Palm Springs restaurants claim food-delivery services are overcharging, defying city ordinance

There is no doubt that the pandemic has caused unprecedented losses when it comes to the restaurant industry. Many local businesses are holding on by a thread, while thousands of restaurant doors have permanently shuttered nationwide.

Several restaurants in Palm Springs are especially experiencing the impacts as they are only able to offer takeout and delivery under the state's current stay-at-home order.

In October, the Palm Springs City Council voted to enact an ordinance to "prevent food delivery services from overcharging customers and businesses during the COVID-19 pandemic."

The new ordinance establishes the following limitations:

• Food delivery services cannot charge more than a 15% delivery fee on the purchase price of each online order.
• No more than 5% of the purchase price can be charged to the business for any combination of service fees.
• All tips must go exclusively to the driver.
  • Example: If a customer orders a meal that is advertised at $10 on the third-party delivery service’s app, the delivery service cannot charge more than $10 for the meal. Nor can the service provider charge the restaurant more than $1.50 as a delivery fee -- or the restaurant more than 50 cents as a fee or commission for their placement on the delivery service’s app. If the customer agrees to provide the delivery person a $2 tip, that tip amount must go to the delivery person; not the third-party delivery service company.

"Let’s say you place an order for $100. Grubhub and Uber takes $30 out of every order so that’s a loss in my revenue," owner of Palm Springs restaurant Johannes, Johannes Bacher said.

Bacher said his restaurant is not meant for takeout, but at the beginning of the pandemic he decided to use services from DoorDash, Uber Eats, and Grubhub to keep his business going.

When the new ordinance went into effect, Bacher's publicist, Kathleen Bennett sprung into action.

"I jumped right on it so I’ve been working with all 3 platforms trying to get this fixed through their legal department," said Bennett.

Bennett said DoorDash honored the ordinance right away. She said Uber Eats and Grubhub, however, continue to charge the restaurant 30%.

"I get an email back from Grubhub saying, 'We’re working on it. It’s with our legal department," said Bennett.

She's been in contact with both companies multiple times over the past 2 months.

"But Uber Eats, I get these responses like, 'This doesn’t apply to you, it doesn’t apply to your city. It’s only new restaurants."

"That’s not really right because we’re all struggling and to take advantage of people when they’re struggling is just the wrong thing to do," said Bacher.

According to Palm Springs City Attorney Jeffrey Ballinger, there are no contingencies that limit which restaurants fall under the ordinance.

It turned out, Johannes was not the only restaurant experiencing higher prices.

In a statement to News Channel 3, Ballinger wrote:

Yes, the City has recently received complaints that two companies in particular are not complying with the City’s ordinance. Both Uber Eats and Postmates have been identified by local restaurants as not complying with the City’s ordinance. The City Attorney’s Office has written to both companies. Postmates has responded and indicated that is in the process of incorporating the City’s limitations into its app platform. We have yet to hear back from Uber Eats.

The City’s ordinance contains no contingencies, such as applying only to new restaurants. The ordinance applies to all restaurants following the ordinance’s adoption.

If the delivery app companies do not comply with the City’s ordinance, the City will need to consider additional actions, including enforcement through courts, fines or limits on the ability of these companies to operate within the City.

Ballinger did not see complaints specifically about Grubhub.

In the meantime, Bacher has kickstarted his own delivery service. He is encouraging customers to call and order. His employees will be sent out to deliver the orders.

News Channel 3 reached out to Postmates, Uber Eats and Grubhub for comment. Neither company has responded.