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File #: 21-241 MEETING DATE: 3/15/2021
REQUEST FOR CITY COUNCIL ACTION
SUBMITTED TO: Honorable Mayor and City Council Members
SUBMITTED BY: Oliver Chi, City Manager
PREPARED BY: Travis K. Hopkins, Assistant City Manager
Subject:
Adopt an Emergency and Interim Ordinance No. 4229, Establishing Limitations on Third-Party
Food Delivery Fees
Five Affirmative Votes are required to adopt per Charter Section 501
Statement of Issue:
On February 1. 2021 , the City Council directed that staff prepare an emergency Ordinance limiting
the delivery fees that can be charged by third-party food delivery application services to fifteen
percent (15%) of the cost of food purchased for delivery. with a five percent (5%) cap on the non-
delivery charges. while COVID-19 restrictions remain on indoor and outdoor dining.
These interim regulations were directed given that the COVID-19 crisis has placed extreme
pressures on restaurant operations. Due in large part to the pandemic restrictions that have been
placed on indoor and outdoor dining, normal operational procedures have been disrupted, and in
response, restaurants have had to rely heavily on third party delivery apps such as Postmates.
Grubhub, DoorDash, and Uber Eats, which can charge fees as high as 30% for use of their delivery
services.
Per the Huntington Beach Charter, the City Council can approve the proposed fee limitations that
technology companies can charge to restaurant owners via an emergency ordinance, which would
become effective immediately if at least five (5) affirmative votes endorse the measure. Also, as an
urgency ordinance, the proposed regulations will expire automatically after 120 days.
Financial Impact:
This emergency Ordinance will have limited costs related to the staff time needed to enforce these
provisions while it remains in place for the 120 days.
Recommended Action:
Adopt Ordinance No. 4229. "An Emergency and Interim Ordinance of the City of Huntington Beach
Establishing Limitations on Third-Party Food Delivery Fees."
City of Huntington Beach Page 1 of 3 Prr!ed on 3 t, 2C2 1
File #: 21-241 MEETING DATE: 3/15/2021
Alternative Action(s):
Do not adopt the Emergency Ordinance and provide alternate Council Direction.
Analysis:
The COVID-19 crisis has placed extreme financial pressures on restaurants, due in large part to the
restrictions that have been placed on indoor and outdoor dining. As such, restaurants have had to
rely heavily on third party delivery apps such as Postmates, Grubhub, DoorDash, and Uber Eats to
generate sufficient revenue to stay in business and keep staff employed.
These third-party apps require restaurants to pay high delivery fees that can at times exceed 30% of
the cost of each order. Some restaurants pay these fees directly, which reduces their operating
margins, while others have had to increase menu prices, which discourages potential customers.
Noting that restaurants have been disproportionately impacted during COVID-19, several cities have
adopted temporary ordinances to limit the fees that third party apps can charge restaurants during
the pandemic. For example, the City of Los Angeles implemented fee caps of 15% and 5% for
delivery and non-delivery fees that restaurants have paid, respectively. Further, the Los Angeles
regulations also mandate that 100% of tips go directly to the drivers.
Other cities that adopted similar measures in California include Alhambra, Palm Springs, San
Francisco, and Santa Clara. Of note, these measures are temporary and are set to expire upon the
end of the pandemic, or the lifting of indoor dining COVID-19 restrictions, whichever comes first.
On February 1, 2021 , the City Council considered Councilmember Moser's initiated item directing
staff to prepare a temporary ordinance that limits the fees paid by restaurants to Third-party Food
Delivery Service during the COVID-19 pandemic. The Council approved the motion directing staff to
prepare the temporary ordinance that places a 15% cap on fees paid by restaurants and a 5% cap on
non-delivery fees paid by customers until the current COVID-19 pandemic restriction on both indoor
and outdoor dining are lifted. The Huntington Beach Charter Section 501 sets the requirements for
emergency ordinances, which requires at least five (5) affirmative votes and the all emergency
ordinances expire after 120 day if no further Council action is completed.
The City Attorney's Office prepared Ordinance No. 4229 for Council Consideration that includes the
following provisions for Third-party Food Delivery Service:
• Limits charging delivery fee to no more than fifteen (15) percent of the purchase price of each
online order.
• Prohibits charging any amount designated as a delivery fee for an online order that does not
involve the delivery of food or beverages.
• Limits charges for all other fees, commissions, or costs for service to no greater than five (5)
percent of the purchase price.
• The cost for food or beverage item charged to customers through the apps are limited to the
price set by the retail food establishment.
City of Huntington Beach Page 2 of 3 Printed on 3/10/2021
ycwered by Leg,star'-
File #: 21-241 MEETING DATE: 3/15/2021
• Any tip or gratuity shall be paid, in its entirety, to the person delivering the food or beverages.
The ordinance also requires the Third-party Food Delivery Service to disclose to the customer an
accurate, clearly identified, and itemized cost breakdown of each transaction including and not limited
the purchase price of food and beverages, delivery fees, other fees and commissions, and gratuity.
The ordinance provides enforced alternatively as a misdemeanor or an infraction at the discretion of
the City Attorney, or the City Attorney may bring a civil action to enforce the provision of the urgency
Ordinance
The Council may approve the Ordinance with five or more affirmative votes declaring an emergency
measure and for immediate preservation of the public peace, health, or safety during the COVID-19
pandemic, and the provisions will remain in effect for 120 day after which will expire.
Environmental Status:
Not applicable.
Strategic Plan Goal:
COVID-19 Response
Attachment(s1:
1. Ordinance No 4229, An Emergency and Interim Ordinance of the City of Huntington Beach
Establishing Limitations on Third-Party Food Delivery Fees
City of Huntington Beach Page 3 of 3 Printed on 3/10/2021
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ORDINANCE NO. 4229
AN EMERGENCY AND INTERIM ORDINANCE OF THE CITY OF HUNTINGTON
BEACH ESTABLISHING LIMITATIONS ON THIRD-PARTY FOOD
DELIVERY FEES
WHEREAS,the City of Huntington Beach is a charter city organized pursuant to Article
XI of the California Constitution and pursuant to the authority so granted,the City has the power
to make and enforce within its limits all ordinances and regulations with respect to municipal
affairs not in conflict with its own charter. Such police powers include without limitation the
ability to adopt emergency ordinances for the immediate preservation of the public peace,health,or
safety pursuant to Section 501 of the City Charter; and
WHEREAS, due to the spread of COVID-19 (coronavirus)within the State, on March 4,
2020, Governor Gavin Newsom, declared local and state public health emergencies due to the
spread of COVID-19 locally and within the State,pursuant to Health& Safety Code Section
101080 and Government Code Section 8625,respectively; and
WHEREAS, as a result of the spread of COVID-19,restaurants were prohibited from
providing in-person dining, and were limited to drive through,pick-up or delivery. Pursuant to
California Health and Safety Code sections 101030, 101040, 101470, 120175, and 120130, on
December 17, 2020, the County of Orange Health Officer issued Orders and Strong
Recommendations providing that the only businesses and activities allowed to open are those
under the purple tier assigned to Orange County,provided that such businesses and activities
comply with all applicable restrictions for the purple tier. The purple tier prohibits indoor dining
at restaurants, and permits only outdoor dining with modifications. Further,to help prevent the
spread of droplets containing COVID-19, all County residents and visitors shall wear face
coverings when outside of the home, and comply with the Limited Stay At Home Order, issued
by California Department of Public Health, effective November 21, 2020 10:00 pm PST; and
. WHEREAS, the County Health Officer's Strong Recommendations state that all Orange
County residents who are 65 years old or older;have serious underlying medical conditions, or
have a compromised immune system should remain at home;
WHEREAS,the City Council has carefully reviewed and considered all of the evidence
presented in connection with the hearing on this Emergency and Interim Ordinance, including,
but not limited to,the staff report, and all written and oral testimony presented; and
WHEREAS,the City Council finds that approval of this Ordinance would not only make
the use of third-party delivery services more affordable,thereby enabling an increase in their use
by consumers, and reducing the potential for spread of COVID-19 from in-person dining, but
also reduce COVID-19's economic impacts on retail food establishments and food consumers.
The City Council of the City of Huntington Beach does hereby ordain as follows:
ADOPTION OF LIMITS ON THIRD PARTY FOOD DELIVERY SERVICES.
SECTION 1. DEFINITIONS.
For purposes of this Ordinance,the following definitions apply.
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ORDINANCE NO. 4229
A. "City"means the City of Huntington Beach.
B. "Delivery Fee"means a fee charged by a Third-party Food Delivery Service for
providing a Retail Food Establishment with a service that delivers food and beverages from such
establishment to customers. The term does not include any other fee or cost that may be charged
by a Third-party Food Delivery Service to a Retail Food Establishment, such as fees for listing or
advertising the Retail Food Establishment on the Third-party Food Delivery Service platform or
fees related to processing the online order, including, but not limited to, service fees, fees for
facilitating Online Orders for pick-up, and credit card processing fees.
C. "Online Order"means an order placed by a customer through or with the
assistance of a platform provided by a Third-Party Food Delivery Service, including a telephone
order, for delivery or pick-up within the City.
D. "Purchase Price"means the price, as listed on the menu, for the items contained in
an Online Order,minus any applicable coupon or promotional discount provided to the customer
by the Retail Food Establishment through the Third-Party Food Delivery Service. This definition
does not include taxes, gratuities, and any other fees or costs that may make up the total amount
charged to the customer of an Online Order
E. "Retail Food Establishment"means a restaurant, delicatessen,bakery, coffee
shop, or other eat-in or carry-out service of processed, or prepared raw and ready-to-eat food or
beverage.
F. "Third-party Food Delivery Service"means any website,mobile application, or
other internet service that offers or arranges for the sale of food and beverages prepared by, and
the delivery or pick-up of food and beverages from,no fewer than twenty (20)Retail Food
Establishments located in the City that are each owned and operated by different persons.
SECTION 2. PROHIBITIONS.
A. It shall be unlawful for a Third-party Food Delivery Service to charge a Retail
Food Establishment a Delivery Fee that totals more than fifteen(15)percent of the Purchase
Price of each Online Order.
B. It shall be unlawful for a Third-party Food Delivery Service to charge a Retail
Food Establishment any amount designated as a Delivery Fee for an Online Order that does not
involve the delivery of food or beverages.
C. It shall be unlawful for a Third-party Food Delivery Service to charge a Retail
Food Establishment any combination of fees, commissions, or costs for the Retail Food
• Establishment's use of the Third-party Food Delivery Service that is greater than five(5)percent
of the Purchase Price of each Online Order. Fees, commissions, or costs do not include the
Delivery Fee.
D. It shall be unlawful for a Third-party Food Delivery Service to charge a Retail
Food Establishment any fee, commission, or cost that is to be paid to the Third-party Food
Delivery Service, other than as permitted in Subsections A through C, above.
E. It shall be unlawful for a Third-party Food Delivery Service to charge a customer
any Purchase Price for a food or beverage item that is higher than the price set by the Retail Food
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21-9342/244971/SFF
ORDINANCE NO. 4229
Establishment on the Third-Party Food Delivery Service or, if no price is set by the Retail Food
Establishment on the Third-Party Food Delivery Service,the price listed on the Retail Food
Establishment's own menu.
F. It shall be unlawful for a Third-party Food Delivery service to retain any portion
of amounts designated as a tip or gratuity. Any tip or gratuity shall be paid by the Third-party
Delivery Service, in its entirety,to the person delivering the food or beverages.
G. As an example, if a customer orders a meal that is advertised for$10.00 on the
Third-party Food Delivery Service's app,the Third-party Food Delivery Service cannot charge
the customer more than$10.00 for the meal, or charge the restaurant more than$1.50 as a
Delivery Fee. In addition,the Third-party Food Delivery Service may not charge the restaurant
more than.500 as a fee or commission for the restaurant's placement on the Third-party Food
Delivery Service's app. Finally, any tip the customer pays the delivery person shall not be paid to
the Third-party Food Delivery Service.
SECTION 3. DISCLOSURES.
A. The Third-party Food Delivery Service shall disclose to the customer an accurate,
clearly identified, and itemized cost breakdown of each transaction, including,but not limited to
the following:
1. The Purchase Price of the food and beverages at the cost listed on the Retail Food
Establishment's menu;
2. The Delivery Fee charged to the Retail Food Establishment;
3. Each fee, commission, or cost, other than a Delivery Fee, charged to the Retail
Food Establishment;
4. Each fee, commission, or cost, other than the Delivery Fee or the Purchase Price
of the food, charged to the customer by the Third-party Food Delivery Service;
and,
5. Any tip or gratuity that will be paid to the person delivering the food or
beverages.
SECTION 4. ENFORCEMENT.
A. A violation of this Ordinance shall subject the violator to the following:
1. Notwithstanding any other provision in this Code, each violation of the provisions
of this Chapter may be enforced alternatively as a misdemeanor or an infraction at
the discretion of the City Attorney, or the City Attorney may institute an action in
any court of competent jurisdiction to restrain, enjoin or abate the condition(s)
found to be in violation of the provisions of this Chapter.
2. A civil action in the Superior Court of the State of California to recover all actual
damages resulting from a violation of this ordinance.
3. A civil action alleging a violation of any provision of this Ordinance shall
commence only after the following requirements have been met:
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ORDINANCE NO. 4229
a. Written notice is provided to the Third-party Food Delivery Service of the
Provisions of this Ordinance alleged to have been violated and the facts to
support the alleged violation; and
b. The Third-party Food Delivery Service is provided 15 days from the date
of the written notice to cure any alleged violation.
SECTION 5. ADOPTION AND SUNSET. Pursuant to Charter Section 501,this
Ordinance is hereby declared to be an emergency measure for the immediate preservation of the
public peace,health or safety during the COVID 19 pandemic and becomes effective
immediately upon adoption by at least five affirmative votes. This Ordinance shall automatically
expire automatically after 120 days or repeal by the City Council.
PASSED AND ADOPTED by the City Council of the City of Huntington Beach at a
regular meeting thereof held on the day of , 2021.
Mayor
ATTEST: APPROVED AS TO FORM:
Pr\ Uytti
City Clerk 51/4,, City Attorne
INITIATED AND APPROVED:
City Manager
4
21-9342/244971/SFF
Emergency Interim Ord. No. 4229
STATE OF CALIFORNIA )
COUNTY OF ORANGE ) ss:
CITY OF HUNTINGTON BEACH )
I, ROBIN ESTANISLAU,the duly elected, qualified City Clerk of the
City of Huntington Beach, and ex-officio Clerk of the City Council of said City, do
hereby certify that the whole number of members of the City Council of the City of
Huntington Beach is seven;that the foregoing emergency ordinance was read to said
City Council at a Regular meeting thereof held on March 15,2021,and failed due to a
lack of an affirmative vote of at least five members of said City Council.
AYES: Carr,Kalmick, Moser
NOES: Peterson, Ortiz,Posey, Delgleize
ABSENT: None
ABSTAIN: None
•
I,Robin Estanislau,CITY CLERK of the City of
Huntington Beach and ex-officio Clerk of the City
Council,do hereby certify that a synopsis of this
ordinance was not published in the Huntington Beach
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In accordance with the City Charter of said City. '�j�
Le bin Estanislau, City Clerk City Clerk and ex-officio Clerk
enior Deputy City Clerk of the City Council of the City
of Huntington Beach, California
Switzer, Donna
From: Fikes, Cathy
Sent: Monday, March 15, 2021 10:27 AM
To: Agenda Alerts
Subject: FW: vote NO on 21-241, meddling in business decisions
From: Dawn Crowley<older.than.dirt@hotmail.com>
Sent: Monday, March 1S, 2021 10:23 AM
To: CITY COUNCIL<city.council@surfcity-hb.org>
Subject: vote NO on 21-241, meddling in business decisions
We do NOT live in a communist or a socialist society. Mind your own business; do NOT meddle in business
decisions. Let the market in our REPUBLIC work! Vote NO on this agenda item.
Ordinances for Adopt an Emergency and Interim Ordinance No. 4229, Establishing Limitations on Third-
241 19. Adoption Party Food Delivery Fees Five Affirmative Votes are required to adopt per Charter Section
501
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Agenda tam No.
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Switzer, Donna
From: Fikes, Cathy
Sent: Monday, March 15, 2021 1:00 PM
To: Agenda Alerts
Subject: FW: Support for Delivery Fee Ordinance
From: Natalie Stewart Elder<nataliestewartelder@gmail.com>
Sent: Monday, March 15, 2021 12:56 PM
To: CITY COUNCIL<city.council@surfcity-hb.org>
Subject:Support for Delivery Fee Ordinance
Hello!
I'd like to express my support for tonight's agenda item 19. the ordinance temporarily reducing delivery app fees
for HB's restaurants.
Silicon Valley companies have made billions of dollars off the backs of struggling local businesses during the
pandemic shut-downs. Reducing the burden of app fees on local restaurants would 1) provide needed financial
relief for the businesses currently using delivery apps, and 2) could allow more businesses to afford to sign up
and bring in new customers... who would hopefully continue to frequent new favorite restaurants after the
shutdowns are lifted.
The city can't afford to rescue every struggling restaurant with grants-- let's help people help themselves.
Natalie Elder
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Switzer, Donna
From: Fikes, Cathy
Sent: Monday, March 15, 2021 12:43 PM
To: Agenda Alerts
Subject: FW: Delivery Fee Cap/ mandatory giant tip
From: Chuck Johnson <sleeplessmedia@gmail.com>
Sent: Monday, March 15, 2021 11:23 AM
To: CITY COUNCIL<city.council@surfcity-hb.org>
Subject: Delivery Fee Cap/ mandatory giant tip
Since the HB CityC council wishes to inject itself into wage and price controls by limiting fees that can be charged to
restaurants for a service THEY SIGNED UP FOR , just as the state dining limitations are lifted, perhaps they can engage in
some real virtue signaling and mandate that all people who order through a third party app ( Doordash, Grubhub...etc. )
must tip 20 percent... wait, lets make that 30 percent...to the drivers that deliver the orders.
Wait...does that sound ludicrous?
So does the price controls. If the restaurant dosnt want to do business with doordash or grubhub, they don't have to.
In the spirit of your proposed law, lets drop fees for all city services by 25 pct for the next 4 months.
Sent from Mail for Windows 10
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Switzer, Donna
From: Fikes, Cathy
Sent: Monday, March 15, 2021 12:43 PM
To: Agenda Alerts
Subject: FW: Food delivery Fees
-----Original Message-----
From: Buffie Channel <buffie2@earthlink.net>
Sent: Monday, March 15, 2021 12:38 PM
To: CITY COUNCIL<city.council@surfcity-hb.org>
Subject: Food delivery Fees
Dear City Council,
I support limiting the fees that big food app companies can charge in our city while our restaurants get back up and
running. Some charge restaurants up to 30% and don't let them position their website over the deliver apps on a search.
It's the right thing to do to support restaurants in our city for now.These big biz delivery companies have made billions
during the pandemic. They'll survive. Will our restaurants?
Thank you.
Buffie Channel
Relocation Consultant
Quest Relocation Group
Cell/Text: 714-317-303 5
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Switzer, Donna
From: Robert Daniel <bdaniel5@verizon.net>
Sent: Monday, March 15, 2021 5:20 PM
To: supplementalcomm@surfcity-hb.org
Subject: VOTE NO on Food delivery App Fees
Dear City council members.
I am alarmed that the city is considering regulating the prices that one business charges another. This sort of legislation
results in economic destruction,just look at Venezuelas economy.The government knew best they told every one as
they regulated every aspect of their economy.
They ended up taking over bread factories in a vain attempt to feed people. You may think... this regulation is a far cry
from Venuzulas economy. However it's a first slippery slope. It invites the city to be sued and any council person who
exposes the city to this sort of legal peril will not be re-elected.
While it might feel good to "help local business'The reason they are hurting in the first place is — government
regulation.
DO NOT VOTE FOR THIS HORRIBLE IDEA!
Sincerely,
Robert Daniel
t