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Unveiling the Markups: Understanding the True Costs of Food Delivery Services like Grubhub and Doord

May 09, 2024

In an era where convenience often reigns supreme, food delivery services like Grubhub, Doordash, and Uber Eats have become an integral part of many people's lives. With just a few taps on a smartphone, you can have your favorite meal delivered straight to your doorstep within minutes. However, what many consumers may not realize is the hidden cost associated with this convenience: markup fees.

While the allure of having hot, delicious food delivered to your door is undeniable, it's essential to understand the financial implications of using these services. One of the primary factors driving up the cost of ordering through platforms like Grubhub and Doordash is the markup fees imposed on both customers and restaurants.

Markup fees are essentially the difference between what the customer pays for their order and what the restaurant receives. These fees can vary significantly but typically range from 15% to 30% of the total order value. For consumers, this means paying more for the same meal than if they were to dine in or pick up their food themselves.

So, why do these markup fees exist, and who ultimately foots the bill?

For restaurants, partnering with delivery services can be a double-edged sword. On one hand, it allows them to reach a broader customer base and increase their sales without investing in delivery infrastructure. However, this convenience comes at a cost. Many restaurants find themselves grappling with slim profit margins, making it challenging to absorb the hefty markup fees imposed by these platforms.

To compensate for these fees, restaurants often resort to increasing menu prices for delivery orders or implementing minimum order requirements to make the service financially viable for them. As a result, customers end up paying more for the same meal when ordering through these platforms.

So, what can consumers do to mitigate the impact of markup fees on their wallets?

First and foremost, it's essential to be mindful of the true cost of using food delivery services. While the convenience they offer is undeniable, it's essential to weigh the benefits against the added expense. Consider alternatives such as picking up your order yourself or opting for restaurants that offer their delivery services, bypassing third-party platforms altogether. Last week, Alex from our office picked up his dry cleaning AND a MOD Pizza internet order for the office, thus avoiding Doordash markups and fees and adding only 5 minutes to his lunch run.

Additionally, keep an eye out for promotions, discounts, and loyalty programs offered by these delivery services... Many platforms frequently run special deals to attract customers, allowing you to save on delivery fees or receive discounts on your orders. For Doordash, it is under the Promotions section on the confirmation screen and is available for many orders; however, you must elect the discount to receive it.

While food delivery services like Grubhub and Doordash offer unparalleled convenience, it's essential to understand the markup fees associated with them. By being informed consumers and exploring alternative options, we can make more financially sound decisions without sacrificing the joy of having our favorite meals delivered to our doorstep.