Mayor Lightfoot, BACP Announce New Rules For Third-Party Food Delivery Apps

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By WBBM Newsradio 780 AM & 105.9 FM

CHICAGO (WBBM NEWSRADIO) -- Mayor Lightfoot and the Department of Business Affairs and Consumer Protection (BACP) announced Tuesday the first-in-the-nation rules for third-party food delivery companies to increase transparency and fair competition.

Starting Friday, May 22, all third-party delivery companies will be required to disclose to the customer an itemized cost breakdown of each transaction, including the menu price of the food, any sales or other tax, delivery charge and tip, and any commission or service fee paid by the restaurant to the third-party delivery company.

The vast majority of third-party delivery companies charge a commission fee to the restaurant from which food is being delivered, Lightfoot's office said in a statement. Since this fee is not currently transparent when an individual is purchasing food, customers may believe that the restaurant is receiving the full menu price of the food.

The cost information must be disclosed both before a customer places an order, as well as via receipt after the purchase.

“If a delivery service is taking what some have alleged is an inordinate amount of the fee, making it difficult for restaurants to be able to earn what are already tight margins, the average consumer wants to know that and is gonna act accordingly on the basis of that information,” Lightfoot said.

This requirement will be in place permanently and will apply to all websites, phone apps and other internet services that offer or arrange the sale of food or beverages by a restaurant, bar or other food-serving establishments.

Violations of these rules can result in a daily fine ranging from $500 to $10,000.

"Amid the COVID-19 crisis, our restaurants are relying on third-party delivery services more than ever so that they can keep their doors open and stay afloat," Lightfoot said in a statement. “By providing customers with more transparency when they use these delivery services, we can further ensure not only fair business practices for our restaurants but also maintain the innovation that is essential to this industry."

Chicago-based Grubhub charges business owners several fees for its services, including a 20 percent marketing commission, 10 percent delivery commission and a 3.05 percent processing fee, according to its website.

Last month, WBBM Newsradio reported Ald. Scott Waguespack was proposing an ordinance that would limit the fees charged to restaurants by food delivery companies to five percent; rather than the 25 to 30 percent that companies are charging restaurants now - that's for the percentage of the order.

The ordinance is similar to what was done in San Francisco, although there the fees are capped at 15 percent and it was done through an emergency order issued by San Francisco Mayor London Breed. New York was considering a similar cap before the stay-at-home order, which has a lot more people ordering through these services.

The Chicago proposal would require that all delivery fees go to the drivers and would fine companies up to $3,000 for noncompliance. Restaurants have long complained the fees charged by GrubHub and others are too high.