When it comes to gas prices, $4 a gallon is the tipping point for many Americans, according to AAA. That’s when people start to change their behavior by driving less or spending less.
That tipping point could apply in particular to third-party delivery drivers, who have to foot their own gas bills while they’re out delivering food for DoorDash or Uber Eats. And what affects delivery drivers can also affect the restaurants they deliver from.
Gas prices blew past that dividing line this month, with the average cost of a gallon hitting a record high of $4.32 on Thursday, AAA said. Those prices are unlikely to normalize anytime soon because of their connection to Russia’s ongoing invasion of Ukraine, the organization warned.
Local news reports from across the U.S. detailed how those prices are impacting food delivery drivers. Most said they’re taking home less money. Some are being more selective about the type of orders they accept, and others said they might have to leave the job. A number of online petitions have sprung up urging companies like DoorDash and Uber to raise their rates in response to the higher costs.
Driver supply is an important variable for restaurants that offer delivery. It impacts delivery times and food quality as well as an operation’s ability to meet demand. If higher gas prices lead to fewer drivers, it could upset the whole system, adding to existing problems like poor food quality and unfavorable margins.
Some delivery companies are starting to respond to the higher costs in order to maintain supply. Grubhub, for instance, said it would raise driver pay in certain markets.
“We’re committed to offering competitive rates for our drivers and are constantly making adjustments on a market-by-market basis to ensure we have enough drivers to meet diner demand,” a spokesperson said in a statement.
It also said it could raise prices for customers. Uber CEO Dara Khosrowshahi on Monday hinted that his company could do the same, without too much of a pinch for consumers. A 20% hike in gas prices could be offset with a 1% increase in Uber prices, he said during the Morgan Stanley Technology, Media and Telecom Conference. (For context, gas prices have risen about 14% since the beginning of March, but the year-over-year increase is roughly 4 times that.)
“That's not going to change trends one way or the other, again, assuming that our take is the same and the drivers' take is the same,” Khosrowshahi said of the potential hike, according to a transcript on financial services site Sentieo. “So that hopefully will show you the size of the issue.”
A 1% price increase would be minor compared to overall inflation in restaurant menu prices, which have increased nearly 7% over the past year. Food delivery prices have ballooned at even higher rates: Restaurants are marking up delivery prices by an average of 24% from their regular menus, according to a recent study by tech supplier Paytronix.
Restaurants claim to have faced little resistance from customers to these higher prices. But $4 or even $5 gas could very well be the final straw. Not only could it make delivery less desirable, but it could also discourage customers from visiting restaurants altogether. Among adults 35 and older, 43% said they would cut back on dining out as a result of higher gas prices, according to AAA.
And nearly 70% of consumers said gas prices have a big impact on their spending habits, second only to retail prices, according to a study published Wednesday by ICSC, an organization that supports the commerce and retail industries.
Still, the group sounded a note of optimism on consumers’ durability, even as just about everything gets more expensive: ‘We remain confident in the broad trajectory of the economy, and the marketplaces industry is poised for success in 2022 as, to date, consumer resilience has outpaced these concerns,” said ICSC CEO Tom McGee.