up for. "Restaurant owners select the services they want and only pay a commission to Grubhub when we help generate sales," the company told the Chicago Tribune. "Grubhub is happy to work with restaurant partners to help them manage costs and grow their business.”

In an earnings call last week, Grubhub CEO Matt Maloney said that some of the social media posts about the company's assorted fees and charges are "frustrating" and "inaccurate," and that the company was barely eking out a 1.5-percent profit on orders that have been placed during the coronavirus pandemic. "We are bending over backward, deferring revenue, giving profitability,” he said. “We are doing everything we can imagine to help restaurants.”

But Chicago Mayor Lori Lightfoot and the city's Department of Business Affairs and Consumer Protection seem to disagree. On Tuesday, they announced some new rules for all third-party delivery apps and, going forward, the city wants these companies to be more transparent with their customers about commission and delivery fees, and what percentage of a meal's cost is actually going back to the restaurant that prepared it.

"A material factor in the decision-making process for many consumers is the desire to support local businesses, or 'Shop Local,' an interest that is heightened amidst the current COVID-19 pandemic, which has forced restaurants to cease in-house dining operations and thereby imperils their existence," the officials wrote. "Given the choice between carry-out, delivery by the restaurant, or delivery by a third-party, the consumer may wish to choose the method that maximizes the amount of the consumer’s money that is retained by the local restaurant."

Starting on Friday, all of the third-party delivery services that operate in the city must provide customers with an itemized breakdown for every transaction, one that includes the menu price of the food being ordered; any sales tax or other tax that will be added; all delivery charges or service fees; the tip amount that will go to the delivery person; and any commission fee that is paid by the restaurant. The customer is to be presented with all of this information both before they make a transaction through the app, and on the receipt they receive afterwards.

According to the Chicago Sun Times, these first-of-their kind requirements could be permanent, and any third-party delivery service that fails to comply could be fined between $500 and $10,000 per day.

It's not a surprise to learn that the delivery services aren't exactly thrilled about this. "We support policy and legislation that help restaurants serve their communities, and a path to reopening these businesses must be the focus," a Grubhub spokesperson told VICE in a statement. "These arbitrary disclosure rules, however, will do exactly the opposite of their intent by causing confusion to consumers. These efforts by policymakers risk discouraging people from enjoying restaurant meals safely at home and hurt our efforts to support restaurants."

But if the new rules also prevent terrifying (and supposedly "inaccurate") Facebook posts like Giuseppe Badalamenti's, then it's hard to see that transparency as a bad thing.

This article originally appeared on VICE US.