Enjoying massive popularity since the Covid-19 pandemic, food delivery apps will likely remain a customer favorite and part of the restaurant market for the foreseeable future. But like many other gig-economy apps, these food delivery services have recently come under scrutiny. This has led cities to propose new regulations such as delivery service fee caps which are designed to protect small restaurants but have been shown to hurt consumers.
Since its inception, the business landscape for the food delivery sector has grown tremendously, especially in urban and suburban areas. There has also been a revolution in how restaurants engage with food delivery, expanding access to a wide variety of cuisines. While there have been growing pains, such as grumbles over delivery fees eating into the profit margins of restaurants and questions about how gig workers should be classified, delivery apps have unlocked new benefits for consumers such as time saved, loyalty programs, and more services to choose from.
But as food delivery apps have grown in popularity, they have drawn criticism for the fees that they charge restaurants. Critics argue that delivery apps reduce the number of dine-in customers and consequently lead to lower profit margins for restaurants. This, on top of a commission rate that ranges anywhere from 15 to 30 percent, poses new challenges to restaurants.
City governments across the country tried to combat this during the pandemic by capping the maximum rates delivery apps could charge restaurants. While most are set to expire, New York City made its cap permanent.
Read the full FEE article here.
Trey Price is a policy analyst with the American Consumer Institute, a nonprofit education and research organization. For more information about the Institute, visit us at www.TheAmericanConsumer.Org or follow us on X @ConsumerPal.