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Secrets of Food Delivery Services
Unwrapped: The Hidden Costs Behind Your Favorite Food Delivery Services
Ben Smith
March 08, 2024
Food Delivery…What You Need to Know
How Hungry Are You?
As I write this article, I’m sitting in my dorm room, late at night craving a pizza from a restaurant about a half-mile away. Too tired to walk, I open DoorDash on my phone and add a plain pizza pie and six breadsticks to the cart. The total: about $43, excluding tip. With a standard 20% for the driver, it comes out to over $50…
“How is this possible?” I think to myself as I immediately remove the items from my cart. The website of the restaurant has a cheese pizza listed for $24 and breadsticks for $8…
Let me break it down for you→
True Costs of Food Delivery:
Many of these services, like DoorDash, do not require restaurants to match their menu prices on the service to the physical menu in the store. This leads to t many restaurants charging several dollars higher per item than they cost in-store. A $10 burger from your favorite burger spot, costs $14 the second you open that food delivery service app, not even counting fees.
Shockingly, 31% of consumers said they use these third-party delivery services at least twice a week, with the average American spending over $150 per month on delivery!
This brings me to my next point →
Fees:
Americans spend $12.80 per order on average, just on service fees, delivery fees, and tip expenses. This equates to $654.44 annually in fees. Ordering from one of these third-party services means that you owe merchant fees, service fees, delivery fees, ‘bag fees’, and commonly a tip. These are the main reasons that the total ends up being drastically higher than expected.
That’s a lot of extra money leaving your pocket…
Proof:
A study was done on identical McDonalds orders, placed through food delivery services. It told us, “Across all three apps, the average markup proved to be relatively similar: UberEats was 51.3%, DoorDash was 48.8%, and Grubhub was 48.7%.” (Pomranz)
Did you realize that your fries and milkshake cost you 50% more everytime you ordered through one of these apps?
(Deepwater Asset Management)
This graphic gives a complete breakdown of what you are really paying. This study was done independently from the previous one mentioned yet, the results stand.
Think About It:
To anybody reading this, keep in mind on average you’re paying about 50% more than what you would’ve paid had you just called the restaurant and picked your food up, the next time you elect to use a third party delivery service.
Ask yourself, can I go pick this up? Sometimes the answer is no, like when you’re cramming for a test or you want something from a restaurant too far away to walk to when you don’t have a car. But many times the answer will be yes, and the savings will be very real.
After reading this newsletter, my goal was for you to simply think twice the next time you decide to order from a delivery service, when you don't really need to. Now, whatever you may decide, you understand what it will cost you every time you open the app.
Be smart.
Disclaimer: Food delivery services can be an efficient and time-saving way of getting food, if used in a responsible manner and having an understanding of the financial risks associated with them. The purpose of this article is not to convince you into never ordering delivery. It is simply to ensure that the younger users in this country understand what they are getting themselves into when they do.