Platform commissions force restaurants to inflate menu prices 20-30%

food+10 views
Restaurants pay 15-30% commission on every delivery order, so they raise their delivery menu prices to compensate — a $14 bowl in-store becomes $18 on DoorDash. Customers see the inflated price, add the delivery fee, service fee, and tip, and end up paying $28 for a $14 bowl, which makes them order less frequently and leave worse tips. Restaurants cannot show their real prices because the math does not work at 30% commission on thin margins, but customers blame the restaurant for being expensive rather than the platform for extracting the margin. This persists because restaurants are locked into a prisoner's dilemma: if they leave the platform, their competitors stay on it and capture all the delivery demand.

Evidence

https://www.washingtonpost.com/business/2020/10/27/doordash-grubhub-high-fees/

Comments