Core Insights - The food delivery industry is facing challenges as rising costs and service fees lead to consumer frustrations, impacting order volumes and profitability for companies [2][3][5] Group 1: Industry Trends - Third-party food delivery services like Grubhub, DoorDash, and Uber Eats are becoming increasingly common among American consumers, with a rise in the share of consumers using these services from 15% in 2020 to 21% in 2024 [17] - Consumers reported higher yearly increases in total checks on third-party apps compared to direct restaurant orders between 2022 and 2024, indicating a trend of rising costs associated with these services [16] - The premium charged by restaurants for third-party delivery menus has nearly doubled since 2020, contributing to consumer dissatisfaction [18] Group 2: Company Performance - Grubhub, owned by Just Eat Takeaway, has not posted an annual profit since going public in 2020, with only one quarter of profit reported during the early COVID-19 lockdowns [7][8] - Uber's delivery segment, which includes Uber Eats, reported adjusted EBITDA of $1.51 billion for 2023, an increase of over $955 million from 2022, highlighting strong performance in the delivery business [37] - DoorDash has seen an all-time high of active users and increased order frequency while claiming to have lowered fees for consumers over the last two years [20] Group 3: Consumer Behavior - A significant portion of consumers (41%) reported ordering less delivery due to high delivery fees, while 48% cited inflated menu prices as a reason for reduced orders [18] - Consumers often experience surprise at checkout due to additional fees, which can lead to frustration and impact their willingness to order [13][24] - Tipping practices are influenced by the perception that service fees do not adequately compensate delivery drivers, leading consumers to feel obligated to tip despite high overall costs [36][52] Group 4: Restaurant Dynamics - Restaurants face a difficult balance in using third-party delivery services, as the associated costs can force them to raise menu prices [28] - The commission structure for restaurants varies, with Uber Eats and DoorDash charging between 15% to 30% of the order total, while Grubhub charges a marketing commission of 5% to 10% [26] - Some restaurant owners resist using third-party delivery services due to concerns over high fees and the impact on their bottom line [30][47] Group 5: Subscription Models - All three major delivery services offer premium memberships that eliminate delivery charges, but service fees still apply, which can vary by location [48][51] - Partnerships with companies like Amazon for membership offerings aim to attract more customers and reduce overall costs for frequent users [33] - Subscription models are seen as a way to retain loyal customers while providing them with tailored discounts and benefits [34]
Food delivery fees are rising, and everyone's feeling the pinch