The Washington Post conducted an experiment, placing identical orders on each app and then gathering receipts from all parties to see how each fared. [...]
Here’s the breakdown:
Our unscientific experiment offers an illustration of how costs can stack up across the food delivery landscape.
“The opacity is a feature and not a bug of these systems,” said Lindsey Cameron, a management professor at the Wharton School of the University of Pennsylvania.
The Customers
The Post ordered chicken skewers and a side of fried plantains from Artesano, a Latin comfort food joint in San Francisco. That order costs about $22 when you pick it up from the restaurant, including sales tax of about 9%.
Dealing directly with the restaurant was by far the cheapest way to get the food.
If you want it delivered to your doorstep, you will pay substantially more.
For starters, in all three apps the customer total without tip averaged about $6 more than an in-store order.
All three apps charged a delivery fee, ranging from 49 cents on Uber Eats to $3.99 on Grubhub. Other charges were more opaque. And we also included tip this time.
Grubhub and DoorDash charged an unspecified “service fee,” for example. (Grubhub said it covers “driver related costs.” And for DoorDash the fee helps the company operate the platform.) Uber Eats didn’t charge a service fee, but did include a line item for “taxes and fees” that added up to $5.20.
Veena Dubal, an employment law professor at the University of California College of the Law, San Francisco, said the lack of transparency can be infuriating for consumers.
“Is this money going to the restaurant? Is this money going to the driver? Is this money going to the firm? It’s all so opaque…Customers have been really frustrated when they look at their receipts.”
The Restaurant
Artesano owner Douglas Mathieux, 54, saw the three orders pop up on his restaurant’s payments system. The kitchen got to work as he studied the receipts.
Mathieux pays for the premium tier plan across all three platforms.
On every order, he pays a commission of between 25% and 30% of the food charge.
In return, his customers get lower delivery fees and he gets greater visibility on the apps, which theoretically helps him reach a broader base of customers.
Mathieux said he charges slightly more for dishes ordered on the apps, a common practice. But the higher charges, he said, don’t fully cover the additional cost of using the apps.
“If the delivery companies didn’t exist, customers would go back to ordering straight from me over the phone or from my website, and I would actually be able to make money on the orders again,” he said.
As it is, the apps are responsible for about a third of the revenue at Artesano, which is on track to generate about $1 million in sales this year.
“If I decide to not use them anymore,” he said, “it would be shooting myself in the foot.”
The Drivers
Our tip accounted for a third to a half of their total earnings.
The Delivery Apps
The Post estimated how much each of the app companies made on our order by subtracting taxes and payments to the drivers and the restaurant from the amount we paid. Grubhub took roughly a quarter, while DoorDash took 17 percent and Uber Eats just under 11 percent.
The apps are also on the hook for costs that include credit card processing fees, insurance and customer service, which can reduce their cut further. [...]
Conclusion
Uber, DoorDash and Grubhub have become synonymous with quick food. The companies banked on technology to help make the food delivery business an affordable and profitable luxury for all.
This experiment shows how smarter, faster algorithms have not entirely solved the problem of point-to-point delivery, long a difficult business model with margins that hinge on small variances of dollars and cents. And a crucial component of each order was the tip — which generated a substantial portion of drivers’ earnings.
Payout breakdown with tip:
While each app treats customers, restaurants and drivers slightly differently, the receipts suggest the difficulty of all parties coming out ahead in food delivery.
…pickup orders may be the best way to go — for the restaurant and your pocketbook.
Thanks for reading! Hope you have a terrific day.
#1035
Thanks for reading Still Learning! Subscribe for free to receive new posts and support my work.
