NPR’s Sarah McCammon speaks with Ahmed Ali Akbar, host of the podcast series “Delivery Wars,” which explores the economics of food delivery apps.
SARAH MCCAMMON, HOST:
As the pandemic raged last year and restaurants across the country struggled to stay afloat, many shifted to reach customers where they were, which was at home. Delivery apps like GrubHub and DoorDash made it easy to connect hungry customers to food options. But even as these apps became a lifeline for the industry, they were also a huge pain for some restaurant owners who complained about the high fees that make their already slim margins even slimmer. Just this week, San Francisco became the first city to set a permanent cap on fees from these apps. But overall, food delivery remains a huge business. Today, the biggest delivery apps – DoorDash Uber Eats and GrubHub – are worth more than $130 billion in total.
AHMED ALI AKBAR: That’s bigger than Chipotle, Pizza Hut, Taco Bell, KFC and the Olive Garden combined.
MCCAMMON: Ahmed Ali Akbar is the host of a new podcast mini-series that explores the true cost of this convenience and what it means for restaurants, delivery drivers and consumers. The mini-series is called “Land Of The Giants: Delivery Wars” (ph). And when he spoke, Akbar told us why he thinks now is the time to take a deeper look at this industry.
AKBAR: If you’re a food writer, you’ve known that for a long time, restaurants have had a lot of complaints about delivery apps, the fees that you mentioned. But the pandemic really accelerated things for this industry. So it was kind of the perfect time to take a look at what was really happening and the different actors in this economy.
MCCAMMON: In the first episode, you talk with restaurant owners who are trying to adapt during the pandemic. And I want to play a clip where you’re interviewing the owner of a bagel shop who just said that these apps kept the restaurant afloat during the pandemic, but then he said this.
(SOUNDBITE OF PODCAST, “LAND OF THE GIANTS: DELIVERY WARS”)
UNIDENTIFIED PERSON: The other thing that I don’t like is how they sort of, you know, and I’m Italian American, to use the Mafia reference, but it’s very Mafia-esque, very like, hey, pay up or you’re not going to make any money.
MCCAMMON: So how are these restaurant owners dealing with that?
AKBAR: So what the restaurant owner there is referring to is the commission fee, which is about a 20 to 30% – it depends on the area – cut of each order that apps like GrubHub, Uber Eats and DoorDash take. Restaurant industry is a definitely a place where there are razor-thin margins. It’s not an easy business by any means. So we spoke to one restaurant owner in Harlem who started packaging these notes in with his orders saying, please order from us directly. We have a website where, if you order from us on that website, you’ll actually pay less, because when you order directly from him, they’re paying less fees and commission.
MCCAMMON: Yeah, as you mentioned, I mean, the restaurant business is a famously difficult one with thin margins. Then these delivery apps take their cut. I mean, is it even worth it for these businesses to be on these apps?
AKBAR: That’s a question I asked time and time again. And the answer was ambiguous because, you know, restaurateurs are customer-service focused. They want their food to go to their consumers. So it’s kind of a can’t-live-with-them-can’t-live-without-them situation for a lot of these restaurant owners.
MCCAMMON: So we talked a lot about the restaurants. What about the drivers? I mean, these are gig workers. They’re using their cars, their fuel – right? – to deliver these orders. How are they coming out at the end of the day in terms of compensation for their labor?
AKBAR: So this is a hotly-debated question. Many of the drivers we spoke to said that working for an app like DoorDash, it really helped them with their ability to have a flexible schedule and to pay their bills. Now, the question of wage is a really interesting one, because as an independent contractor, gig workers aren’t compensated for waiting time. So we spoke to one driver who started signing on to the apps around 7:30 in the morning. And by 2:00 p.m., they had only gotten two orders. So they made about $20 for all of that time working, which is significantly less than minimum wage. But of course, on a good night, sometimes they’re making $17, $25 an hour. But then you start doing some of the math as you spend more time as a driver, the money spent on gas, the money spent on vehicle maintenance, what happens if you get injured and can no longer work, and the wages might not look as good as initially claimed.
MCCAMMON: Do the prices the customers pay reflect the true cost of what we’re getting?
AKBAR: So one of the most interesting things about this is, that for the most part, these apps have not been profitable. A lot of venture capital money was injected into this industry because it was seen as a new Uber and Lyft possibility. Many cases, this means that the apps are operating at a loss and using the venture capital funds to subsidize some of the costs. But what we saw in our reporting was that basically the customer, even though they’re paying fees and tips, they’re actually getting a better deal than they might otherwise think. Delivery drivers and labor is like a huge cost for this industry, and it’s not a cheap thing. So the way to get, you know, the kind of spread and reach across America that they have had is by subsidizing a lot of that wages. And it remains to be seen. We still don’t really know whether the prices will increase for the consumer, but it’s a possibility.
MCCAMMON: Given what we’ve talked about when it comes to labor costs in particular and the cost to restaurants, you know, small businesses, what is the takeaway for consumers? I mean, should we skip the delivery apps and just walk in if we possibly can?
AKBAR: That’s not always a possibility for everybody, so I want to keep that in mind that these apps can provide some real accessibility. But a lot of the restaurants, they’re asking customers that, hey, if you can, just call us in order and pick it up. We are going to see more of the profits of that order than if you order on the app. I do a mix personally. I think it’s just fair to talk about what I do. I’ve seen that if I’m ordering on these apps, less of my money is going towards the restaurants. And if I’m going to support the restaurants, that’s like one of the reasons why I’m ordering from a restaurant is to keep them in business, then it’s probably not the best for them to order on an app. So I will often try to call them up myself and walk over, but I recognize that’s not always a possibility as well.
MCCAMMON: That was Ahmed Ali Akbar. He hosts the new mini-series “Delivery Wars” from “Land Of The Giants” podcast. Thank you so much for being with us.
AKBAR: Thanks for having me.
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