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ST. LOUIS PARK, Minn. (WCCO) — A policy proposed at the Minnesota state capitol would cap fees imposed by third-party delivery services to 15% — a move praised by the hospitality industry but dismissed by tech companies as an economically unviable solution to the problem.
The bill backed by DFL lawmakers was approved in a Minnesota House committee on Wednesday. It’s framed as a way to provide more relief to bars and restaurants during a pandemic that has hit their businesses especially hard. Restaurants have been at times forced to close and customers have chosen to stay home.
The proposed 15% cap would expire 60-days after the peacetime emergency ends. Similar limits are already in place at a local level in the cities of Minneapolis, St. Paul and Edina.
“The current picture in our state is desperate,” Ben Wogsland, director of government relations for Hospitality Minnesota, told the committee, citing a Federal Reserve Bank of Minneapolis survey that found nearly half of restaurants indicated that without further help, they would face financial collapse in the first quarter of 2021.
Wogsland called the fees levied by third-party delivery apps like Grubhub, DoorDash and Uber Eats “excessive.” The fees can be upwards of 30% of an order, he said, which hampers the ability of restaurants to actual make money off of to-go orders.
For The Block in St. Louis Park and its partner restaurants owned by Craft & Crew Hospitality, delivery sales have increased ten-fold since the pandemic began to about 30-40% of all business, said Luke Derheim, co-owner.
His restaurants use every delivery on the market and he said the fees are “all over the place.” He welcomed the idea to cap those fees for consistency and because it will boost profit margins.
“It’s almost every single time we sent out a meal on a third party delivery system that they are making more money in the transaction than we are,” he said in an interview at The Block on Friday.
But the bill is drawing opposition from tech companies who say the move is government overreach and not an economically viable solution to the problems restaurants face.
They also told the committee it would steer drivers away and as a result, diminish delivery access.
“I just think that what we’re trying to do here will have an opposite effect. And it isn’t that we aren’t sympathetic. We all understand it,” said Joel Carlson, who represents Uber Eats. “But delivery fees didn’t cause this pain—the pandemic causes pain.”
Bill sponsors said the proposal only deals with “back-end” fees not “front-end” costs. That means if the proposal became law, there might be additional charges on a customer’s bill.
For example, if someone orders from a restaurant in Minneapolis—where a fee cap already exists—there is a “regulatory response fee” of $1.50 on DoorDash because of the city order. There’s a similar “temporary local fee” on Uber Eats.
The app says the additional cost is necessary “to continue to offer convenient delivery” ensuring drivers are “active and earning.”
The bill is now moving to another House committee for review. Its fate is unclear in the GOP-controlled Senate. Republican House members voted against advancing it during this week’s hearing.
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