Assembly Bill 578 went into effect on January 1, 2026, and it fundamentally changes how delivery platforms handle refunds in California. If you run a restaurant with any meaningful delivery volume, this one matters.
The law requires DoorDash, Uber Eats, Postmates, and every other food delivery platform operating in California to issue full cash refunds to customers for incorrect or undelivered orders. That means actual money back to the original payment method, not app credits or promo codes, including all taxes, fees, and gratuities.
What Changed
Before AB 578, platforms had discretion in how they handled complaints. A customer who reported a missing item might get a $5 credit toward their next order. The platform absorbed the cost on paper, but the restaurant often had no visibility into the claim and no way to dispute it. Credits kept the customer in the ecosystem and kept the complaint off the books.
Under the new law, every refund is real money leaving the transaction, not a recycled credit. The law also requires platforms to provide customers with an itemized breakdown of every charge, including the food cost, each fee, and the tip. If the platform’s automated system can’t resolve a complaint, the customer must be connected to an actual human being for support.
For delivery drivers, there’s a protection built in: gratuities refunded to customers cannot be clawed back from the driver. And drivers now receive an itemized breakdown of their own pay, including base pay, promotional bonuses, and tips.
Why This Matters for Restaurant Operators
Restaurants already lose 20 to 30 percent of every delivery order to platform commissions. Layer on the cost of packaging, the labor to manage a separate order stream, and the higher error rates that come with off-premise preparation, and delivery margins are often razor-thin before a single refund enters the picture.
The concern I’m hearing from operators in San Diego and Orange County is fraud exposure. One restaurant owner put it plainly: “One bad actor can claim an order was wrong or missing, get a full cash refund, and there’s very little stopping that from happening repeatedly.” The platforms say they investigate suspicious patterns internally, but the process is opaque, and operators have limited recourse when a refund hits their account.
The control problem compounds the financial exposure because operators have no way to verify what happens after handoff. When a guest eats in your dining room and something goes wrong, you fix it on the spot. With delivery, you lose control the second the bag leaves your counter. You can’t verify what happened in transit, and now the financial consequence of that uncertainty is more direct.
The Broker’s Perspective
When I evaluate a restaurant’s financials for a potential sale, delivery revenue has always required a closer look than dine-in. The margins are thinner, the customer relationship is owned by a third party, and the cost structure is harder to pin down.
AB 578 adds another variable to that equation, and it’s one that directly affects how buyers assess risk. A restaurant doing 30 to 40 percent of its revenue through delivery apps now carries a refund risk profile that didn’t exist a year ago. That doesn’t mean delivery revenue is worthless in a valuation, but it does mean buyers and their advisors need to scrutinize delivery P&L more carefully than ever.
The businesses that will hold their value are the ones that track delivery metrics separately, keep tight records on refund rates and chargebacks, and can demonstrate that their off-premise operation is genuinely profitable after accounting for platform fees, packaging, labor allocation, and now, refund exposure.
What Operators Should Do Now
If you haven’t already, pull your delivery platform statements and calculate your effective commission rate after refunds. Most operators know their gross delivery revenue but far fewer know the net number after the platform takes its cut and processes refunds against their account.
Set up a simple tracking system for disputed orders so you have documentation if patterns emerge. When a customer claims something was wrong, note the date, the order, and the outcome. If you see patterns, you’ll have documentation to bring to the platform or, if it comes to that, to your attorney.
And if you’re thinking about selling in the next few years, understand that a savvy buyer is going to ask about your delivery economics in detail. Having clean, separated financials for your delivery channel is no longer optional. It’s the difference between a smooth due diligence process and one that raises red flags.
California has a long track record of leading on restaurant regulation, and AB 578 will likely become a model for other states. The operators who adapt their tracking and their financial reporting now will be better positioned regardless of what comes next.
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