The Deteriorating Landscape of Food Delivery Apps

Despite raking in tens of billions in gross bookings, food delivery apps just can’t crack profitability. The industry’s economics reveal a precarious, unsustainable model that impacts every stakeholder.

The Financial Struggles of Food Delivery Services

Food delivery apps like Uber Eats and DoorDash have reshaped how people access meals, but their financials paint a stark picture. Uber, which handles as much gross booking volume as McDonald’s does in global restaurant sales, reported a $4.6 billion loss last year. Uber Eats posted $6.9 billion in revenue on $51.6 billion of gross bookings, yet ended 2021 with an EBITDA loss of $348 million. Comparable patterns appear in DoorDash, which has reported persistent quarterly losses even as its bookings soared.

This hemorrhaging continues despite multiple funding rounds raising billions from venture capital and public investors. Ultra-low interest rates and a surge of SPAC deals have temporarily masked the urgency of hitting breakeven. But without a clear path to net profitability, these platforms risk investor fatigue and a withdrawal of capital that has long subsidized steep discounts and driver incentives.

High Fees and Their Impact on Restaurants

Restaurants bear the brunt of high commissions charged by delivery platforms. Uber Eats typically takes a 30% cut of each sale and charges a $500 onboarding fee to cover photography and set-up. DoorDash follows a similar structure, imposing commissions up to 30% on delivery and 15% on pickup orders.

Liberal refund policies compound the problem. If a customer requests a refund for missing or low-quality items, the platform retains its commission, forcing the restaurant to absorb the full cost plus the fee for that canceled sale. For example, a $100 order could cost the restaurant $30 in commission—and if refunded, an extra $100 loss on top, effectively a $130 hit for a transaction that never materialized. Small businesses, with razor-thin margins, can quickly find that these apps erode profitability rather than boost volume.

The Driver Perspective: A Mixed Bag

Drivers—classified as independent contractors—face inconsistent earnings and limited protections. In Australia, delivery riders can earn between AUD 20 and 30 per hour, often exceeding the legal minimum wage. However, pay fluctuates with demand, leading to unpredictable weekly income. A midday lull can slash average earnings, while peak times offer little guarantee that bonuses or tips will sufficiently compensate.

Platforms also levy cancellation fees on drivers and may penalize low acceptance rates, all without offering health insurance or paid leave. The classification battle culminated in California’s Proposition 22, preserving contractor status but providing only modest benefits, such as health stipends and mileage reimbursements after meeting weekly thresholds. Drivers still report opaque algorithms and a lack of clarity around how pay is calculated.

The Customer Experience: Pricey Convenience

For customers, convenience comes at a premium. Delivery fees have risen from around $1–$3 per order to often $6 or more. Service charges, small-cart fees, and surge pricing during peak hours drive up total costs. To offset commission costs, restaurants increase menu prices by as much as 30%, making online orders significantly more expensive than dine-in meals.

Subscription plans like DoorDash’s DashPass or Uber’s Uber One offer reduced fees and free delivery for a monthly fee, but they only make sense for heavy users. Casual diners will still face high individual order costs, and loyalty to a single app remains rare, reducing the value of these subscription services in driving long-term customer retention.

The Only Winners? Executives

While restaurants, drivers, and customers struggle, executives at major delivery apps have prospered. Uber’s CEO received $42 million in compensation in 2019—much of it in stock grants—following a reported $200 million signing package. Executives at competing firms have also benefited from lucrative options and bonuses tied to aggressive growth targets, irrespective of bottom-line losses.

Although equity-based awards don’t affect day-to-day operating costs, they dilute investor ownership and shield leadership from the financial pain experienced by other stakeholders. This pay disparity underscores a growing disconnect between executive rewards and overall platform profitability.

No Room for Differentiation

The highly competitive landscape lacks clear differentiation, turning food delivery into a commodity battle. Restaurants can list on multiple services, drivers switch platforms mid-shift, and customers hop between apps based on promotions. Efforts to claim an advantage in speed or reliability ring hollow when other platforms make similar promises.

“The apps feel the same, but they’re not Uber’s somehow better,”
an Uber Eats executive conceded in a 2019 interview.

Attempts to stand out with ghost kitchens, grocery delivery add-ons, or exclusive restaurant partnerships have yielded mixed results. Without a sustainable network effect—where users and restaurants become locked into a single platform—companies compete primarily on price, further squeezing already thin margins.

Future Possibilities: A Silver Lining?

Despite current headwinds, technological advancements may eventually bolster the economics of delivery. Automated solutions—like drones and autonomous vehicles—could substantially cut labor costs, the single largest expense for these services. Platforms are already piloting sidewalk robots and limited drone routes in select markets.

Consolidation may also play a role, as smaller players get acquired and operational scale efficiencies improve. Yet, these shifts remain years away. Until then, delivery firms will rely on periodic funding infusions to cover operating losses while testing new revenue streams like advertising or loyalty subscriptions.

Conclusion: Key Takeaway

Assess whether the convenience of food delivery apps justifies their escalating costs, and consider ordering directly from restaurants or supporting local favorites to help sustain the broader ecosystem.