Colorado lawmakers pass bill to let counties cap food delivery fees

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DENVER — A bill that allows local governments to place caps on food delivery services like DoorDash and GrubHub passed in a special session of the Colorado state legislature.

The bill comes as restaurants in areas across the state have had to close down their indoor dining as case numbers from the novel coronavirus continue to climb.

For Three Margaritas in Westminster, the switch from indoor dining to takeout and delivery has been a saving grace during a difficult financial time.

These days about 40% of the restaurant’s business is coming from delivery.

“We have to pivot and shift and make changes to think more like a fast food restaurant,” said Adrian Gutierrez, the general manager.

For restaurants, adding a delivery option of their own can be challenging; they have to figure out who will drive, how the logistics should work, how liability works if there is a car accident, etc.

Because of that, many restaurants are turning to established services, like GrubHub and DoorDash, to do the deliveries for them. However, those services come with a cost that can sometimes be too much for the restaurants to bear.

“They charge way too high of a commission fee; they charge from 20 to 25 to sometimes 30%,” Gutierrez said.

Some cities like Denver have passed ordinances to cap these delivery fees during the pandemic. They are able to do so because they are considered home rule cities

Other statutory towns and counties cannot pass an ordinance of this nature without explicit approval from the state.

“If you are home rule, you already have the authority to pass this kind of limitation. But, if you’re a county, counties only have authority given to them by the state expressly,” said Rep. Shannon Bird, a Democrat who represents Adams County.

Under House Bill 20-1005, all Colorado counties and municipalities are allowed to pass an ordinance to limit the amount of fees third-party food delivery services impose on retail food establishments under certain circumstances.

“With dining restrictions, one of their only meaningful ways to access the public and sell their food was to use delivery companies,” Rep. Bird said. “Our bill imposed no caps. We mandated nothing. All we did was give local governments a tool in their tool chest.”

The ordinance is only allowed during a declared public health disaster emergency, excludes fees related to credit card processing and can only happen when indoor dining is limited to 50% or less. The bill also specifies that third-party food delivery services cannot dock the compensation rates for their drivers or withhold tips to restaurant or driver to offset revenue reductions. It also immunizes counties or municipalities who impose these restrictions from liability for economic damage suffered as a result of the ordinance.

Rep. Bird said some of the big delivery services actually collaborated with her on the bill.

“This was one easy way that we could lift up small businesses in a way that didn’t cost anybody any money,” Rep. Bird said.

However, the bill did receive some pushback from Republicans who questioned whether it was the government’s place to intervene.

“I think we always have to be cautious if we’re trying to set a fee and have a government imposing itself in a private transaction,” said Rep. Hugh McKean, a Republican who represents Larimer County. “’Is it government’s responsibility?’ is the first question you should ask and a lot of us don’t believe it’s the government’s responsibility to step in between two private parties that are negotiating an agreement.”

Nevertheless, the bill passed and is awaiting the governor’s signature. Once it’s signed, it will be up to localities to debate and pass their own resolutions or ordinances before restaurants see any relief.

For now, while it still relies on DoorDash for some of its deliveries, Three Margaritas has worked through the logistical challenges of setting up its own delivery service and is now offering it through the restaurant’s website.

“At this point, anything helps. I mean, we’re all scrambling to do as much as possible to bring in revenue,” Gutierrez said.

Creating their own delivery system has allowed the restaurant to keep more employees on the payroll and has allowed the tips to go directly to their waitstaff.

Like many restaurants, Three Margaritas is just trying to adapt to the challenges the pandemic has presented, hoping to keep their doors open, their employees paid and their margaritas cold.