High prices are pervasive across the delivery app world, from Grubhub to Uber Eats to DoorDash. As one industry consultant told the Guardian, “The delivery fees and service charges from these websites are murder. They’re incredibly high rates… It’s almost impossible to profit at all.”
And yet, the the food delivery network business paradoxically isn’t doing very well. Uber and Grubhub are considering merging because prices they charge to restaurants are too low to support their overhead. These apps should probably be a modestly profitable regional services, connecting local eateries to local eaters, like taxicab stands or co-working spaces before WeWork. But our global monopoly-centric public policy framework has flooded capital into the space, leading to money-losing attempts to build global empires. It’s a variant of counterfeit capitalism, where investors hoping for monopoly rents are subsidizing an artificial and predatory business model.
The pandemic has put this dynamic into stark relief. Food apps are seeing a flood of new business. At the same time, the disease has changed the food service business. Most restaurants focus on takeout and delivery, because they are otherwise shut down. The restaurant industry always lived on thin margins, and these apps charge up to 30% of the total order amount. When delivery was a side business for most restaurants, high delivery app fees were manageable. But since restaurants have gone to a mostly takeout/delivery business during the pandemic, they have become dependent on this new sales and distribution channel.
Uber should not exist. It lost over eight billion dollars last year and has never turned a profit, even though it only has to pay for wages and not any of the physical infrastructure of its core businesses. Its food delivery service is wildly expensive for restaurants and the company, and its ride sharing business is a predatory version of actual taxicabs. There are many companies that have benefitted from lax regulations and bottomless capital, but Uber stands out as a particularly toxic example.