In relief for restaurants, Minneapolis caps delivery app fees at 15%

Third-party delivery apps can't charge Minneapolis restaurants more than 15% commission on orders thanks to an emergency regulation signed Monday by Mayor Jacob Frey.

The cap on fees will help restaurants that have turned to takeout and delivery to survive while Minnesota dining rooms remain closed because of the coronavirus. The regulation goes into effect Wednesday.

"Our restaurants have stepped up to continue serving their communities while safeguarding the health of their employees and customers," Frey said in a statement. "We need to provide every ounce of available support to them. Our restaurants are cultural institutions throughout Minneapolis, and this is urgently needed relief at a critical time."

While restaurants increasingly rely on apps to facilitate ordering and delivery, such as GrubHub and Postmates, fees to use those platforms have become a sticking point. Some restaurants have paid the services up to 40% of a purchase. But avoiding the apps means missing out on business. And taking delivery in-house isn't an option for many of the restaurants, which are operating with skeleton crews.

Delivery accounts for 70% of sales at Pho Mai in Dinkytown, which is on several apps.

"Do we like it? No. But without it I wouldn't be able to pay my rent," said owner Michael Bui.

Bui hands over up to 30% of each order to the apps, sometimes more when he runs a promotion, such as free delivery for new customers. (Under the new regulation, restaurants can agree to pay the platforms more for add-ons such as advertising.)

"I'm fortunate to make enough not to lose money, but at the same time, we didn't open a restaurant to break even," Bui said.

Before the pandemic, Craft & Crew restaurants, which owns the Howe Daily Kitchen & Bar and Stanley's Northeast Bar Room in Minneapolis, used the apps sparingly. Now, they're a large part of the business, said Luke Derheim, Craft & Crew's director of operations.

"It's unbelievable the amount of fees that they charge, and the lack of service, in our opinion, for what the customer receives," said Derheim, who is "thrilled" with the new regulation.

Customers will see a more detailed receipt with every order that breaks down exactly where their fees are going and how gratuities are distributed between the restaurant and the delivery driver. (Drivers' compensation and gratuities cannot be reduced to make up the difference in commission for the apps.)

Minneapolis is the first Minnesota city to place a cap on delivery fees. Restaurant owners in other cities say they want to see the same thing happen there.

Beth Judeh, who owns Shish and Grand Catch in St. Paul, says she and other business owners have been appealing to Mayor Melvin Carter for relief from the fees that have sapped all profit from online orders.

"The impact is huge," she said.