On-demand food delivery saw truly explosive growth during the pandemic. With restaurants closed to in-person dining and takeout’s ability to turn “a lethally depressing Saturday night into a lethally boring Saturday night with pad thai,” as “Last Week Tonight” host John Oliver recently put it, apps like GrubHub and DoorDash experienced a surge of new users and global revenue for the industry skyrocketed from $90 billion in 2018 to $294 billion in 2021.
However, new reports show they still aren’t profitable.
According to a 2024 analysis from the Financial Times, leading online food delivery groups in Europe and the U.S. “have racked up more than $20 [billion] in combined operating losses since they went public,” reportedly leaving investors queasy at the idea of funding more loss. Not only that, but consumer reports indicate customer dissatisfaction with the apps is on the rise, while labor groups continue to decry the ways in which they say the food delivery industry takes advantage of gig economy workers.
Put another way: On-demand food delivery is not working for customers, couriers, restaurants, or even the companies behind the apps themselves. The food delivery bubble is definitely bursting — but maybe that’s not a bad thing.
To understand why the industry is flailing, it helps to understand how it actually began.
Desire for novelty and convenience has always helped drive food delivery.
Texts from the Korean Joseon Dynasty dated around 1770 indicate that scholars and government officials would occasionally order in naengmyeon, chilled buckwheat noodles served with pickled radish, thin strips of cucumber and slices of Korean pear. By the late 19th century, dabbawalas — which translates to “one who carries the box” — began operating in colonial Mumbai, delivering hot lunches to workers. Across the globe, in Naples, Italy, Queen Margherita placed what is now recognized first delivery pizza order from Pizzeria di Pietro e Basta Così in 1898; after the queen fell ill, the shop’s head chef, Raffaele Esposito personally brought a mozzarella and basil pie to her doorstep.
The advent of the telephone meant that average diners could receive similarly royal treatment. In 1920s Los Angeles, the Chinese cafe Kin-Chu would fulfill orders via phone until 1 a.m., a stroke of prescience that forecasted the eventual and immense popularity of late-night delivery.
Technology continued to inspire shifts in the industry. For instance, after the second World War, many restaurants began advertising “television menus,” dishes meant to be ordered for takeout or delivery and enjoyed in front of TV sets, which were becoming increasingly commonplace in middle-class American homes. In 1994, Pizza Hut launched one of the first internet-based food delivery websites, Pizzanets, which allowed customers in Santa Cruz (though only in Santa Cruz) to order delivery.
Then smartphones came to market, quickly followed by food delivery apps, like DoorDash, GrubHub and UberEats, now the three top food delivery companies in the United States, which collectively account for 80% of the sector’s revenue. The introduction of these apps completely upended how food had previously been delivered.
Instead of customers calling a restaurant and placing an order, which would then be delivered by a restaurant employee and often paid for in cash, customers now place an order and pay through one of these third-party apps, which connect a local courier with that order. Unlike typical restaurant delivery, the majority of these couriers are contract workers, while restaurants are also charged hefty commission fees for each order.
Especially in recent years, local restaurant owners and chefs have tried to educate their customers on what a toll on-demand, third-party delivery apps take on their businesses. In a 2021 story for Eater Chicago, Philip Foss, the chef and owner of the Michelin-starred EL Ideas and Boxcar BBQ, wrote that the restaurant industry has been “cannibalizing itself” by joining delivery services like Grubhub, DoorDash, and UberEats.
“As a consumer, I get it,” Foss wrote. “The convenience and the wide selection of restaurants makes takeout in recent years as good as it’s ever been. And as someone who used the apps a lot (pre-pandemic), ordering delicious food from the sofa speaks powerfully to the lazy side of my heart.”
He continued: “The allure as a restaurant owner is obvious: Our goal is to get our succulent barbecue in front of people. And if the customer’s goal is to get dinner on the table as quickly as possible, the best way to do that is to open an app and have it delivered. So it’s on restaurants to try to make that happen. Well, we tried. But here’s the thing: Delivery apps are destroying restaurants, from mom-and-pop places to chefs with Michelin stars. They’re a terrible deal.”
Foss laid out how, after accounting for normal restaurant costs plus paying the commission fees third-party apps charge — which can range between 15% and 30% — he makes $1.50 on a $30 check. The delivery app? They would make $4.50 on the same order.
“New studies show that gig work is less profitable than it used to be as the cost of fuel, insurance and car maintenance have increased — and as the rate of tipping on food delivery has decreased.”
It’s a staggering discrepancy, but the couriers coming to pick up the order aren’t seeing that profit, either. For instance, the typical Uber Eats driver earns a base fare per delivery, ranging from $2 to $4, depending on the market. However, new studies show that gig work, in addition to being driven by sometimes unpredictable consumer demand, is less profitable than it used to be as the cost of fuel, insurance and car maintenance have increased — and as the rate of tipping on food delivery has decreased.
This, in turn, speaks to reports of customers’ growing dissatisfaction with on-demand food delivery. From research done by Consumer Reports to the annals of delivery app-specific subreddits, customers complain about growing wait times, cold food and exorbitant fees.
“As a customer that uses multiple food delivery apps: Grubhub, DoorDash, Uber Eats, I find that prices for each menu item are higher through the apps than if I ordered directly through the restaurant,” one respondent who spoke to Consumer Reports said. “Some apps also then charge a ‘Service Fee’ and/or ‘Delivery Fee.’ I have no idea how much of those added charges go to the restaurant, driver, or app company. It is not clearly outlined at all. Plus I need to tip on top of all those extra charges to make it work the driver’s time and effort. So, it quickly becomes ridiculously expensive to order through the apps.”
In 2023, New York Magazine officially declared food delivery a 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,” wrote New York’s Kevin T. Dugan. “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.”
Julia Craft, a hairstylist in Bushwick, told Dugan she’d have to give up the habit. “I’m not struggling too hard, but when I see how much money I waste by ordering, it’s kinda nuts,” Craft said. “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.”
“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”
And even with all that, on-demand food delivery apps are still having trouble figuring out a profitability model that works post-pandemic, thanks largely to high operating costs, low margins and the deeply competitive market. So what’s the answer? According to chef Phillip Foss, there’s no single solution that is completely convenient and completely profitable for everyone, though there are some simple steps that can be taken to drive a more equitable delivery ecosystem.
“Most of the public wants what it wants when it wants it, and asking a consumer to give up a quality-of-life attraction like having food from their favorite restaurant delivered to their door is like asking a kid to give you back candy they’ve already put in their mouth,” he said.
Some companies, like ChowNow and Slice, are positioning themselves as ethical alternatives to big-name apps by prioritizing fair wages for drivers and offering more reasonable fees to area eateries. However, Foss maintains that one of the most responsible ways to get delivery is just by going old-school— simply picking up the phone and calling local restaurants for delivery or take-out.
“I ask the general public to take action by supporting restaurants that are just saying no to delivery app services,” he wrote. “The connection with the eatery will be more intimate, and you will feel good for supporting hard-working people through difficult times.”
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