The economic structure of the food-delivery ecosystem is constantly evolving, even as the sector grows. As this space matures, factors like brand power, real estate, operating efficiency, depth of offerings, and shifting consumer behavior will shape which players succeed—or fall behind. This reshuffle will also account for regulatory issues, including changes to driver compensation.
Despite booming growth during the global pandemic, most distribution platforms remain unprofitable—with only a few exceptions.
Massive Investments and Mergers Continue
Even with these financial challenges, investments continue to pour in. Some recent examples:
- Wolt raised $530M (January 2021)
- REEF Technology raised $700M (November 2020)
- Rebel Foods secured $26.5M (July 2020)
There have also been major acquisitions:
- Uber bought Postmates for $2.65B (December 2020)
- Just Eat Takeaway acquired Grubhub for $7.3B (June 2021)
And IPOs:
- DoorDash (December 2020)
- Deliveroo (March 2021)
The landscape is constantly shifting, especially post-pandemic, introducing both challenges and opportunities for platforms, restaurants, drivers, consumers, and tech enablers.
Meanwhile, quick-commerce platforms like Getir ($550M, June 2021) and JOKR ($170M, July 2021) have emerged—joining the competition for a “share of stomach.”
Sizing the Market
From 2018 to 2019, food delivery markets in countries like Australia, Canada, the UK, and the US expanded rapidly—doubling in the US and quadrupling in Australia. This trend continued into 2020 and early 2021, with market sizes now 4–7x larger than in 2018.
Emerging Delivery Battlegrounds
The US food delivery space is especially complex. As of May 2021:
- DoorDash led in many markets (e.g., 77% in San Jose, 56% in Houston)
- Uber Eats + Postmates held 50% in LA and 41% in NYC after their merger
These figures change often as platforms battle for local dominance.
One of the biggest battlegrounds in coming years will be geographic competition. As platforms offer more services, this rivalry will extend beyond food into other verticals.
Niche Delivery Players
Specialty apps targeting specific cuisines or customer segments are also entering the field. Examples:
- Slice (pizza delivery)
- HungryPanda (Chinese cuisine)
This adds more complexity to the competitive landscape.
Commission Rates: A Hot Topic
Several cost factors come into play:
- Customer delivery fees ($2–$5)
- Service surcharges (up to 15%)
- In-app advertising
- Tips
However, restaurant commissions are the most controversial. Many US cities temporarily capped these during the pandemic—some are considering making those limits permanent.
As caps are lifted, restaurants will again feel pressure from rising platform fees, especially as platforms grow more powerful. Some platforms are now experimenting with flexible commission structures, but the future remains uncertain.
The Rise of Dark Kitchens
“Dark kitchens”—delivery-only establishments—present both competition and opportunity for traditional restaurants. These businesses often have lower overhead and can afford higher commissions, gaining better visibility in apps.
Some restaurants may consider expanding into delivery via remote kitchens, while others might exit the delivery space entirely due to low margins.
Driver Pay and Gig Work Debate
Driver compensation remains a major concern. The gig economy offers flexibility, but ongoing global debates around classification of drivers (employees vs contractors) could significantly impact platform economics.
Evolving Stakeholder Economics
As regulations and technology evolve, so too will the economics for all key players: restaurants, platforms, drivers, and customers.
Restaurants: Squeezed from All Sides
Typical cost breakdown:
- Food: 28–32%
- Labor: 28–32%
- Occupancy: 22–29%
- Profit margins: 7–22%
Delivery used to be an add-on—an extra “table.” During COVID-19, it became a lifeline, boosting revenue for many. But profitability fell, sometimes into negative margins.
Why Profits Are Dropping Despite More Orders
- Delivery platforms charge 15–30% commissions—unsustainable under normal margins
- Fewer in-house diners means delivery has to shoulder more fixed costs
- More delivery may require larger kitchen space, increasing expenses
- Focused delivery expansion could hurt dine-in experience and reduce customer base
- Staff must work harder, requiring new systems and workflows
To survive, restaurants must balance delivery against all other parts of the business.
Pizza Industry: A Case Study
Pizza restaurants often specialize in either dine-in or delivery. Similarly, other restaurants may start to specialize—either focusing on the dine-in experience or committing fully to delivery.
Those doing both will need to adapt:
- Raise all menu prices, making dine-in customers subsidize delivery
- Or create separate, higher-priced delivery menus
Example: Chipotle increased delivery prices by 13%. CFO Jack Hartung said, “Delivery comes with an added cost... we want to make sure that channel covers the cost.”
Delivery Platforms: Chasing Profitability
Even with rapid growth, most platforms remain unprofitable. Wall Street Journal reports suggest this may continue for years.
Current revenue sources:
- Restaurant and customer fees
- Delivery charges
Average margin: around $1.20 per order (3%)
What Can Improve Platform Profits?
- New tech: automation, better routing, delivery stacking
- Reduced marketing costs through consolidation
- More power to favor leading restaurant partners
- Expansion into other products (alcohol, groceries, meds)
These changes can increase order size, attract new users, and optimize delivery runs.
Drivers: Balancing Time and Money
To stay profitable, drivers must complete enough deliveries per hour. The biggest time sink? The handoff, which takes 1–5 minutes per order.
Delivery in rural or suburban areas is costlier due to greater distances.
Driver earnings may decline per delivery but could improve per hour as tech boosts efficiency.
Customers: Paying the Premium
Consumers are paying up to 40% more than the listed meal price. For example, a $25 meal could cost around $35 after:
- Delivery fee: $2–$5
- Tips: 10–20%
- Platform fees: around $3
- Price markups from restaurants to cover commissions
Still, restaurants only receive ~55% of what the customer pays.
What Customers Now Expect
As dining options grow post-pandemic, customers want:
- Fast delivery (under 30 mins)
- Restaurant-quality meals
- Order accuracy
- Cuisine variety
Delivery is most efficient in densely populated areas with large orders. But to grow, platforms and restaurants must also serve:
- Lower-spend customers
- Rural or spaced-out communities
To meet these expectations, platforms may raise fees—though costs could drop again once scale efficiency kicks in.
Loyalty Programs: A Win-Win?
Many platforms are launching monthly subscriptions, similar to Amazon Prime. This could drive customer retention and offer users better value, making the model more sustainable for all parties.
