Why your delivery order comes with a heaping side of fees

We all know the feeling: You’re home in front of the TV, treating yourself to your favorite delivery meal, when all of a sudden your $18 ramen turns into a $32 order.

It’s an experience that will have you eating a Trader Joe’s frozen meal in no time — but why is it happening?

A bunch of reasons, per Vox:

• Ordering on a delivery app is usually more expensive than ordering directly from a restaurant.
• Delivery and services fees are then added to an already pricier bill. DoorDash charges a 15% service fee with a $3 minimum; Uber Eats’ service fee depends on basket size.
• On the other hand, delivery apps can take as much as 30% of an order’s subtotal from restaurants.

The apps still seem to be doing just fine

In 2023, DoorDash’s profit margin was almost 49%, and Uber’s delivery segment earned $1.5B, a 173% YoY increase.

Why, then, has there been so much discourse about delivery services struggling to gain profitability?

Probably because they’re shelling out billions on growth tactics.

DoorDash spent $2B of its $8.6B in 2023 revenue on sales and marketing and $1B on research and development. Plus, it spent $750m on stock buybacks — something Uber plans to spend $7B on this year.

Did someone order a whole mess?

Joining the unhappy customers and disgruntled restaurants are the frustrated delivery workers. What a party.

Delivery workers, who face an increased risk of fatal accidents and on-the-job violence, only pocket a small cut of the fees charged to customers.

And they’re underpaid for risky work: One 2022 study shows delivery workers in Seattle made an hourly average of $8.71, while another found that those in New York City made ~$11, both well below state minimum wages.

New York and Seattle recently put new minimum pay laws into effect for delivery workers, and the reception has been rocky, to say the least.

Uber claimed order volume in Seattle dropped 30% following new regulations, and Grubhub wrote that tips dove 26%.

DoorDash said Seattle businesses lost $1m+ in revenue — but not before it slapped a $4.99 regulatory fee on all delivery orders.