Hidden Costs by Third-Party Delivery Could Harm Local Businesses

Quarantine—stuck at home, no food in the fridge, and craving something that cannot be burnt on the stove.

You pull out your phone, open an app, and now your restaurant-quality meal will be at your doorstep in 30-45 minutes. 

Third-party delivery apps have paved their way in mainstream society. Some of the most popular options include UberEats, DoorDash, Grubhub, and Postmates.

While they have proven to be convenient for many individuals stuck in cities, the COVID-19 pandemic and stay-at-home orders have highlighted some of the problems that consumers and small businesses face when using their services. 

Restaurants have become more accessible to the public, but this accessibility has come with a price. 

According to an article by Forbes, “higher demand for food delivery initially led to a surge in pricing…from March 12 to March 18, we saw food delivery fees were 16.3% higher compared to the first week of February”. 

Additional fees are often a means to offset company operating costs; however, some third-party apps are not transparent with customers and businesses. The apps that choose to have some sort of transparency, like DoorDash, end up giving businesses an ultimatum—charge customers more to make up for commissions or allow the third-party company to raise the price of products at its discretion.

During an interview with Chicago Business, deli owner Jeff Miller explained concerns over markups, stating that “they’re padding the cost of my menu items without telling me or giving me a cut of the money. I had no idea they’re doing this.”

To avoid some of the hidden fees and obligations to third-party delivery, many restaurants have found themselves offering grocery services and platters. These changes have become incentives to potential customers. 

Initiatives like these help encourage people to order directly from them and take advantage of takeout and curbside pickup options. 

As a response, many third-party apps have jumped into the popularity of the Great American Takeout movement. The Great American Takeout was a coalition of roughly 400 restaurants and partners encouraging consumers to order takeout from restaurants. 

Companies like UberEats then began offering free delivery when patrons used their apps to order from local businesses. DoorDash announced a commitment of $100 million to local restaurants and reduced commission fees by fifty percent throughout May. These moves allow businesses to receive all of the profits of their sales instead of a portion of them being siphoned by third-party companies. 

Despite these changes, some restaurants are still preferring that customers will order meals from them directly, online, or by phone.

“We work very hard to put out a safe product unlike any other,” a spokesperson for Melinda’s Specialty Deli stated. “We are ready to serve you whenever or wherever you feel most comfortable. Small business is suffering.’

You can find more information about Melinda’s and how to support other local businesses here.