County Issues Warning About Third-Party Apps' Delivery Fees

ROCKVILLE, MD — As more diners stay home and order takeout during COVID-19, Montgomery County officials are warning residents and restaurant owners about the hefty fees charged by third-party food delivery services.

Montgomery County Office of Consumer Protection issued a press release on Tuesday, encouraging consumers to order directly from restaurants, instead of companies like Grubhub, Uber Eats, and DoorDash.

Citing a recent report from Washington Consumers' Checkbook, county officials said leading delivery apps typically charge restaurants between 20 and 40 percent to ferry food to a customer's home, even if the customer didn't pay a delivery fee.

"Our restaurants and food establishments have been hit hard by the COVID-19 pandemic," said County Executive Marc Elrich. "Many residents have been eager to support their local restaurants by getting takeout and delivery. I don't think they realize how much some of these delivery services charge the restaurants, and I think that this is an important step — to let customers know that the restaurants may be paying way too much to these companies."

Many restaurants, especially during the public health crisis, rely on these types of food delivery companies for customers. Restaurant owners and government leaders alike have long criticized these apps for charging as much as they do for delivery, saying they take a huge bite out of every order's profits.

"If you're a small mom-and-pop restaurant and you depend on apps, that's now 20 to 30 percent of 80 percent of your business," said the manager of one Chicago-area restaurant who spoke to Checkbook on the condition of anonymity.

Despite paying high fees, many restaurants continue to partner with these apps because that's the only way they can offer delivery.

"Small restaurants may feel forced to pay steep fees and commissions in order to stay in business," said Eric Friedman, director of Montgomery County's Office of Consumer Protection. "Full disclosure is essential to ensure integrity in the marketplace."

Three big companies dominate the online food delivery industry after consolidating their market shares by buying up rivals: DoorDash acquired Caviar; Uber Eats, after unsuccessfully trying to buy Grubhub, is now acquiring Postmates; and Grubhub merged with Seamless.

Checkbook's executive editor, Kevin Brasler, said he was surprised that the three largest online-ordering companies can demand charge so much for delivery.

"These businesses do little work, acting as mere booking agents for restaurants," he said. "Consumers need to know that huge portions of their orders are going to well-financed Internet giants, not to the restaurants that pay workers' salaries and for ingredients, rent, utilities, taxes, licensing, and other costs. I think that if most consumers were aware so much of their money were going to these apps, they wouldn't use them."