Your go-to Chipotle order cost double? Blame the apps.
It’s so easy, isn’t it? Picture this: It’s Friday. You’re hungry, too tired to cook, and three stops from home on the commute back from work. DoorDash, Uber Eats, Grubhub: In the time it takes the subway car to enter and exit the station, you could open any one of those apps and scroll through the menus of a variety of restaurants. Pad Thai sounds good — buy. The door buzzes just minutes after settling onto the couch. There, finally, is dinner. For all but the newest of New Yorkers, the price of delivery was, at one time, the mere tip. Even before the app age, extra fees for en route foods were for lesser cities, your D.C.s and the like. Either way, somebody paid for this intricate swing time of orders, cooks, packagers, and couriers — but not the customer.
That is decidedly not the case in 2023, when everybody seemed to notice that getting food delivered was an absolute rip-off.
It’s not exactly clear when it got out of hand, but at some point fees were eclipsing the cost of the actual food, especially in New York, the largest market for delivery apps. A Chinese-food order in Park Slope that totaled about $28 in May 2022 cost an extra $24 a year later via Grubhub. A $17.95 order for a chicken-and-rice bowl with chips at Chipotle nearly doubled to $32.06 after tip. A 30-something-dollar sushi order approached $50. “It’s so expensive. I have to quit doing it,” said Julia Craft, a hairstylist in Bushwick who showed me the Chipotle receipt. “I’m not struggling too hard, but when I see how much money I waste by ordering, it’s kinda nuts. When I don’t order, I’m amazed at how much farther my money goes, because it really eats up a lot of my income.”
The online-delivery business is the food industry’s most perfect mousetrap, a web of snarls designed to capture a customer’s money without the hassle of making anything to eat. The inflation starts with the menu, on which restaurants will sometimes post higher prices for the same items than what they charge in the store. There are service fees, delivery fees, then tips — which, historically, have not always gone to the delivery drivers. If you order for pickup? The apps take a cut. Even if you Google a restaurant’s phone number to call them directly, you might be calling a duplicative number, displayed on an app-owned dummy site, that just redirects the call through its own system so the delivery company can take a fee. It is no wonder that the top-three third-party delivery apps have parent companies with a market value of over $150 billion.
“The public has been conditioned to believe there is no cost to convenience, that getting food delivered to your front door quickly is free,” said Andrew Rigie, executive director of the New York City Hospitality Alliance, an interest group of restaurant owners. “But that could not be further from the truth. For so long, many of these big delivery companies convinced consumers that convenience was free because they took the expense out of the pockets of local restaurant owners.”
But did it always cost this much? Theadora Paulucci, an emergency manager in city government, shared with me a recent order from Oita, a sushi restaurant in Brooklyn, over DoorDash. A single Make Your Own Temaki set cost $32. Add on to that a $4.99 delivery fee, then a $4.80 service fee, $2.84 in tax, and a $4.00 tip and Paulucci ended up with a $48.63 bill for dinner. “I feel like every time I order delivery, my price doubles,” she said. “When I was a kid, you’d call the Chinese place or the pizza parlor and they would deliver FOR FREE.” (She also told me she normally tips 20 percent when the fees aren’t so high.)
Of course, this is more than just a New York phenomenon. Self Financial, a loan-consolidation company, found that the price of delivery Big Macs tripled in cities such as Tucson, Salt Lake City, and Philadelphia compared to prices for walk-ins. (Those mark-ups were also substantially higher than delivery bills just the year before, which were between 135 and 152 percent higher.) “You expect things like a service fee and a delivery fee, but then sometimes there were these add-ons, such as gas surcharges,” said George Driscoll, an analyst at Root Digital, which ran the survey for Self.
So how did we get here? I should confess that I shoulder a small part of the blame. Back in 2019, I reported a series of stories with my then-colleague Lisa Fickenscher at the New York Post about Grubhub charging restaurant owners for bogus fees. At the time, Grubhub was the largest delivery company in the U.S., and New York was the largest single market. I could not see this then, but this would become the first in a series of falling dominoes that would lead to the current state of delivery-fee insanity. The bogus-fees issue led to further revelations about how restaurant owners were paying 30 percent or more per order, and pretty soon Senator Chuck Schumer got involved. Then the pandemic hit. Indoor service at restaurants was forbidden. With everyone stuck at home, the demand for delivery went skyward, providing a windfall for delivery apps. The City Council responded by capping how much the third-party delivery companies could charge restaurants at 23 percent.
Meanwhile, the app companies were only growing larger. Uber bought Postmates. DoorDash bought Caviar, then eventually went public. After acquiring Seamless and MenuPages, Grubhub was taken over by the Danish delivery company Just Eat Takeaway. It was the same Silicon Valley endgame as ever: Get big enough to monopolize a market, then worry about making a profit. After the apps could only charge so much in fees, they seemed to have found that they could start making even more money by charging on both ends.
Customers don’t seem to really know that the delivery companies take about a quarter of the restaurant’s revenue per order. When I went by Tacoomar, the owner, Omer Gormus, showed me how Grubhub didn’t disclose the extra fees or tips the customers were paying. “We never see how much the total comes to,” he said. “From the total, at the end of the day, we pay close to 35, 40 percent.” Gormus, who opened up his shop just about a year ago, said he makes about a 1.5 percent profit on each delivery order compared to a 2.5 percent margin for a walk-in. (It’s a little bit less for those who order pickup via the apps since the delivery companies still take a small cut.)
Other restaurants have found a way to keep their orders profitable by charging two different prices. Across the street from Tacoomar, the Double Windsor charges $17 for a burger or a buttermilk-fried-chicken sandwich — both of which cost a dollar more on delivery apps. At Henry’s, a few blocks away, a Vietnamese sandwich costs $9.50 at the counter, which is 50 cents cheaper than the app price. It’s a way for the restaurants to keep making some kind of profit in an industry where the margins are notoriously thin, but it also helps enrich the delivery companies, too. Since tips, taxes, and fees are typically charged as a percentage off the base price, these small increases can have a big impact on the final bill. (An Uber Eats spokesperson said that it never hides its fees. DoorDash said it “consistently made the service more affordable over the years.” GrubHub said it’s “committed to keeping consumer fees low while accounting for the real costs to provide on-demand delivery.”)
After this year’s shocking price hikes, delivery costs are probably going to keep shooting up. Last month, a New York judge ruled against the delivery companies as they tried to fight against a $19.96-per-hour minimum wage for delivery workers, saying that they could just “pass on the increase to consumers in the form of higher delivery fees.” Ligia Guallpa, executive director of the Workers Justice Project, the advocacy organization behind Los Deliveristas Unidos, a union for delivery workers, told me the workers were getting paid about $1,500 a week now, up from about $800. (In response to this law, Uber and DoorDash have moved the prompt for tips to appear on the app only after the food is delivered. As a result, Guallpa said, tips have declined for workers.) This, at the very least, puts pay back to comparable levels. Back in 1986, the then-novel bike messengers who were dive-bombing down the Park Avenue Viaduct could make as much as $500 a week — about $1,400 in today’s money.
Maybe, though, this is all going to come to an end. Domino’s Pizza has blamed high third-party fees for its declining deliveries, and Uber’s revenue from food deliveries has fallen for three straight quarters. DoorDash has never been profitable. The Danish business that bought Grubhub in a $7.3 billion deal is now worth less than half of that and is trying to dump the company. It turns out that, even after bleeding everyone you can of their money, it’s still incredibly difficult to make a sustainable business out of delivering somebody’s pizza.