California Bill Requiring Food Delivery Fee Transparency Awaits Governor’s Approval

In California, a bill that would require third-party delivery services such as DoorDash and Uber Eats to show consumers an itemized breakdown of costs and fees, is heading to the desk of Governor Gavin Newsom for approval. The bill was approved by the California State Assembly on Wednesday (Sept. 1) following approval in the State Senate in August.

“We’ve seen reports of restaurant owners losing money on food delivery app orders because of hidden fees from companies like DoorDash, Uber Eats and Grubhub,” Assemblywoman Lorena Gonzalez, who introduced the bill, commented. “AB 286 is about providing much-needed transparency so restaurants and customers know exactly what they’re being charged upfront, and gives restaurant owners the choice to share with their customers how much from the transaction is actually going to their business.”

The Consumers’ Perspective

Consumers are willing to pay extra fees for delivery services, but only to a point. A 2019 US Foods survey of over 1,500 American consumers found that the average amount consumers are willing to pay for the delivery fee, service fee and tip combined is $8.50, with 35% of consumers unwilling to pay more than $5 and 28% of consumers willing to pay above $10.

Of course, since 2019, delivery has become a larger part of many consumers’ lives. PYMNTS census-balanced survey of over 5,000 U.S. consumers published in the report, The Bring-It-To-Me Economy: How Online Marketplaces And Aggregators Drive Omnichannel Commerce, created in collaboration with Carat by Fiserv, found that 46% are now ordering from third-party aggregators more often than they were at the start of the pandemic. The more they order, the more those fees add up, and the less willing consumers may be to pay those extra costs.

See also: Bring-It-To-Me Economy Ascends as Consumers Embrace Home-Centric Lifestyles

The Restaurants’ Perspective

Data from PYMNTS’ 2021 Restaurant Readiness Index found that aggregators now generate 16% of the average restaurant’s revenue — more than in-restaurant, pickup, mobile order-ahead, outdoor dining, delivery through the restaurant’s own platform or phoned-in delivery orders. Itemizing fees can help restaurants make it clear to consumers how much of the sale is supporting the establishment.

Read more: Average Quick-Service Restaurant Now Takes up to 75% of Orders Remotely

The Delivery Services’ Perspective

Geoff Vetter, spokesperson for the Protect App-Based Drivers & Services Coalition, a coalition that includes participation from Uber, Lyft, DoorDash and Instacart, commented: “AB 286 is a poor effort to harm the app-based delivery industry, creating redundant requirements and seeking to disclose the terms of private business-to-business contracts. This bill will not improve transparency, does not benefit consumers and has no support from any segment of the industry.”