Ontario food delivery

Ontario officially proposes cap on delivery fees to support local restaurants

The provincial government is introducing new legislation that it says will protect local restaurants from the impacts of high Ontario food delivery fees.

The Supporting Local Restaurants Act 2020 would cap fees charged by Ontario food delivery companies in areas where indoor dining is prohibited to help more small and independent restaurants stay in business.

Currently, says a government news release, fees placed on Ontario restaurants by food delivery companies can reach as high as 30 per cent. After working with the sector, Associate Minister of Small Business Prabmeet Sarkaria said restaurants should expect a cap of 15 per cent for delivery fees, similar to what has been put in place in New York City, with an overall cap of 20 per cent, inclusive of all fees.

This approach, says Ontario, aims to ensure that delivery drivers’ pay would be protected and delivery apps would not reduce service areas or restaurant selection.

However, groups like the Canadian Union of Postal Workers (CUPW) and app-based delivery workers have said they have “grave concerns” about the move.

Summary of food delivery measures

In summary, the legislation would:

  • Cap the rates charged by food delivery service companies and apps in areas where indoor dining is prohibited.
  • Permit fines of up to $10 million to food delivery service companies that do not comply with the law.
  • Provide food delivery service company employees or contractors who perform delivery services with protection that their compensation will not be affected by these changes.

“Ontario’s small and independent restaurants have shouldered an outsized share of COVID-19’s economic burdens,” said Minister Sarkaria. “But through it all, they’ve continued to serve our communities, our families and have lifted our spirits. With this legislation, our government is helping local businesses stay in business, and providing a solution that will help our local restaurants when every little bit helps.

This legislation follows a call from Toronto in late October, when a motion to ask the province to cap third-party delivery commissions was unanimously approved by City Council.

ORHMA support

A statement from the Ontario Restaurant, Hotel, and Motel Association (ORHMA) notes it has been challenging the high delivery fees set by third-party delivery companies in behalf of the restaurant industry in Ontario. It says it welcomes the legislation.

Tony Elenis, ORHMA President and CEO, said: “The vast majority of restaurants generate a profit of 2 to 3 per cent from delivery services, with many operating at a loss. The issue is disproportionately more punitive to smaller businesses. A permanent solution is required through a regulation that caps commission fees. We thank the Ontario government for their effort to regulate fees and provide some relief to restaurants.”

Opposition from delivery services and unions

The move has not received universal support, however. In addition to CUPW’s opposition, Kevin Edwards, CEO of leading Canadian delivery service SkipTheDishes, noted in a statement provided to RestoBiz that the company is “disappointed” that Ontario wants to regulate food delivery with a commission cap. 

Edwards added that SkipTheDishes has already implemented a 25 per cent commission rebate in heavily affected regions of Ontario, meaning that “all local, independent restaurant partners on the SkipTheDishes platform are already paying less than 20% in commission while their dining rooms are closed.”

Other government measures

Meanwhile, the Ontario government has also announced $600 million to help local restaurants and businesses with fixed costs, including property taxes, hydro, and natural gas bills. The government says it is also supporting small businesses and restaurants through its Main Street Recovery Plan by:

  • Committing to permanently allow licensed restaurants and bars to include alcohol with food as part of a takeout or delivery order before the existing regulation expires;
  • Offering the $60-million Main Street Relief Grant that provides up to $1,000 to help eligible small businesses with the cost of PPE;
  • Permanently allowing delivery companies to provide deliveries 24/7, providing needed flexibility;
  • Helping nearly 23,000 small businesses grow online with $2,500 grants through Digital Main Street; and
  • Offering free financial advice and online training to help small businesses make informed decisions and navigate the unprecedented economic circumstances brought on by the pandemic.

Related: Restaurants can learn from the pizza chain delivery model

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