In hope of reining in food delivery services and prevent price gouging, the city of Seattle on Friday imposed a 15% cap on commissions that third-party, app-based services can charge to deliver food and drinks around town.

The emergency order is effective immediately and will remain until the state allows dine-in service again, the mayor’s office said Friday evening.

“Unfortunately, some third-party delivery services are charging exorbitant commission fees, which exacerbates the financial hardship many restaurants are already experiencing,” Mayor Jenny Durkan said in a news release. “This commission cap will be critical to ensuring that delivery and takeout remain viable options and don’t cause increased financial hardship.”

UPDATING: Seattle-area restaurants offering takeout and/or delivery during the coronavirus pandemic

To help stop the spread of the coronavirus pandemic, Gov. Jay Inslee last month ordered all restaurants to shut their dining rooms. Many restaurants pivoted to takeout and delivery, relying on multiple app-based services such as GrubHub, UberEats, DoorDash and Postmates to handle their  orders. But weeks into the experiment, restaurateurs complained that many of these unregulated app-based services were reportedly charging up to 30% on commission for each transaction.

“Because so many of these platforms charge such high fees, we have started to handle all takeout and delivery orders in-house,” Kamala Saxton, co-owner of Marination and Super Six, said in the news release. “But this commission cap will allow us to transition to a third-party delivery service without facing further financial stressors.”

In the Chinatown-International District, Hood Famous Cafe + Bar owners Geo Quibuyen and Chera Amlag started delivering their own baked goods instead of relying on app-based delivery services because they couldn’t make a profit when delivery services mandated a 30% commission fee for each transaction, Quibuyen said.

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To make the delivery app services work from a financial standpoint, Quibuyen estimates he would have had to raise a cheesecake order from $25 to at least $30.  Even then, the couple worried the price hike would reduce sales, or worse, the public might accuse them of price gouging.

“Thirty percent was a deal breaker. We are not giving up 30% of revenue. But 15%, we will crunch some numbers to see if this will work for us,” he said.

It’s a problem restaurants in many cities are facing as they try to get food to customers while their dining rooms stay shut. Earlier this month, San Francisco also capped food delivery service app commissions at 15%. New York and Chicago are both considering similar measures.

Under the new emergency order, any third party that charges more than 15% on commission to Seattle restaurants faces a “misdemeanor offense.” The mandate also requires that 100% of tips go the driver.

“With tight margins, every dollar paid to an app-based delivery service is a dollar taken from our local restaurants, economy and workforce. We know some of these corporations are imposing inflated fees and profiting from this crisis on the backs of our main street. We cannot allow that to happen. This Emergency Order will provide much needed relief and establish a system that is more fair and equitable to our restaurants,” Council President M. Lorena González said.

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