Photo illustration: Intelligencer.Photo: Getty
of course easy, That’s not it? Picture this: It’s Friday. I’m hungry, I’m tired, I don’t feel like cooking, and I’m on my way home from work, three stops away from home. DoorDash, Uber Eats, Grubhub: You can open one of these apps and scroll through the menus of different restaurants while your subway car is in and out of the station. Pad Thai looks good, so let’s buy it. A few minutes after I sat down on the couch, the door rang. It’s finally time for dinner. For all but the most recent New Yorkers, the price of delivery was once just a tip.Additional charges apply even before the app expires in the middle The food was meant for smaller cities, DC, etc. In any case, someone paid for the variable time, cook, packer, and courier for this complex order, not the customer.
Clearly not in 2023. At the time, everyone seemed to realize that getting food delivered was a complete rip-off.
It’s unclear exactly when things got out of hand, but at one point the fees exceeded the actual cost of the food, especially in New York, the delivery app’s biggest market. In May 2022, his Chinese food order at Park Slope totaled about $28, but a year later it cost him an additional $24 via Grubhub. A $17.95 order of chicken rice bowl with chips at Chipotle nearly doubled to $32.06 after the tip. A sushi order of $30-odds came close to $50. “It’s so expensive. I have to stop doing it,” said Julia Craft, a Bushwick hairstylist who showed me her Chipotle receipt. “I’m not really struggling, but it’s kind of crazy when I think about how much money I’m wasting by ordering. If I don’t order, it eats up a huge chunk of my income. , I’m amazed at how far my money goes.”
Online delivery businesses are the food industry’s most perfect mousetrap, a whirring web designed to swindle customers’ money without the hassle of making the food they eat. Inflation starts on the menu, where restaurants often post higher prices for the same items than they charge in-store. There are service fees, delivery fees, and tips, which historically have not always been paid to delivery drivers. What if I order pickup? Apps are expensive. Even if you Google a restaurant’s phone number and call them directly, you may end up calling a duplicate number that appears on a dummy site owned by the app. The number simply redirects the call through its own system so that the shipping company can collect the charges. No wonder the parent companies of the top three third-party distributed apps have a market value of over $150 billion.
“People don’t pay for convenience, and they want food delivered quickly to their door for free,” said Andrew Riggy, executive director of the New York City Hospitality Alliance, a restaurateurs interest group. “I’m led to believe that it is,” he said. “But that couldn’t be further from the truth. For a long time, many of these big delivery companies have been trying to convince consumers that the convenience is free because they pay for it out of the pockets of local restaurant owners.” I’ve been led to believe that.”
But does it always take this long? Teadra Paucci, an emergency manager for the city government, shared with me via DoorDash a recent order from Brooklyn sushi restaurant Oita. The Make Your Own Temaki set costs $32. Add to this the $4.99 delivery fee, $4.80 service fee, $2.84 tax, and $4.00 tip, and Mr. Paucci’s dinner bill came to his $48.63. “It feels like every time I order delivery, the price is double hers,” she said. “When I was a kid, you could call a Chinese restaurant or a pizza place and they would deliver for free.” said.)
Of course, this isn’t just a New York phenomenon. Loan consolidation firm Self Financial found that in cities like Tucson, Salt Lake City and Philadelphia, the price of a delivery Big Mac tripled compared to walk-in prices. (These increases were significantly higher than last year’s delivery fees, which were 135 to 152 percent higher.) George Driscoll, an analyst at Root Digital, who conducted the research for Self, said:
As prices rise, the feeling of gouging has spread to social media, where complaints about the fees have flooded in. Sean Trende, election analyst at RealClearPolitics, revealed: he spends $125 I wanted my family of four to have dinner delivered from Outback Steakhouse. Some people complain of the embarrassment they feel in the “refreshing moment after Uber Eats.”
So how did we get here? I must confess that I am also partly responsible. Back in 2019, my colleague at the time, Lisa Fickensher, and I reported on a series of stories on a New York TV show. post About Grubhub charging restaurant owners fake fees. At the time, Grubhub was the largest delivery company in the U.S., with New York its largest single market. We didn’t realize this at the time, but this would be the first of a series of dominoes that would lead to the current shipping fee madness. The fake commission issue led to further revelations that the restaurant owner was paying him more than 30 percent per order, and soon Sen. Chuck Schumer got involved. Then the pandemic hit. Indoor service at restaurants was prohibited. With everyone stuck at home, demand for deliveries skyrocketed, creating a windfall for delivery apps. The City Council responded by capping the amount that third-party delivery companies can charge restaurants to 23%.
Meanwhile, app companies have only grown. Uber acquired Postmates. DoorDash acquired his Caviar and eventually took it public. After acquiring Seamless and MenuPages, Grubhub was taken over by Danish delivery company Just Eat Takeaway. It was the same final phase of Silicon Valley as before. Only when you’re big enough to dominate the market do you worry about making a profit. The app was only able to charge a lot of money, but it appears they realized they could make even more money by charging from both ends.
Customers don’t actually seem to know that delivery companies take about a quarter of a restaurant’s revenue for each order. When I visited his Tacomar, owner Omer Gormus told me how Grubhub doesn’t disclose the surcharges and tips customers are paying. “You never know what the total will be,” he says. “Out of the total, you end up paying closer to 35 to 40 percent,” said Gormas, who opened the store just over a year ago and said his profit margin on in-store orders is 2.5 percent. He said he earns about 1.5% profit on each delivery order. (If you order for pickup via the app, it will be a little cheaper as the delivery company will take a cut of the cut.)
Other restaurants have found ways to maintain profits on orders by charging two different prices. At Double Windsor across the street in Takumar, a burger or buttermilk fried chicken sandwich costs $17, and both are $1 more on delivery apps. At Henry’s, a few blocks away, a Vietnamese sandwich costs $9.50 at the counter, 50 cents less than the app price. Not only is this a way for restaurants to continue to make some kind of profit in an industry where profit margins are notoriously thin, but it also helps enrich the wealth of delivery companies. Tips, taxes, and fees are typically charged as a percentage of the base rate, so these small increases can have a big impact on your final bill. (A spokesperson for Uber Eats said it never hides its prices. DoorDash said it has “consistently made its service more affordable over the years.”) Grubhub said it “offers on-demand delivery.” “We are committed to keeping consumer rates low, while taking into account the real costs of doing business.”
After this year’s shocking price hikes, shipping costs will likely continue to rise. Last month, a New York state judge ruled that delivery companies that tried to challenge the $19.96 hourly minimum wage for delivery workers could simply pass on the increase to consumers in the form of higher delivery fees. was lowered. ” Ligia Gualpa, executive director of the Workers’ Justice Project, an advocacy group for the delivery workers’ union Los Deliveristas Unidos, said workers used to earn about $800 a week, but now they earn about $800 a week. He said it was now $1,500. (In response to this law, Uber and DoorDash changed their apps so that tip prompts only appear after food has been delivered. As a result, tip payments to employees have decreased. (He said Guallpa.) This means at least the following: Repay to the same level. In 1986, he was earning $500 a week as the then-new bike messengers dive-bombing the Park Avenue overpass. That’s about $1,400 in today’s money.
But perhaps this too will come to an end someday. Domino’s Pizza blames high third-party fees for the drop in deliveries, and Uber’s revenue from food delivery has declined for the third consecutive quarter. DoorDash has never been profitable. The Danish company that acquired Grubhub in a $7.3 billion deal is now worth less than half that and is trying to sell the company. It turns out that even after spending as much of everyone’s money as possible, it’s still incredibly difficult to make a sustainable business delivering someone’s pizza.