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Hawaiian Gardens Passes Ordinance Limiting Delivery Service Price Gouging



Major delivery platforms such as Grubhub, DoorDash, Postmates and Uber Eats are refusing to give restaurants a break. Some restaurateurs are calling this refusal, predatory behavior.

An urgency ordinance was submitted to Hawaiian Gardens City Council January 26, prohibiting price gouging from third party delivery services.

More specifically this ordinance will limit the overage amount and put a cap on what third party delivery service can charge to local restaurants in terms of percentages of the total bill. How third party delivery services work is that they charge a percentage fee for delivery and another percentage fee for order pick up. For example Uber Eats notes on its website that a 30 percent charge is added for delivery and a 15 percent fee for pick up.

With delivery food service being the sole lifeline for many restaurants, chefs and owners have had to lay off their staffs, liquidate their inventories and figure out how to operate on a delivery-only mode, if they want any chance to survive this pandemic.

One such restaurant that serves middle eastern cuisine and requested to remain anonymous, says that he is required to pay a 25 percent commission fee per order to a specific delivery company and that the charge him an additional 10 percent per order to deliver the food.

A 30 percent commission average is steep even during ‘normal’ times, but given the pandemic situation the restaurant industry is finding itself in painful circumstances. According to Uber Eats website, they now charge each new restaurant a $350 activation fee.

City Council proposed that any third party delivery service can only charge 15 percent to any restaurant within the city. This proposed ordinance is considered an urgency ordinance and requires a majority vote for approval.

These ordinances are being proposed by City Councils throughout the state. Hawaiian Gardens City Manager, Ernie Hernandez has previously issued an emergency executive order to limit price gouging and the City Council has ratified these orders. However these ordinances were only extended by Governor Newsom through September 2020. This urgency ordinance will extend through the City’s pandemic emergency status.

The way that the ordinance has been drafted creates a ‘private cause of action’ for each restaurant owner if a delivery service exceeds the cap for their services. “Now more than ever, we need to support our small businesses and this one way that we can begin to do this. We want as much profit as possible to go to and stay with our restaurants,’ stated Councilmember Myra Maravilla, “third party deliveries provide a much needed service, but we need to make this affordable for our restaurants.”

A representative from Door Dash stated, “A 15 percent price across the board does not allow us to cover our costs. We can look at having two types of tiers, one that is tied to delivery and another which includes other services, the platform, technology items and customer services.”

The goal is to protect the restaurants, having a conversation with both the owners and delivery services, and for restaurants to enforce this ordinance. The ordinance was passed unanimously.

Cerritos Councilman Frank Yokoyama commented, “Great job Hawaiian Gardens and Myra Maravilla financially protecting your restaurants from price gouging during the pandemic. I suggested this at the January Cerritos City Council meeting, and Mayor Solanki, Mayor pro tem Chuong Vo and Councilman Bruce Barrows were against it. Their pettiness is hurting our Cerritos restaurants who need our city’s protection from the price gouging of the multimillion dollar third party delivery services. Cerritos restaurants are going out of business. That’s bad for Cerritos and Cerritos residents. Who’s going to tell Cerritos restaurants that the Cerritos City Council is stubbornly refusing to protect Cerritos restaurants from price gouging?

“Artesia’s Melissa Ramoso deserves credit and recognition for protecting Artesia restaurants from price gouging first. Now Buena Park and Diamond Bar are proposing to protect their restaurants. Cities across the country have been prohibiting this price gouging of their restaurants but a majority of my council refuses to hear the item.”