Zachary Davis, owner of The Glass Jar restaurant group in Santa Cruz, Calif., said he intentionally avoided working with food-delivery apps before the COVID-19 pandemic because the costs to his business just seemed too high.
Still unclear is how long the surge in deliveries will last, though, and what it means to the financial success — or lack thereof — of food-delivery apps in the long run. While the companies are seeing a surge in business, their costs remain too high to post any sustained profit. And the other stakeholders involved, such as the restaurants, drivers and cities, are looking to either cap the fees the companies are allowed to charge or to get their fair share of the companies’ revenues.
In the third quarter, Uber’s delivery business continued its growth: Uber Eats’ bookings rose 135% year over year, and its revenue surged 125% to $1.45 billion. Uber’s purchase of Postmates, which is expected to close in the fourth quarter of 2020, will bolster its delivery business.Chicago-based Grubhub, which is being acquired by Just Eat Takeaway TKWY, +1.29%, a European company, is also reporting increased business.
“The profitability of the third-party delivery industry still remains a lingering question, with no perspectives offered on when this would be achieved,” Cowen analysts wrote in a research report. “The restaurant industry wants to cap commission,” said Mark Cohen, director of retail studies at Columbia Business School. “The only way to offset this conundrum is to raise the prices of the food. When all is said and done, the consumer is going to pay the price.”
Delivery apps say they are actually helping restaurants, especially during the pandemic. Taylor Bennett, global head of public affairs for DoorDash, said in an email that the company “has always focused on empowering local businesses,” and that “supporting restaurants is more critical than ever.”