191126

The City of Portland ordains:

Section 1. The Council finds:

1. Restaurants are vital to the culture and economy of the City of Portland (“City”). They reflect and nurture the cultural diversity of the City, while offering access to food, an essential foundation of human health and basis for social connection. 
2. Portland’s culinary scene is an important part of the social and economic fabric across all the City’s business districts and neighborhoods. Portland’s restaurants are also integral to Portland’s reputation and tourism industry. Portland is consistently ranked as one of the country’s best cities for dining due to its numerous, eclectic, and exceptional restaurants.
3. Most Portland restaurants are small businesses, and many are owned or operated by people of color, LQBTQ+, and recent immigrant community members. Supporting these small, diverse businesses strengthens both the economy and the social health of the City.
4. The COVID-19 emergency worsened the economic picture for City restaurants. Due to a ban on dine-in restaurant service to prevent the spread of COVID-19, the prevalence of remote work, and the general decline of dining out, many restaurants continue to struggle from the pandemic’s impacts. Hundreds of restaurants have closed and many commercial districts in Portland continue to struggle due to these restaurant closures.
5. Related to the decline of in-person dining, sixty percent of American consumers order takeout or delivery at least once per week. This percentage is even higher in urban markets such as Portland. In April 2022, over half of U.S. consumers had ordered food using a meal delivery service; up five percentage points from a year ago. As a result of the changes in customer behavior, many Portland restaurants have become dependent on delivery and takeout orders. This dependency makes restaurants increasingly vulnerable to unfair contract terms demanded by third-party food platforms.
6. Third-party food platforms, which arrange for delivery or takeout of food prepared by restaurants, have become a global market worth more than $150 billion, having more than tripled in size since 2017. In the United States, the market has more than doubled during the Covid-19 pandemic, following a historical growth rate of 8 percent. During this time, DoorDash, one of the largest third-party food platforms made its public market debut with one of the biggest initial public offerings of 2020.
7. This booming market is highly concentrated in just a handful of businesses. As of November 2019, just four third-party food platform services controlled approximately 98% of the entire market. Since that time, Uber has acquired Postmates, further consolidating this market.
8. The increasing market dominance of a small number of third-party food platforms coupled with the increasingly difficult economic conditions for City restaurants, means restaurants often must contract with these companies if they wish to access the growing share of customers who rely on third-party food platforms to obtain meals.  About 77% of U.S. restaurants offer service through third party food platforms.
9. Market dominance also gives these companies disproportionate leverage in contract negotiations with restaurants. These companies may use this leverage to extract high fees from restaurants – totaling in some instances, as much as 30%, or more, of an order total – and thereby diminishing restaurants’ already-narrow profit margins.
10. In addition to high commissions, third-party food platforms often impose contract terms that prohibit restaurants from charging a higher price for delivery orders than dine-in orders, eliminating a means by which restaurants could recoup the fees charged by these companies. The companies also frequently include in restaurant contracts a “telephone order charge” that restaurants are required to pay even in cases where a customer telephone call does not result in an order.
11. On June 29, 2020, the Portland City Council adopted Ordinance 190032 (“Temporary Cap”), which capped fees that a third-party food platform could charge a restaurant at 10% of the purchase price for delivery orders and 5% of the purchase price for orders that do not include deliveries. Since adoption, the City received minimal complaints from either third-party food platforms or restaurants regarding compliance with the Temporary Cap.
12. On June 22, 2022, Portland City Council adopted Ordinance 190898, which extended the 10% temporary delivery fee cap and the 5% temporary take-out fee cap that limited the amount of commission third-party food platforms can charge restaurants until February 29, 2023.  This temporary cap was otherwise set to expire consistent with the expired City state of emergency on June 29, 2022.  This extension provided Portland restaurants with an additional eight months of continued certainty, until a permanent policy could be adopted.
13. The three largest third-party food platforms currently advertise their lowest cost fees for delivery services between 10% and 20%. These same platforms offer their lowest fees for takeout orders between 5% and 10%.
14. Capping the fees third-party food platforms can charge restaurants for delivery and takeout services and prohibiting these companies from imposing unfair “telephone order charges” unconnected with any customer purchase are important steps to ensure that restaurants can thrive in Portland and continue to nurture vibrant, distinctive commercial districts.
15. Since June 29, 2020, third-party food platforms have operated within lower and more rigid commission caps in Portland. These same companies also nationally advertise commissions for basic delivery and takeout services that are similar to the caps proposed by this Ordinance. Given their current operations, a higher and more flexible permanent fee cap on delivery and a similar, permanent takeout service fee is a reasonable, permanent step to protect restaurants from financial collapse without unduly constraining third-party food platforms’ businesses.
16. Prohibiting third-party food platforms from providing delivery and other services to a restaurant without the restaurant’s express consent, and further requiring that third-party food platforms to terminate a contract promptly upon receiving oral or written termination notice from a restaurant, are other important steps to ensure that restaurants can exercise appropriate control over their businesses. 
17. Setting standards by which Portland restaurants are treated and charged by third-party food platforms will protect local, diverse small businesses and support the cultural importance and economic opportunities generated by the City’s food services industry. 

NOW, THEREFORE, the Council directs:

1. Add Code Chapter 7.27, Regulation of Third-Party Food Platforms, as shown in Exhibit A.
2. This Ordinance and the incorporated Chapter 7.27 take effect on March 1, 2023, upon expiration of Ordinance No. 190898.