FOOD DELIVERY: Food delivery apps are a scam.
Do you want to get Chinese food?
Uber Eats.
Do you want to get Indian food?
Uber Eats.
Do you want to get burgers?
Uber Eats.
Do you want to get pizza?
Well, maybe DoorDash.
Food delivery has become a ubiquitous service that virtually everyone uses.
In fact, 86% of Americans use food delivery atleast once a month.
31% use atleast twice a week.
And as for millennials, I mean, this is basically their entire diet.
This is not too surprising given the extraordinary convenience of food delivery apps.
You can order from virtually any restaurant in your vicinity and have it delivered to
your doorstep within an hour.
This is in stark contrast to food delivery just 10 years ago when your options were basically
just limited to pizza.
This unprecedented surge has allowed for the food delivery industry to thrive with several
apps popping up from Uber Eats and DoorDash to GrubHub and Postmates.
But, while these apps sure are convenient, they’re not exactly a great deal for anyone.
The average American spends $37.28 every week on food delivery which translates to $150
per month and over $1800 per year.
And over a third of that amount is simply going towards service fees, delivery fees,
and tips coming in at $13 per order or $650 per year.
But, I’m sure you already knew that.
For most people, food delivery is more of a guilty pleasure than anything.
But, unlike Netflix binging and singing in your car, this habit will cost a lot of young
adults their retirement.
In fact, if young adults simply invested food delivery money into the S&P 500 instead between
the ages of 20 and 65, they would end up with an extra $715,000 instead of a bunch of empty
Panda Express boxes.
But, it’s not just end consumers who are getting a bad bargain either.
Food delivery is also not that great for restaurants, delivery drivers, or even the food delivery
apps themselves.
Yet, the popularity of food delivery is only continuing to skyrocket.
So, here’s why food delivery apps are kind of a scam for everyone and why no one seems
to care anyway.
SCAMMING CONSUMERS: We all know that food delivery is expensive,
but just how expensive is it?
Well, let’s do the math.
Single adults tend to spend between $59 and $91 every week at the grocery store, so about
an average of $75 per week.
There’s no stats about how much single adults spend on food delivery, but we do know how
much Gen Zers spend on food delivery which should be pretty close.
The average Gen Zer spends about $30 per food delivery order.
So, even ordering food delivery just once a week would increase the average person's
food budget by almost 50%.
Twice a week would increase the budget by 80%, and 3 times a week would increase the
budget by 120%.
For those of you who use food delivery every day, I know you’re watching, you’re increasing
you’re food budget by nearly 300%, spending $210 every week on food delivery.
On the brightside, your grocery bill is probably far lower than average, but that’s not exactly
a net positive.
To make things worse, this shortfall will only compound throughout your life.
Just one food delivery per week will set your retirement back $600,000, obviously assuming
that you invest your money well instead.
This means that 2 deliveries per week is costing you $1.2 million, 3 delivers is costing you
$1.8 million, and a delivery every day is costing you $4.2 million.
At that point, that could literally be your entire retirement.
The only way that this is not a bad financial decision is if you’re already investing
a $100,000 or more every year.
At that rate, you’d be worth $40 million by the time you’re 65.
$4.2 million is still a pretty large amount, but percentage wise, it’s not terrible.
I suspect that most of you aren’t investing a $100,000 every year though, so probably
best to cut back on the food delivery.
Now, I know what some of you are already saying.
What’s the point of having so much money at retirement if you didn’t even get to
enjoy the journey there and that is valid.
74% of people say that they would show up to an event if they knew the food was going
to be good, so there’s no doubt that food plays a big role in people’s lives.
This brings us to exhibit B which is how much money is going towards the food itself and
how much is going towards delivery.
It may seem like you’re just paying a delivery fee and a tip, but that’s just what’s
shown.
You see, restaurants know that people are willing to pay more for the same food when
it’s offered for delivery, and they’ve taken the liberty to increase prices across
the board on delivery apps.
Take Panda Express for example.
A family feast costs $39 at the restaurant, but it costs between $45 and $47 on delivery
apps.
It might not seem like a big difference, but when you combine this with delivery fees and
service fees, it becomes quite egregious.
The same Subway order costs 25% more on Grubhub, 46% more on DoorDash, 63% more on Postmates,
and 91% more on Uber Eats, and that not even accounting for a tip.
On average, people tip 15.7% for food deliveries, so really you’re spending an extra 40 to
100% over your meal price just for the delivery.
Let’s call it an average of 70%.
Here’s what this means long term. $247,000 of this is going to delivery.
$494,000 of this is going to delivery.
$741,000 of this is going to delivery.
And a disgusting $1.7 million of this is going to delivery.
That’s enough money to make a grown man cry, but all of that is just the consumer
side of things.
SCAMMING DRIVERS: YouTube has glamorized the life of delivery
drivers.
Trying to make $500 in a day.
Trying to make $700 in a day.
Trying to make $10,000 in a month.
I mean, there’s nothing wrong with these videos.
There fun entertaining challenges, but don’t take them for anything more than just that.
While delivering food may be a lucrative avenue for broke college students and young adults,
it’s not exactly as good as it sounds especially as a career.
To reach numbers like $10,000 per month, delivery drivers have to work 12 to 15 hours every
single day.
And when you do the math, it’s not all that great.
Even calling it 12 hours per day, delivery drivers have to work 360 hours per month to
reach those numbers.
If delivery drivers worked a more reasonable 40 hours per week or a 160 hours per month,
they’d make about $53,000 per year which doesn’t sound too bad, but that number is
actually super misleading because most of us contextualize that number as a job.
I mean, that’s how much teachers and police officers make, but the difference between
making $53,000 on Uber Eats and making $53,000 at a job is night and day.
First of all, the job is infinitely more stable, but let’s put that aside as there’s plenty
of other attributes to discuss.
For example, most of the numbers you see on YouTube are top line numbers that don’t
account for gas or depreciation of the car, but let’s even put that aside.
The real first obstacle that you’ll face as a delivery driver is taxes.
As a delivery driver, your tax status will be self employed which means that you’ll
have to pay both sides of social security and medicare tax.
This adds up to an extra 7.65% every single year, so earning $53,000 on Uber Eats is effectively
the same as earning $49,000 at a job, and that’s just because of taxes.
Next, you have deal with health insurance.
Most people making $49,000 per year have some sort of government job or low end private
job.
Either way though, the benefits are pretty strong in most cases.
The average teacher, for example, gets $10,500 in health insurance benefits.
As a delivery driver, you’ll have to pay this amount out of pocket which takes your
salary down to $38,500.
After that, we have retirement benefits.
Police officers for example, get as much as $29,000 towards retirement every year.
If you’re trying to match this as a delivery driver, you’ll be down to less than $10,000
in net income.
But, let’s be more conservative.
Let’s say that you’re missing out on $5,000 in retirement benefits.
That still knocks you down to $33,500.
Most jobs will also have paid time off, sick days, and other perks.
But, if you want these as a delivery driver, you’ll have to pay it out of pocket which
will bring your net income to below $30,000, but it gets even worse.
When you hear that police officers and teachers make $50 or $60,000, that’s truly an average
across the nation.
These jobs exist in every community and every city across the world really.
The opportunity to do Uber Eats food full time, however, only exists in highest cost
of living cities in the world like New York, San Francisco, London, Austin, etc.
I mean, you’re not gonna be very busy if you’re trying to do Uber Eats in Nebraska.
In many of these cities, the minimum wage itself is $15 per hour which translates to
just over $30,000 per year.
So, while topline numbers on YouTube challenge videos may look appealing, driving for these
food delivery apps is basically just an unstable minimum wage job.
SCAMMING RESTAURANTS: It’s not just consumers and drivers that
are getting screwed over by these apps either.
Restaurants are also getting the short end of the stick.
Have you ever wondered why delivery prices are relatively affordable?
Of course, we discussed how even these small $10 or $15 fees can add up over time, but
in terms of face value, it’s not too big of a fee to have any restaurant delivered
to your doorstep.
Well, the reason for that is that you’re not the only one that’s paying.
Restaurants have to be exorbitant amounts to be listed on these food delivery apps which
was basically required during the pandemic.
On DoorDash, for example, restaurants have to pay 15, 25, or 30% depending on how much
they want DoorDash to push their restaurant.
DoorDash also gets an additional 6% commission on pickup orders given that they can’t charge
you a delivery fee.
Uber Eats and all of the other delivery apps have virtually identical pricing plans.
And given that restaurants tend to have pretty meager profit margins of 3-5%, there’s no
question that these fees weigh down these businesses quite a bit.
This is the main reason that restaurants markup their food so heavily on these delivery apps
in the first place.
Oftentimes, they have to charge that much more just to breakeven.
They also have no option to avoid these apps either because the pandemic transitioned much
of the customer base to delivery.
But, delivery apps aren’t just hurting the bottomline of restaurants, they’re also
oftentimes hurting their reputation.
You see, first these delivery apps use extremely aggressive salespeople to convince restaurant
owners to list their restaurants.
But, if they don’t agree to do it voluntarily, these apps often just go ahead and list the
restaurant anyway.
They figure that most owners don’t have the time, money, or energy to take these corporations
to court.
Maybe 1 in a 1000 or 1 in 10,000 will actually sue and win.
But this doesn’t really matter for these apps.
They’re basically having to pay $300,000 or $500,000 for every 10,000 restaurants that
they list.
So, listing these restaurants without the owner’s permission is a no brainer net positive.
The same, however, cannot be said for owners.
When these apps list menus without their permission, they often end up using outdated menus and
prices.
So, customers end up ordering something and get mad when they realize that the food is
no longer being offered or costs more than they thought.
Customers will naturally get mad at the restaurant and think: why don’t these people even keep
their menus up to date, but in reality, it wasn’t even the restaurant's fault.
These frustrations don’t just apply to wrongfully listed restaurants either.
Correctly listed restaurants have their own set of headaches with delivery drivers and
angry customers.
For example, drivers have the ability to drop an order up until they pick it up.
And this happens more often than you think.
The driver arrives at the store and sees that the line is super long or they find a more
lucrative delivery or whatever the reason may be.
If another driver doesn’t accept to do the delivery, the food is ready and the customers
wants the food, but the food will never get to the customer, the customer will want a
refund, and restaurant will have lost out on the food and the money.
Little to say, there’s not much for restaurants to get excited about when it comes to food
delivery apps.
SCAMMING THEMSELVES: With customers getting screwed over, drivers
getting screwed over, and restaurants getting screwed over, you would think that atleast
the food delivery apps must be coming out on top, but this is also not the case.
All food delivery apps lose money and the most popular ones lose the most money.
Inflation is only making these losses even worse with most delivery apps posting record
losses.
In the last 12 months, DoorDash lost a record $1.36 billion.
But, that’s nothing in comparison to Uber’s $9.1 billion loss.
For Uber, this isn’t even a record as they’ve been casually losing $8 to $10 billion for
4 years now.
With all the fees they charge everyone, this might be a bit confusing, but when you think
about it, it all makes sense.
The only food industry that has mastered delivery and is able to stay profitable if pizza chains,
and they had to make a lot of sacrifices to achieve this.
Every restaurant only delivers to a very small radius, they have full time delivery drivers,
and they’ve refined their delivery process to be extremely efficient over decades of
doing this.
Modern delivery apps are basically the exact opposite of this.
Drivers usually have to go to different restaurants for each delivery, they have to deliver to
a very big radius, and drivers generally choose deliveries based on how lucrative they are
as opposed to how efficient they are for the overall platform.
Given this combination, it’s no wonder why delivery apps are struggling to turn a profit.
The bottom line is that delivering from any restaurant to any doorstep is simply a logistical
nightmare that requires a bunch of man hours which is not cost effective by any means,
and it never will be.
In the meantime, everyone from drivers and consumers to restaurants and delivery apps
will have to put up with the associated expenses.
And to think that all of this pain for everyone can be traced back to us being too lazy to
not just cook but even pick up cooked food.
How often do you use food delivery apps?
Comment that down below.
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