Saw a food delivery boy in Manhattan.
Luiz C. Ribeiro | Luiz C. Ribeiro New York Daily News | Tribune News Service | Getty Images
Food delivered straight to your door from the restaurant of your choice – how much does it cost?
Third-party food delivery is becoming the norm for U.S. consumers, with delivery apps like Grubhub, door panel and Uber Food plays an important role in daily meals. It also presents customers and restaurants with an increasingly complex equation of service fees, delivery costs and worker tips.
The dissatisfaction on both sides has hit the services, which have struggled to protect (or realize) profits and shore up orders while cash-strapped Americans scrutinize checkout screens that often see order totals exceed expectations.
Compared to orders placed directly through restaurant websites, Consumer Reports said the total amount they pay on third-party apps will increase at a higher annual rate between 2022 and 2024. technical economy. The food service industry research firm said that despite Uber Eats, DoorDash and Grubhub all launching paid memberships to lower fees, consumers still report paying more on average for third-party orders.
Costs continue to rise as more Americans pay attention to their wallets during a period of persistent inflation.
San Francisco resident Zainab Batool, who said she orders weekly delivery from Uber Eats or DoorDash, called the added cost “crazy.”
“I don’t think I remember the level being that high before, maybe four years ago, but it seems to be increasing now,” Bartle said.
According to data, the proportion of consumers choosing third-party delivery services instead of direct restaurant delivery is rising, rising from 15% in 2020 to 21% in 2024 techno-economic 2024 Delivery and Delivery Consumer Trends Report. The research firm found that superior order tracking, access to deals and promotions, and the ability to discover new restaurants keep app customers coming back.
But the cost of the extra fees may be prohibitive for some of them.
Among consumers who said they were ordering less, 41% said it was because delivery fees were too high, while 48% said menu prices were too high, the report said. The premiums restaurants charge for third-party delivery service menus will increase between 2022 and 2023, nearly doubling since 2020, according to a study Gordon Haskett Research Consultant.
Companies that facilitate deliveries say they aim to keep fees down while trying to stay afloat.
Grubhub said in a statement that its goal is to keep expenses as low as possible while maintaining business: “As the costs associated with processing deliveries have increased, including managing logistics and paying delivery partners, we have increased our costs accordingly. Adjusted our fees,” a Grubhub spokesperson said.
The company is owned by Just Eat Takeaway, an Amsterdam-based online food ordering and delivery company. which said It is actively seeking to sell part or all of Grubhub.
DoorDash said it has lowered fees for consumers amid historic inflation over the past two years, while it had record active users last year and increased order frequency.
The company, which went public in 2020, has yet to report annual profits. Delivery service posts quarterly profit – Net income $23 million ——The three months ended June 30, 2020, the beginning of the U.S. COVID-19 lockdown
On the other hand, travel giant Uber Revenue last year was nearly $1.9 billion, due in part to significant growth in its delivery business. Uber’s food delivery business, which includes Uber Eats and Uber Direct, reported adjusted EBITDA of $1.51 billion in 2023, an increase of more than $955 million from 2022.
An Uber spokesperson said Uber Eats users are paying for a service that allows them to browse merchants and order efficiently through on-demand delivery.
“Fees charged for orders on Uber Eats help pay delivery personnel and cover platform costs such as safety programs, 24/7 support, background checks, product development and more so orders can be delivered reliably,” a spokesperson said in a statement. Da.
Add up the cost
For diners, computing across platforms is getting trickier.
both sides Uber and door panel, order totals may vary by region depending on the respective website, as additional fees are required to offset local laws and regulations. For example, in California, Uber Eats customers pay the California Driver Benefit Fee, which funds the following mandatory benefits for drivers: Proposition 22According to Uber.
An app-based delivery driver waits outside a restaurant that uses app delivery on July 7, 2023, in New York City.
Spencer Pratt | Getty Images
Even before local differences emerge, add-ons can be daunting.
Uber charges a delivery fee, which depends on demand, location and driver availability, according to its website. DoorDash charges a similar delivery fee, which it says depends on a variety of factors. Both apps say the fee is paid directly to them to cover delivery costs, rather than to the driver or restaurant. Grubhub also includes order delivery fees, which increase with distance, up to the maximum price.
These three applications also charge separate service fees, which are not simple to calculate.
Grubhub and DoorDash said the fee covers the operating costs of their platforms, and Uber said all but 10 cents of its service fee is paid directly to delivery drivers, though drivers are expected to then pay Uber for various support services. An undisclosed amount.
DoorDash and Uber both said fees may change based on the subtotal of the order.
With all of these changes, and taking into account possible discounts or promotions, many customers won’t know the total cost of their order until they select the items and make it all the way to checkout.
“You see something listed for $15, and you go to checkout and it adds up to maybe $25, but you’ve already made up your mind to buy that thing, or you’re looking forward to it,” said app user Batool. “This adds additional friction between cancellations.”
Both Uber and Grubhub say their fees are clearly disclosed before checkout, while DoorDash says the applicable total fee can always be viewed in the shopping cart.
Weigh economics
Shelle Santana, an assistant professor of marketing at Bentley University, said part of the value proposition of third-party delivery services for restaurants is the potential for more exposure and customers.
According to the two companies, more than 1 million merchants work with Uber Eats and more than 375,000 merchants work with Grubhub. DoorDash says that by 2023, more than 100,000 new merchants will join its marketplace, generating nearly $50 billion in sales for businesses. According to Uber, Uber Eats merchants in the United States and Canada generated more than $15 billion in sales through the app last year.
For restaurants listed on their respective markets, both Uber Eats and DoorDash offer tiered pricing structures with commission fees ranging from 15% to 30% of the order total, according to their websites. Restaurants that join the Grubhub Marketplace pay a “marketing commission” of 5% to 10% on each order, as well as an order processing fee and a 10% delivery fee, according to its website.
New York City restaurant doors have signs for We Deliver, Doordash, Grubhub and Uber Eats.
Lindsay Nicholson | Underground CG | Universal Image Group | Getty Images
All three platforms say restaurants can choose from a variety of pricing plans, including commission-free online ordering, depending on the rate and level of marketing support they require.
Tony Scardino, owner of Professor Pizza in Illinois, said his two Chicago locations use a variety of third-party delivery services, including Grubhub, DoorDash and Uber Eats. He has been using the services for nearly four years and said the apps’ pricing was “predatory” and “exorbitant.”
But he said it was worth it for smaller businesses to use their delivery service instead of paying in-house delivery fees. All this adds up to what he calls a “difficult balance.”
“You first have to consider whether you should use them,” Scardino said. “But they have such a large audience that it’s hard not to.”
The costs, in turn, force restaurants to raise menu prices.
According to a study of menu pricing premiums at 25 popular restaurants with third-party delivery services, the average cost is 20% higher than dine-in. Gordon Haskett Research Consultant.
“It’s like restaurants are saying, ‘We’re not going to pay for DoorDash, Uber and Grubhub,'” said Meredith Sandland, CEO of Empower Delivery. “If consumers value the convenience and want to use the service, they can pay for it.”
Empower Delivery aims to compete with major delivery services by connecting restaurants with a fleet of delivery workers, which it says is cheaper for businesses. website.
Ann Arbor, Michigan, restaurateur Phillis Engelbert has been boycotting DoorDash and other third-party delivery services since before the pandemic. She said her Detroit Street gas station relies on dine-in orders and limited delivery options, with a flat fee of $7.
Engelbert said she doesn’t believe third-party delivery apps will boost her profits or benefit her employees, even if they lead to higher sales.
“This feels like another way for corporations to step in and take a big chunk of the fruits of our labor,” Engelbert said.
Flexible Savings
As more restaurant owners pass on the cost of takeout apps to consumers, third-party services are adding monthly membership options to help relieve some of the pressure.
All three services offer free shipping on every order through their premium memberships – Grub+, Dashtone and Uber One –$9.99 per month, according to their respective websites.
Grubhub has struck a deal with e-commerce giant Amazon to offer US Prime users a one-year membership to the food delivery service. Photograph: Gabby Jones/Bloomberg via Getty Images
Gabby Jones | Bloomberg | Getty Images
in May, Grubhub partners Amazon Add Grubhub+ to the e-commerce giant’s Prime subscription. DoorDash offers Free full year membership For users with DoorDash rewards MasterCardand Uber offers Member benefits for some capital one Available to credit card holders for a limited time only.
They also offer incentives to students: Dashtone and Uber One is half price, and Grub+ The program is free for students at partner universities, according to their respective websites.
The benefits of subscriptions are twofold: More customers are likely to check out more frequently due to the promise of lower total order costs; through carefully curated subscriptions, Steve Tadelis, an economics professor at the University of California, Berkeley, said Premium user lists, these services can tailor future discounts to your most loyal customers.
While shipping fees are eliminated on all subscriptions, service fees and any local differences still apply. DashPass members are seeing reduced service fees, according to the company.
If you’ve made it this far, there’s only one expense left: a tip for the delivery driver.
Empower’s Sandland said that when consumers are surprised by the total price, tipping may be “the only tool they have left” to manage their budget.
Bartle said she always tips, but that doesn’t mean she feels good about it considering the other costs. She said because she couldn’t determine whether service charges and other charges actually went to the driver, it was necessary to tip to ensure they were compensated.
“It makes me angry because I feel like service fees should go to the people who provide services to us,” she said. “But that doesn’t seem to be the case.”
