A committee of East Lansing’s Downtown Development Authority discussed on Wednesday the possibility of an ordinance to cap fees by third-party food delivery services as a possible measure to aid struggling local eateries.
In discussing the steep fees assessed on businesses by companies like DoorDash, Grubhub and Uber Eats, DDA member Greg Ballein offered the suggestion of capping fees at 15 percent. It’s a measure other cities have taken in response to the COVID-19 pandemic, he said, as restaurants are getting much of their revenue via deliveries.
Those in attendance at the DDA Public Policy and Market Development Committee meeting agreed that capping fees would be an effective way to reign in these services and protect local businesses.
Mike Krueger, a DDA member and owner of Crunchy’s, suggested the City seek to get Lansing, Meridian Township, and other local governments to consider a similar rule. His fear was that the new cap could cause the services to abandon East Lansing businesses entirely, giving a market advantage to nearby places in neighboring towns.
Heather Pope, economic development specialist for the City, said she would reach out to other localities and confer with City Attorney Tom Yeadon to create a draft ordinance.
Pope also noted that the City has set up six “contactless pick-up” parking spots in the Bailey parking lot for nearby restaurants, as a sort of pilot program to promote direct interaction between customers and businesses – cutting out the delivery services.
This month the City is offering a 30-minute grace period in all gated lots and garages, so there would be no parking fee to dip in, do a pick-up, and leave within 30 minutes.
Since the pandemic public health measures have kicked in, “We became a lot more reliant on delivery to bring in revenue,” DDA member and Crunchy’s owner Mike Krueger confirmed during the meeting.
With Uber Eats, Krueger says he has to hand over 30 percent on every order. So, if someone places an order for $100 worth of food, he said, that money would go to the delivery service, and Crunchy’s would get only $70 from the service.
DDA member Luke Hackney asked Krueger if there are fees tacked on top for the customer to pay, too.
Krueger said yes, and cited his personal example of an order of about $30 of Thai food that, once all the fees and his tip had been factored in, came to nearly $60.
“That’s going to gut them,” Hackney said of the large fees on restaurants.
City Council member Mark Meadows, a member of this committee, asked Krueger if he could raise prices on his food and effectively pass fees on to the customer.
Krueger said he cannot with Uber Eats, but when using a new point of sale (POS) management system called Toast that partners with DoorDash, customers order directly from the Crunchy’s website.
With each order, Crunchy’s is charged with a $7.50 fee, but Krueger has the option to shift that fee into the customers’ cost in part or entirely.
“The other [services] are just gouging,” Krueger said.
Ballein added near the end of the discussion that he believes eventually state laws will regulate these businesses. But with more pressing matters at the state level, he felt the onus was on the City to move expediently to protect local businesses now.
Capping the discussion was Reuben Levinsohn, a new member of the DDA and a partner and financial advisor at Washington Avenue Advisors in Lansing. He said he’s working with an emerging business run by students at Michigan State University that’s aimed at dealing with this precise issue. And they’re getting ready to beta test it soon, he said.