Restaurants urge Mass. legislators to cap delivery fees at 15 percent

“The model isn’t sustainable on so many fronts,” said one restaurant executive.

The delivery companies typically collect between 25 and 30 percent on orders,Blake Nissen for The Boston Globe

Restaurant owners and operators gathered outside the Massachusetts State House on Wednesday to support a bill that would cap the fees charged by third-party delivery companies.

The bill would require delivery companies, including Uber Eats, Grubhub, and DoorDash, to charge no more than a 15 percent commission on online orders. The companies typically collect between 25 and 30 percent on delivery orders, which have skyrocketed during the pandemic, becoming a majority of total sales for some restaurants.

John Schall, the owner of El Jefe’s Taqueria in Harvard Square and on Boylston Street, said his restaurant made $360,000 in delivery sales during the first eight weeks of the pandemic, but since he paid $93,000 to various delivery companies, El Jefe’s had a net loss of $18,000. He said if delivery fees had been capped at 15 percent, and even if his total orders decreased by 10 percent, he would have still made $11,000.

The delivery-fee legislation has been endorsed by the Massachusetts Restaurant Association, the Harvard Square Business Association, the Cambridge Chamber of Commerce and Dining Alliance, and other organizations. Cities including San Francisco and New York City have passed similar legislation, but the Massachusetts effort has stalled.

In early June, a bill passed in the House which included language that would cap the fees charged by delivery companies, but it was never acted on by the Senate Ways and Means Committee. On July 28, the House incorporated the delivery-fee issue into its economic development bill, but the Senate version of the bill did not include language about delivery fees. A committee has been established to resolve the differences in the two pieces of legislation.

Sean Ryan, the chief operating officer of Otto Pizza, said 45 to 50 percent of the company’s sales at a Boston location now come from third-party deliveries — whereas before the pandemic, the restaurant did not offer delivery. Although Otto Pizza is using third-party services to make up for the lack of indoor dining, it is coming at a cost, he said.

“The margins for restaurants are very thin,” he said. “The small mom-and-pops don’t even realize what is happening — the model isn’t sustainable on so many fronts."