Who Is Ordering Restaurant Delivery? Despite Cost Complaints, Everyone – Franchise Times
Nicholas Upton
Since way back in the olden days of app-based food delivery, the restaurant industry watched for some kind of price equilibrium. “What is the most someone would pay for a damp cheeseburger and less-than-crispy fries?” we wondered. And we kept wondering. And today, we’re still wondering.
The fees, price premiums and expected tips keep jumping higher, but people keep ordering more food delivery from those third-party providers.
A recent survey of meal prices showed just how high they’ve gone. Third-party delivery always came with a significant convenience premium, but today’s premiums would have been mind-blowing back in those bygone days of 2013. Today, you may pay 134 percent more for lunch delivered from Chick-fil-A. That’s according to a large price survey by FinanceBuzz, a publication that offers side-hustle and money-saving tips. Unsurprisingly, it advises you don’t order delivery if you’re on a budget.
The price premium in that study varied across restaurant brands and platforms, and $23 for a $9.85 Chick-fil-A order via Grubhub is an outlier. On average, deliveries from the brand are 97 percent higher than pickup. Panera and Tropical Smoothie Cafe carry the lowest premiums, a paltry 47 percent for delivery compared to pickup.
That wide range accounts for price bumps by restaurants, but the markups by the delivery aggregators are far from small. Today, the average markup by delivery companies is 81 percent, which includes fees, taxes and suggested tip (which is always low). Postmates has the highest markup at 92 percent, DoorDash tacks on 83 percent, Grubhub 80 percent and Uber Eats 69 percent.
Back in 2020, the average markup was about 40 percent, according to surveying done by Franchise Times sister publication Food On Demand. The cost to get delivery is twice what it was just four years ago, and yet, the major delivery providers continue to grow to new records every quarter.
In 2023 (the latest available data at press time), Uber Eats grew delivery by 19 percent, to $17 billion globally. DoorDash reported 27 percent order growth, to $17.6 billion. Some of that is the continued market share cage match that’s been going since the food delivery apps launched, with give and take among the major players.
Grubhub orders dipped 11 percent in sales, according to Just Eat Takeaway.com, sales that DoorDash and Uber Eats are happy to grab. The Dutch multinational may well regret jumping into the fray when it acquired Grubhub. The other U.S.-based public food delivery company, ASAP (formerly known as Waitr), just shut down completely after defaulting on loans despite some creative approaches to delivery in the past few years. It filed for Chapter 7 bankruptcy and the company and all its subsidiaries—including Dude Delivery, Waitr, ASAP, Bite Squad, Delivery Logistics and Catering on Demand—ceased operations April 2
DoorDash now controls 67 percent of the U.S. market, according to data firm Second Measure, which mined consumer transaction data for a recent snapshot of the market. Uber Eats is maintaining 23 percent of the market. Grubhub now controls about 8 percent of the U.S. market—a steady decline since the company peaked in order volume in 2021.
Orders don’t stop
Returning to the consumer, despite the record prices, people ordered more from every service except ASAP in March 2024. According to Second Measure, nobody wants to drive anymore. Every platform jumped in sales in March.
So while consumers say the prices are too much, they just keep ordering.
According to Tillster’s latest survey of restaurant consumers, 61 percent of respondents said they abandoned an order because it was too expensive. They also said they prefer to order directly from restaurants; 34 percent said they planned to do that more in the next year. Just short of that, 31 percent of respondents said they planned to use third-party delivery apps more in the next year. Tillster’s report showed 57 percent of respondents still use third-party platforms at least once a week, and 36 percent use them one to three times each month.
A similar response came from the National Restaurant Association’s annual technology survey. In that survey, 80 percent of adults said they would use third-party apps to order food. Millennials especially are sticking with third-party delivery. In that NRA survey, 88 percent of millennials said they would keep ordering via aggregators. But everyone still loves the apps, as 84 percent of Gen Z, 86 percent of Gen X and 59 percent of baby boomers said they would keep ordering via third-party delivery.
There too, all age ranges said they prefer to use restaurant apps or websites, and yet they stick to the routine of third-party. Why? Because it’s easy, and the apps keep working to make it easier with quality-of-life perks like loyalty and quicker ways to sort and order–apparently worth the extra cost.
For those looking for lessons, the tech firms are eager to show how much consumers want to order from first-party sources. And they do, especially for digital pickup, as noted in both the NRA and Tillster survey.
Restaurant companies that have the capacity and budget to build out those first-party resources should do so. There is real power in direct communication, loyalty and all the other benefits by capturing a consumer and engaging with them routinely. In the digital world, there may be no better tactic. But it’s a tactic that requires ongoing work, investment and real partnership to keep the technology moving along with consumer demands for things like easier payment, order tracking and perks—all things consumers said they wanted.
For brands and restaurant companies that don’t have capacity to take that on or just don’t want to, there remains an alternative to keeping margins in line: crank your prices as high as meets some equilibrium. While not everyone has the rabid fans of Chick-fil-A, it appears consumers are more than willing to pay a lot more to stay home. Don’t be shy about raising prices because we’re seemingly nowhere near the ceiling of what consumers will pay.
Nicholas Upton has reported on retail and restaurant technology for more than a decade. His Tech Stack column aims to distill complex ideas into actionable insights. Send interesting tech topics to up******@***il.com.
