Consumers love restaurant delivery. And for good reason. It’s easy, convenient and allows them to enjoy food from their favorite restaurant while watching their streaming content of choice.
Over the past several years, this tempting proposition combined with a historic pandemic has helped make delivery an essential part of life for more than half of all consumers, including about 65% of Gen Zers and millennials, according to the National Restaurant Association.
And what’s more, an overwhelming majority of adults (82%) said they’d order delivery more often, but for one small issue: affordability.
Indeed, if consumers could change one thing about food delivery, it would almost certainly be the price.
Third-party delivery services have done a lot over the years to help ease the blow of those prices. They have lowered their fees and rolled out subscription plans. They have encouraged restaurants to offer deep discounts, often at the restaurant’s expense. And most recently, DoorDash teamed up with a company called Klarna to allow customers to pay for their deliveries in installments.
That last move got the internet talking, mostly about how the advent of burrito loans is probably not a great sign for the health of the consumer right now.
That is true. But it’s also worth remembering why buying a burrito would require a payment plan in the first place.
A lot of work goes into creating that super-convenient delivery experience that consumers love. The restaurant still has to make the food, while also paying the delivery provider a commission for their services. A courier has to go get the food and bring it to the door. And the technology that makes it all happen seamlessly is more complex than it probably gets credit for.
All of that gets built into the price the consumer pays. There are price markups by the restaurant (to offset the delivery commission); fees from the delivery app; and a tip for the delivery person. That’s why it costs $10 to walk into Chipotle and buy a burrito here in Milwaukee, but $24 to have it delivered by DoorDash.
And it's not as if anyone is making out like bandits here. Restaurants are happy if their delivery margins are in line with their in-store ones. Being a delivery driver is not exactly lucrative. And until recently, the delivery providers themselves were losing money.
So far, efforts to lower costs for consumers have mostly been an exercise in passing the buck. Sure, you can get some pretty good deals on delivery apps these days, but someone (likely the restaurant) is paying for them. And yes, you can now pay off that burrito over time, but wouldn’t going and getting it yourself for half the price be the better financial decision?
This is all to say that, for as magical as delivery can be, maybe it’s not meant to be an integral part of our daily eating habits. There are plenty of other ways to get food that cost a lot less and require only a bit more effort. And delivery could still be an occasional indulgence or a solution in a pinch.
To understand just how much would have to change about the whole ecosystem for delivery to be cheaper, consider the plan laid out by Travis Kalanick, the founder of Uber and the CEO of ghost kitchen company CloudKitchens. His vision for the future of food involves fully automated restaurants and delivery vehicles that he says will make delivery as cheap as getting groceries. It will do for food what Uber did for cars, he said, and turn cooking into a mere hobby.
For people who order a lot of delivery, or wish they could afford to, that might sound great. But for those who love restaurants and depend on them for their livelihood, it’s throwing the baby out with the bathwater.
Some things are expensive, often for a reason. Food delivery is one of those things. Let's not upend the entire industry trying to change that.