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It’s no secret that food delivery had a big year in 2020 because of the coronavirus pandemic. With people staying at home, many relied on these apps to bring them food from their favorite restaurants. And at one point when restaurants were struggling to keep afloat given they couldn’t serve people in their premises, it became almost like a crusade to order take out and do our part as consumers to help these businesses.
According to data cited by Second Measure, sales for meal delivery services grew 138% year-over-year, collectively, in Dec. 2020. By that time, 35% of U.S. consumers had ever ordered from one of the services, up from 28% a year ago.
Benefitting the most from this are third-party delivery apps, including UberEats, Grubhub, Postmates, and DoorDash. Per Second Measure’s data, DoorDash and its subsidiaries earned 52% of U.S. consumers’ meal delivery sales in December, and Uber Eats came in second place with 22%. Then came Grubhub and its subsidiaries at 18%. Being the fourth major U.S. meal delivery company, Postmates earned 7 percent of the U.S. meal delivery market in the same month.
When it comes to Los Angeles, as of Jan. 2021, Grubhub and Postmates — which is now owned by Uber— are tied as the most popular services in the area.
With so much growth it would be assumed that the restaurants involved would get a slice of the pie. However, this is not the case. Though the apps offer infrastructure to tackle delivery, they simultaneously employ practices like charging exorbitant fees to the restaurants that use the services, which only ends up hurting the businesses more than helping.
In California we’ve seen pushback against delivery apps and their predatory practices in courtrooms, polling booths, and within restaurants and their customer base. In Dec. 2020, we reported on a story about customers on DoorDash being able to order from “non-partner” merchants, which are restaurants that do not have agreements with the delivery app. Assemblymember Lorena Gonzalez (D-San Diego) authored AB 2149, called the Fair Food Delivery Act, which would require the food delivery services to only list a restaurant on their platform with permission from the restaurant owner and to share certain information about who is ordering. The San Diego assembly member also authored AB5. The Fair Food Delivery Act of 2020, which was signed into law in Sep. and took effect on Jan. 1 2021.
Conversely, the delivery app industry, with billions of dollars in investment, is shaping up to fight every legal challenge thrown its way, and to spend its way to crafting labor legislation in its favor — like the recently passed Prop. 22.
In the last 20 years, apps have allowed restaurants to shift their ordering services from the phone to the internet without having to build their own websites, and eventually also outsourced delivery staff. Now, many small restaurants have opted to strike a deal with one of the apps instead of hiring their own delivery personnel themselves, which in turn would connect the restaurant with an independent contractor to pick up and deliver the food.
As aforementioned, third-party delivery apps often charge processing fees per transaction, as well as commission fees, delivery fees, and subscription fees. They can also offer choice placement on their websites to restaurants that are willing to pay more. As Eater pointed out, most restaurants find themselves paying as much as 30% per order in fees overall.
However, at the end of the day, the fees are all clearly stated in the agreements with the restaurants. What’s more alarming is the less than honest methods of competing with each other while squeezing out every possible cent from restaurants. For example, a Philadelphia restaurant owner filed a class-action lawsuit against Grubhub in 2019 after he discovered that his business was being charged order fees anytime a call was received through a phone number provided to customers by the app. Another big issue, which was already briefly mentioned, is the common practice of deliberately listing restaurants without permission and without a partnership, in which the state had to step in and regulate with The Fair Food Delivery Act.
Largely, restaurant owners and workers have been urging customers to order and pick up from the restaurants directly, instead of going through third-party services. As Giuseppe Badalamenti of Chicago Pizza Boss said, it’s time to “stop believing you are supporting your community by ordering from a third party delivery company.”