Ontario Proposes Legislation to Restrict Restaurant Delivery Service Fees

Mandatory lower fees for restaurants where indoor dining is prohibited due to COVID-19

Many restaurants have been impacted by the restrictions of COVID-19. Reduced seating capacity, closed dining rooms in many cases, are the harsh reality for many businesses in the province.

Here in Thunder Bay Nina’s Restaurant has closed as confirmed case numbers have climbed. A&W locations in Thunder Bay have closed their dining rooms.

To survive, many companies have shifted to having their groceries delivered. The cost of that service cam be as much as 30 percent of the total order.

The Ontario government is looking to assist local restaurants by introducing new legislation that would protect them from high delivery fees. The Supporting Local Restaurants Act, 2020, would cap fees charged by food delivery companies in areas where indoor dining is prohibited to help more small and independent restaurants stay in business.

Currently, fees placed on restaurants by food delivery companies can reach as high as 30% in Ontario. After working with the sector, Minister Sarkaria said restaurants should expect a cap of 15% for delivery fees, similar to what has been put in place in New York City, with an overall cap of 20% inclusive of all fees. This approach aims to ensure that delivery drivers’ pay would be protected and delivery apps would not reduce service areas or restaurant selection.

If passed, the legislation the government intends to introduce today by Prabmeet Sarkaria, Associate Minister of Small Business and Red Tape Reduction, and the regulation under it 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.”

NDP critic for Economic Growth and Job Creation Catherine Fife (Waterloo) says, “Small restaurants are barely hanging on. For those in lockdown, take-out and delivery are their only options to keep their doors open. The Ford government should have taken action months ago, but they dragged their feet and did not listen to small business owners who asked for help. This news comes too late for the many restaurants and bars that have been forced to shut their doors forever.

“In June, I asked the Ford government to introduce a cap of no more than 15 per cent on delivery fees charged to restaurant by third-party delivery apps, and this was a key part of the NDP’s plan to Save Main Street. New York introduced a cap on fees in May, and other North American jurisdictions including San Francisco and Chicago, have taken action, while the Ontario government stalled and delayed.

“The government’s proposals today only apply to regions where indoor dining is prohibited, leaving small businesses in the rest of the province who also rely on delivery services to stay afloat, without protection from these costly charges. Doug Ford is telling all Ontarians to stay home and order-in, but he’s only choosing to protect restaurants in regions under lockdown. Restaurants in every corner of this province are struggling. Doug Ford has forced us into longer and deeper shutdowns because of poor pandemic planning, and restaurants are paying the price through no fault of their own. This limited measure alone is a step in the right direction, but more comprehensive supports need to be made available to small businesses.”

Ford Government Plan

To provide additional relief to local restaurants and other businesses required to close or significantly restrict services in areas categorized as Control or Lockdown, Ontario has announced $600 million to help with them fixed costs, including property taxes, hydro and natural gas bills. The government 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.

QUICK FACTS

• Restaurants would be able to file complaints online if a food delivery service has overcharged fees in excess of the cap.
• Food delivery company employees or contractors who perform delivery services would be able to file complaints if their compensation or payments were reduced once the act comes into effect.