It was a tiresome day at work, but you conquered it nonetheless. Now as you sit back and relax on your couch, you start to get a tingling sensation down in your stomach. You’re hungry and why shouldn’t you be after such a long and strenuous day.

So you do the natural thing you take out your smartphone and open a food delivery app out of the many that you have installed on your device. “But isn’t it a little pricey compared to manually ordering?” You ask yourself, but quickly shrug the feeling off by thinking how convenient the entire process is, if you have to pay a little extra for all that convenience, then so be it!

However, have you ever stopped for a second and wondered if you are indeed paying a ‘little extra’ for this convenience at your doorsteps? Our research tells us otherwise as we dig deeper into the nexus of food delivery apps and how they cost you more than they should.

Numbers Can Be Deceptive

Using major food delivery app networks like UberEats, GrubHub, DoorDash, Postmates, etc. exposes you to a multitude of different parties that you need to pay. For example, when you place an order with UberEats you pay them not only the cost of the food but also surplus taxes, added service charges, even the driver!

To better understand the crazy amount of money you are spending on these food delivery apps you need some perspective & context. According to a research piece done by The New York Times;

Using a food delivery app to order a Family Feast Meal from Panda Express would cost you $39. Now, this might seem like a small amount, but would you like to know how much you would have paid if you were to buy the meal pack from Panda Express directly? The answer would be $19.89, which is a whopping 49% less than what you were paying earlier.

The above revelation tells you a story many don’t want to hear, that food delivery apps are charging way more than they should be. You as the consumer pay a hefty bump in price for what can be termed as glorified ‘home-delivery’.

A Deeper Look

All of this begs the question, why do food delivery apps cost so much compared to traditional food deliveries? The answer to that question lies in a deeper assessment of the food delivery app network’s business model. You see, a delivery app like UberEats isn’t technically a restaurant as they don’t own or make anything they sell. They are a services company that provides you convenience and choice.

Therefore the only way they can make money is by charging money for the peripheral services they provide. For example, a delivery fee, varied-pricing depending on the availability of delivery personal, value-added service costs, etc. All of these peripherals inflate the cost of your meal by a significant margin.

Let us take a look at how the big players of the industry compare with each other in the regard of how much they cost to an average consumer:

The Big Players

There are four big players in the United States food delivery app market namely, UberEats, DoorDash, Postmates, and GrubHub. Understanding these four companies and how do they compare with each other in terms of costs can reveal a lot about the market as a whole.

Therefore to get a comprehensive picture of the industry, we’ll have to place similar orders across all the four platforms to calculate the difference in price margins. The best results will be generated if we place the same order from the same restaurant across all the platforms.

Here is a dataset that elaborates the price difference for 2 turkey sandwiches from a local Subway across all the food delivery apps:

Source – The New York Times

Now for the moment of truth, what is the cost margin difference between meals ordered through apps and meals bought directly? Well, the answer is a gargantuan difference of nearly 7% to 91% increase in your cumulative payment.

A Curious Tale Of UberEats & Postmates

When you look across the board you find that UberEats is the one service provider that charges the highest for orders. But if you look at the services provided by UberEats, they are not very different from what GrubHub or DoorDash provides.

The major difference in the end price between UberEats and the other platforms came up due to multiple charges the platform takes. For example, UberEats charged a $3 “small order” fee for the Subway test order, along with a 15% service charge and a %3.99 delivery fee.

UberEats also indulged in practice its parent company is all too infamous for surge pricing. The delivery fees went up & down rapidly depending upon the availability of delivery personnel in a given area.

Another outlier among the four is Postmates that has a confusing delivery and service fee structure. A customer would need to pay a wide range of fees depending upon the restaurant you’re ordering from.

For example, during the test subway order, Postmates charged a delivery fee of $2.99 which is fair enough compared to UberEats. But then its service charges tallied at the highest at 16.4%. One of the reasons that can justify Postmates’ high-end prices is its courier service that they offer on top of their food delivery.

Be Aware Of Shadow Menus

Have you ever got the feeling of looking at a menu from a restaurant you frequent that maybe the prices are a little different? Now, this might sound shady, but what if I told you that you weren’t missing a few numbers. That there is a difference between restaurant menu prices and food delivery app menu prices!

This is something I like to call ‘shadow menus’, menus that exist in broad daylight yet people don’t pay enough attention to them to realize a difference. Therefore to prove a point let us go back to the Panda Express data set:

Source – The New York Times

In the above data set, you can see the difference in price margins for the same meal pack across multiple food delivery apps compared to the restaurant itself. A simple order of Family Feast meal pack would cost you $39 plus taxes, while the same order would cost you $47.10 plus extras on DoorDash, UberEats, Grubhub, and $44.85 plus extras on Postmates.

What Can Restaurants Do?

The above revelations should act as a wake-up call to both consumers and restaurants to heed to the call of an evolving industry. As the internet’s reach and penetration increase across the globe it becomes more and more feasible to start mobile-app based food delivery systems.

Larger food delivery app networks had some utility in the early days of automated food mobility, but that is no longer the case. If international trends are to be looked at, back in 2019 a large number of Indian restaurants initiated a rebellion campaign with the #LogOut against food delivery aggregators in the Indian market like Swiggy, Zomato, UberEats. The cause of this revolt was the non-payment of dues and the unfair division of revenue streams.

The business model of these 3rd party food delivery apps is based on the provisioning of convenience and not delivering food. As a result of this conflict of interest, a restaurant and a delivery service app would always be at loggerheads against each other.

Starting and operating a restaurant business is a financial capital intensive task, therefore cutting the middlemen out and taking control of your online food delivery is the only way forward. You can’t fight the future, online food delivery is here to stay, but you don’t need to passively accept it, get ahead, and actively engage your future!