Behind the scenes of food delivery platforms and their crushing impact on small restaurants.
Passion, Pizza, and Reality
Opening a pizzeria was my dream come true—a passion project born out of my love for Neapolitan pizza and the desire to make it affordable and accessible. While most Neapolitan-style places cater to the luxury dining crowd, I envisioned something different: a small, casual spot where you could grab great pizza, fast, without the hefty price tag.
But here’s the reality I didn’t fully grasp at first: in today’s market, being a restaurant often means you need to provide delivery. My place had just four bar seats, and eventually, 65% of our revenue came from deliveries. To stay even remotely competitive, we had no choice but to partner with delivery platforms like Wolt, UberEats, Glovo and the others.
It didn’t take long to realize how these platforms, while seemingly helpful, were siphoning the lifeblood out of our business.
The Hidden Costs of Food Delivery Platforms
When you order food online, here’s what happens:
- You pay for the food and a delivery fee.
- The restaurant fulfills your order.
- The delivery platform takes a significant cut—up to 30% commission on the total bill.
That’s right. For every $100 you spend, the delivery fee you payed PLUS $30 goes directly to the platform, not the restaurant. And that’s just the baseline.
Want your restaurant to stand out among hundreds of competitors? You’ll need to pay for sponsored placements or participate in promotional campaigns. For example, “Buy 1 Get 2” deals often mean you’re covering the cost of those promotions, not the platform.
Here’s a staggering figure: in the first quarter of 2024, UberEats took 52% of our revenue through commissions, promotions, and fees. Out of $50,000 in sales, $26,000 went straight to UberEats.
What John Oliver Got Right
John Oliver’s deep dive into the food delivery industry (watch here) pulls no punches about the exploitative practices of delivery platforms. He breaks down the absurd commissions, hidden fees, and marketing tactics that make these platforms almost impossible for restaurants to avoid.
One of his most eye-opening points is how platforms position themselves as “partners” to restaurants while profiting disproportionately off their hard work. It’s a brilliant summary of what I’ve experienced firsthand. Watching his segment gave me validation—this isn’t just my story; it’s a systemic issue.
Why Not Deliver Yourself?
At this point, you might be wondering why restaurants don’t simply manage their own delivery systems. It sounds logical, but the costs and risks make it nearly impossible for most small businesses:
- Logistics: Hiring delivery staff, maintaining vehicles, and covering insurance require significant upfront investment.
- Demand Fluctuations: If orders are low, you’re stuck paying wages and vehicle costs without sufficient revenue to cover them.
- Consumer Habits: Customers are accustomed to using apps. They’re unlikely to search for your restaurant online or call you directly, especially if they’ve been conditioned to rely on platforms like UberEats.
Even building and maintaining your own ordering platform is an uphill battle—it’s an added expense, and it’s hard to compete with the convenience of apps people already have installed.
Breaking Down the Costs
Here’s what restaurant pricing looks like on paper:
- 33%: Fixed costs (rent, utilities, wages).
- 33%: Ingredients.
- 33%: Taxes, rest of operations and a modest profit of maybe 4–5%.
In an ideal world, that leaves just enough to stay afloat. But when delivery platforms take 30–50%, the math simply doesn’t work. Suddenly, the restaurant is operating at a loss.
Delivery platforms claim to support small businesses, but the numbers tell a different story. They’re designed to extract as much value as possible from restaurants while leaving owners scrambling to survive.
The Bigger Picture
Restaurants that rely heavily on deliveries face an uphill battle. If you’re running a small food kiosk or delivery-only concept, you need to be either highly unique or the first in your market. For larger restaurants, dine-in customers are the key to survival. Drinks are where the real profits lie, but they’re rarely sold through deliveries. Even for in-person orders at food kiosks, customers often opt to grab a drink from a nearby store at a quarter of the price.
But even large restaurants are feeling the squeeze as more people opt for the convenience of delivery over dining out. The pandemic accelerated this shift, and now the industry is grappling with its consequences.
The Real Winners: Delivery Giants
While restaurants struggle to make ends meet, delivery platforms rake in billions. UberEats alone reported record revenues in 2023, while its CEO pocketed over $32 million in compensation (source).
It’s a bitter pill to swallow as a restaurant owner. You pour your heart and soul into creating great food, only to watch a significant chunk of your earnings go to a third party.
Is There a Way Forward?
So, are deliveries killing restaurants? In many ways, yes. But there are steps restaurants and the industry as a whole can take to adapt:
- Encourage Dine-In: Focus on creating a unique experience for dine-in customers, where margins are better.
- Leverage Direct Ordering: Promote direct ordering through your website or phone with incentives like discounts or free delivery.
- Community Support: Encourage customers to be mindful of the impact delivery platforms have on local businesses.
- Industry Advocacy: Push for fairer commission rates and more transparent practices from delivery platforms.
Ultimately, it’s about finding a balance. Restaurants need to adapt to consumer behavior while ensuring their operations remain sustainable.
Final Thoughts
Owning a pizzeria was a dream come true, but it also opened my eyes to the harsh realities of the food industry in the age of delivery platforms. These platforms aren’t just tools—they’re gatekeepers, dictating how restaurants operate and whether they can succeed.
For small businesses to thrive, we need change. Until then, every delivery order chips away at the heart of what makes local restaurants special.
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