How Restaurants Everywhere Are Losing Money to Uber Eats, Delivery Apps, and More

How Restaurants Everywhere Are Losing Money to Uber Eats, Delivery Apps, and More

In the era of convenience, food delivery apps like Uber Eats, DoorDash, and Grubhub have become a staple for consumers looking to enjoy restaurant meals from the comfort of their homes.

While these apps provide additional revenue, they also come with significant costs that can erode a restaurant's profit margins.

Problem 1: App Commissions

Delivery apps typically charge restaurants a commission fee ranging from 15% to 30% per order.

• Uber Eats: Around 30% commission per order
• DoorDash: Between 15% and 30%
• Grubhub: Around 20% to 30%

Let’s break this down with an example:

• Customer places a $50 order
• 20% commission = $10 paid to delivery platform
• Restaurant receives $40 before food and labor costs

Problem 2: Increased End Cost to Customers

Delivery apps significantly increase the cost of food for customers due to fees and tips.

Example comparison:

• Chipotle Bowl via Uber Eats
• Food: $18.25
• Fees + Tips: $16.33
• Total: $34.58

• Dominos Pizza ordered directly
• Food: $18.99
• Fees + Tips: $10
• Total: $28.99

Problem 3: Reduced Value for Customers

Ordering through delivery apps reduces the value customers receive per dollar spent.

• Chipotle Bowl via delivery: 20 calories per dollar
• Chipotle Takeout: 38 calories per dollar
• Dominos Pizza direct order: 99 calories per dollar

Problem 4: Ghost Kitchens

Ghost kitchens are delivery-only restaurants operating under multiple brand names without a storefront.

They dominate delivery platforms and often compete directly with real local restaurants.

Problem 5: Losing Growth and Profits

Example scenario:

Without delivery apps

• Monthly revenue: $100,000
• Profit (15%): $15,000
• Yearly profit: $180,000

With delivery apps

• Monthly revenue: $100,000
• Profit after commissions: $5,000
• Yearly profit: $60,000

How Restaurants Can Increase Profit Margins

1. Use direct online ordering through their own website
2. Encourage pickup orders
3. Run their own delivery system

Conclusion

Delivery apps can increase sales but significantly reduce profitability due to commissions and operational costs.