Restaurants Are Fed Up With High Fees From Delivery Companies. Will Consumers Follow?
The Wall Street Journal recently reported that some of the biggest restaurants in the country such as McDonalds are pushing back against delivery companies like Grubhub for the high commissions they pay.
Delivery services typically take around a 25 percent cut per order, according to the Journal, and chains that also include Applebees say the fees are eating into profits.
Gripes between restaurants and delivery companies have been building for some time now and appear to be coming to a boiling point.
Meanwhile, the delivery industry has been growing exponentially and despite the fact that the higher fees are passed on to the consumer, demand has only swelled.
More delivery companies have been sprouting up to provide a wider array of services to a generation that is willing to pay up for convenience.
Will consumers ever get to the same level of frustration as the companies they get their food from?
Expensive Delivery Orders
Delivery has continued to get more expensive as more middle men have entered the supply chain.
A $10 sandwich can now turn into an almost $20 order once you tack on tax, delivery and service fees and a tip for the driver.
This graphic from FoodBoss demonstrates the pricing break down for a lot of the popular delivery services.
It’s a little hard to see, but note that a DoorDash customer pays a delivery fee in the range of $0.99 to $7.99, and then an additional 7 to 15 percent service fee. Customers of PostMates pay a $9 flat rate.
Service fees at UberEats can now equal up to 15 percent of an order’s subtotal.
And the industry is making a killing.
The somewhat new meal delivery market has already hit $120 billion in gross food sales globally, according to Ark Invest.
Is The American Consumer Addicted To Food Delivery?
All data would suggest that yes, the American consumer, a person willing to purchase a $3 or $4 cup of coffee from Starbucks every day, is absolutely addicted to food delivery.
As this chart from Ark Invest shows, the percentage of food that is self-produced has dropped from roughly 33 percent 150 years ago to less than 1 percent today, as shown below.
That’s not to say that some consumers haven’t started taking notice.
One Reddit poster details his addiction to food delivery and how much it was costing him on a monthly basis.
Some courage led to me finally taking a look at my numbers and it was shocking to learn that I was spending upwards of $900 a month on food. Groceries were included but those would often go to waste because ordering food from my phone was such a routine, I didn’t need to open the fridge door.
After being self-aware of my spending, I set limits for myself. I would keep the apps, look at them if I needed to, but I would not order. Instead I would order Dominos if I had an intense craving and remind myself of how I would feel the next morning if I did just that.
The poster goes on to say:
If anyone can relate to this, just know that it is never too late to form better habits. I now have over $5,000 in savings and there’s potential for so much more if I can keep cutting food expenses.
It’s interesting because the savings between delivery and cooking at home are not miniscule.
The publication found that that on average, it is almost five times more expensive to order delivery from a restaurant than it is to cook at home.
Still, the high expense of delivery has not deterred consumers, who are driving up demand for these delivery services.
The meal delivery market is expected to grow dramatically in coming years.
By 2030, a third of the world population — about 2.8 billion people — should be able to afford and access meal delivery services, up more than 50 percent from the 1.8 billion that can do so today.
If adoption were to hit three meals per week, the market size could reach $3 trillion.