Why Are Food Delivery Prices So Expensive? A Look At The Up To 258% Markup

Many of us have enjoyed food delivery services in recent years, especially as COVID-19 has changed our eating habits. And as our society continues to evolve and learn to live in a COVID reality, it’s clear that these services aren’t going to fade out any time soon.

But have you ever wondered how much profit food delivery prices rake in? We know they’re charging a premium for the convenience, but exactly how much extra does this cost us?

These charges can actually be pretty significant. However, there are ways to maximize your returns.

Knowledge is key here. It’s important to educate yourself on which apps provide the best value, which credit cards are best to pay with, and how alternative services measure up.

Food delivery prices markup in Canada

If you’ve noticed that purchasing takeout through food delivery apps is way more expensive than dining in or picking up the food yourself, you’re both correct and not alone in this observation. Food delivery prices are significantly marked up.

There are reasons for this markup, but it’s still costly and can be frustrating.

Food delivery apps quickly gained popularity during the early part of the COVID-19 pandemic. They’ve become a mainstay in the Canadian food marketplace and have helped many restaurants and food establishments remain open – and we’re all grateful for this.

However, there are definitely cheaper ways to purchase your food.

Food delivery options in Canada

Food delivery is a huge industry, becoming mainstream in large part due to a push from the pandemic.

There are 3 main options for food delivery in Canada:

• Skip The Dishes (Canadian-based),
• DoorDash (US-based), and
• Uber Eats (US-based).

All 3 provide similar services, but they do have different rates and formats when it comes to charging fees to both consumers and restaurants.

Each food delivery app provides various deals. If you’re only an occasional user, going with Skip The Dishes and their rewards program might be your best bet since they don’t have a subscription service.

But if you order food delivery regularly, you’ll likely benefit from either DoorDash or Uber Eats. With a monthly subscription for either of these services, you’ll be able to limit your delivery costs and transaction fees.

Use a credit card for food delivery and get rewarded

There are several methods for smart foodies looking to use food delivery services to their advantage. And while it’s impossible to avoid at least some of the fees that they charge for their service, one way to minimize expenses while maximizing returns on food delivery is to use the right credit card.

For example, the American Express Cobalt Card is the top-rated card for restaurant purchases in Canada – and yes, food delivery services do accept Amex.

Users can earn up to a 10% return on food purchases and have incredible flexibility for points redemption through the American Express Rewards Program.

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• Interest: 21.99% on purchases, 21.99% on cash*
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Now what happens when you click Apply?

• It'll take you to the bank's secure site.
• You'll get the chance to read the offer and product details.
• If you choose to apply, filling the form should take between 10 to 15 minutes.

If you prefer to earn cash back, the Tangerine Money-Back Credit Card is a lucrative option.

Choose “Restaurants” from the list of 10 options and you’ll earn 2% cash back on all meals ordered through your favourite delivery apps. There’s no cap on potential earnings and you can redeem the cash whenever you like.

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Marking it up: how food delivery prices are calculated

Naturally, food delivery companies want to make a profit. And to do this, they have to jack up the prices at least somewhat.

You’ve probably noticed that the menu prices you see on your favourite app are quite different than what’s on the restaurant’s own website. These are called markup fees and they’re both varied and often inconsistent. Some items are marked up a lot, some a little, and some not at all.

Why is food delivery so expensive?

Food delivery is expensive because there are additional costs outside of what the restaurant provides. This can include:

• extra packaging,
• disposable utensils, and
• the delivery driver’s wages.

While these costs are obviously necessary, it’s hard to tell whether they might be padded in order to increase profits.

Other ways apps make money

To make as much money as possible, food delivery apps charge delivery fees and service fees, in some cases. And, of course, they all charge the government-mandated sales tax.

Another fee you might pay is for rush orders. Yes, you can get your food faster, but you’ll pay extra for this service. It’s no different than paying extra for next-day delivery through Amazon or your favourite online retailer.

Here is a breakdown of the costs involved in ordering food from delivery apps and services:

• Base food price (in restaurant): This is the amount you’d pay if you purchased your meal from the restaurant itself.
• Markup: The base food price is modified by the food delivery app, increasing it to cover administrative costs and make profit.
• Delivery fee: This is what customers pay for the act of delivery itself. The rates vary but are usually based on the distance from the restaurant to the delivery destination.
• Service fee: Not all apps have a service fee. Sometimes it’s a set amount, sometimes a percentage of the total bill, or there might be minimum and maximum values.
• Sales tax: Sales tax is set by the province, so the amount charged will depend on where you live, and the money goes to the government, not the food delivery company. The tax can be as low as 5% (Alberta and the territories) or as high as 15% (Maritime provinces).
• Tip: Tipping is still optional, but each app provides recommended amounts, usually between 10% and 20% of the subtotal. In most cases, the delivery drivers can see the tip you’ve provided before they deliver your food.

Small businesses can reach more customers

However, the added costs and fees do affect small businesses – most often in a negative way. When Uber Eats, Skip The Dishes, or any other delivery company raises the prices of the restaurant’s items, people sometimes get turned off. They might decide not to order at all.

But even though food delivery apps and services increase the menu prices and add fees, the very existence of these services has provided many small businesses with new opportunities.

For many restaurants, it’s not feasible to have a permanent delivery driver or their own platform either via an app or website. But these apps make it possible for them to reach otherwise unreachable customers through delivery.

Especially during times when in-restaurant dining was shut down for weeks, food delivery apps have helped many small restaurants stay afloat.

How much are food delivery prices marked up?

In my area, certain restaurants have exclusive deals with 1 or 2 delivery providers, making comparisons from multiple restaurants across all 3 apps difficult. In particular, I noticed that higher-end, more upscale restaurants were especially selective with which delivery services they use.

Here’s a look at what I found when comparing Skip The Dishes, DoorDash, and Uber Eats services in my community.

3 things to keep in mind

Before we do a comparison, there are 3 things to keep in mind:

Different menus for different apps

Each app has a different menu with unique variations. Not all products are available on each app, even when looking at the same restaurants.

For instance, I found that ice cream products were not available at all on Uber Eats, and only sundaes were available through DoorDash. Skip The Dishes had McDonald’s McFlurries and sundaes available.

Location of order

I was ordering to a house in the suburbs outside of Edmonton. There are many restaurants nearby, but the restaurant selection varied significantly with each app.

Skip The Dishes was willing to travel the shortest distance, while Uber Eats was willing to go the furthest. Many restaurants that are 30 to 45 minutes away from my location were available to me through Uber Eats, but the delivery costs were significant.

It’s quite common to see delivery charges of $10 or more even for orders travelling short distances. While this isn’t unreasonable for a large order, it’s quite expensive for a small one.

Deals exclusive to individual apps

Occasionally, there are specials advertised within the mobile app which make food delivery cheaper than ordering straight from the restaurant. Sometimes you need to enter a promo code and other times the deal is automatically applied.

Be sure to search the deals or offers section of whichever app you’re using so you don’t miss out on these opportunities.

Subway price comparison

As a comparative example, here’s the info from the cold cut sub sandwich from Subway. This is a small purchase as it was only 1 item.

Buying the sandwich in person was by far the cheapest option. In fact, Subway’s own app offered a promo code that lowered the price to $7.49 plus GST, making it an even better deal if I ordered in advance.

But even without the promo code, the sandwich was $8.59 in-app, making it cheaper than ordering in-store.

Skip The Dishes

Skip The Dishes had 3 different delivery options, all at different prices:

• $3.49,
• $4.49, and
• $4.99.

Interestingly, it seemed to be the rating of the individual Subway franchise location that dictated the delivery fee. The 3 locations I considered were rated 7.5, 8.9, and 9.3 out of 10, and the highest rated one had the highest fee.

This doesn’t seem to be the case with all chain restaurants, however.

In any case, I selected the cheapest delivery option for delivery.

And for a small order like this, Skip The Dishes was by far the cheapest delivery option, but it was still almost twice the price of picking the food up in person.

DoorDash

Since the order was under $12, there was an extra $2 “small order” charge. It also wouldn’t have qualified for DashPass, where the $4.99 delivery fee could have been waived.

The service fees are 11%, but with DashPass this would have dropped to 5% of the price of the order (if it was over $12). Had I added an extra item to push the total food price over the $12 mark, the final price would have been lower than what I paid for the sandwich alone.

For smaller orders, DoorDash is very expensive.

Uber Eats

Uber Eats has a service fee: it’s 10% of the subtotal, with a minimum of $2 and $4 maximum.

The delivery fee varies depending on the distance of the restaurant and the number of drivers available to complete the order.

In this case, if the order had $15, there would have been no delivery fee. Therefore, the price could have been reduced if the order contained slightly more items.

There was also an option to get priority delivery for an additional $1.79. This means the order would be delivered directly to you, without the driver making any additional stops.

Uber Eats also recommends a tip of 20% of the subtotal for these priority orders.

For small orders, Uber Eats is very expensive.

McDonald’s price comparison

This was a much bigger order, made to feed a family of 4. The individual restaurant prices are included here for reference.

• Big Mac Extra Value Meal: $9.29
• Quarter Pounder with Cheese Extra Value Meal: $10.19
• McChicken Extra Value Meal: $9.29
• 6 McNuggets Extra Value Meal: $11.49

Dining in person or picking up is still the cheapest option with a bigger order. However, DoorDash and Uber Eats came down in price significantly as compared to the smaller order.

Skip The Dishes also came down in price relative to the dine-in or pickup price.

How much can subscription services save you on markup?

With free delivery fees and other discounts, how much can subscribing to DashPass and Uber Pass really save you?

Using the same McDonald’s order as above, here’s how the comparison shook out:

With Dash Pass, DoorDash becomes the cheapest option (other than in-restaurant pick up) for larger orders.

Altogether, here’s what the 2 different McDonald’s scenarios look like:

Alternatives to food delivery prices

There are alternatives to food delivery apps. Of course, in-person dining is still available and curbside pickup has become popular thanks to COVID-19.

Here’s a comparison of these 3 options.

In-person dining can be expensive, but offers the best dining experience and the best chance of a freshly made, high-quality meal.

Curbside pickup offers a combination of the lowest price and least risk for COVID-19, but it comes with the inconvenience of having to go and pick up the order yourself. And it doesn’t provide the atmosphere of an in-person dining experience.

Delivery is the most expensive option and still doesn’t provide the experience of in-person dining. Customers also run the risk of receiving a meal that isn’t fresh because the delivery driver completed multiple orders in the same run.

Looking for more simple and convenient meal ideas? You can read more about the best food subscription boxes in Canada right here.

How to save on food delivery prices

For foodies who love a good dining experience but don’t want to pay the extra fees charged by food delivery apps, there are both alternatives and methods of saving to consider.

Order from restaurants with their own delivery service

Some restaurants have their own delivery services. In fact, some restaurants provide free delivery with a minimum order or within a certain proximity of the restaurant. Others will charge a fee for the service.

Either way, there’s usually an expectation that the customer will tip the delivery driver.

When supporting local businesses, it’s important to use their delivery service whenever possible. Ordering directly from the restaurant means there’ll be less charges than a 3rd-party food delivery app.

Obviously, it’s better to support them in any way possible, but for maximum impact, direct ordering is the way to go.

Markups and discounts

Some restaurants mark up their prices for delivery, but this is usually done by adding a delivery fee as opposed to increasing individual prices of items.

On the other hand, you can support local businesses and avoid fees altogether by picking up your own food directly from the restaurant.

At minimum, you’ll save yourself the delivery charge. Some restaurants even offer discounts for those doing their own pickups, and some others offer free bonus items as incentive.

Credit cards with food delivery perks

As discussed earlier, credit cards with cash back or other rewards are convenient and often lucrative tools for offsetting food delivery costs.

On top of the usual rewards, some credit cards have partnerships with food delivery companies that enable them to offer discounts on premium memberships.

Free DashPass with RBC credit cards

Until July 5, 2023, eligible RBC credit cardholders can get a free DashPass from DoorDash.

Here’s a list of participating RBC cards and the duration of their associated free DashPass promotion.

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I Want This Deal

Now what happens when you click I Want This Deal?

• It'll take you to the bank's secure site.
• You'll get the chance to read the offer and product details.
• If you choose to apply, filling the form should take between 10 to 15 minutes.

GC: $100

I Want This Deal

Now what happens when you click I Want This Deal?

• It'll take you to the bank's secure site.
• You'll get the chance to read the offer and product details.
• If you choose to apply, filling the form should take between 10 to 15 minutes.

So how much do food delivery apps really mark up prices?

Ordering your meals on food delivery apps is expensive. Period. In our research, we saw up to 258% markup on our orders.

For the best value, you’ll need to order through the restaurant’s website and pick up the order yourself.

But if you do prefer to use food delivery apps, you should consider getting a DashPass or Uber Pass. These subscriptions will save you money on each order and if you make more than 2 orders per month, you’ll likely be getting your money’s worth.

Do you think that food delivery services are worth it? Have you found any ways to save money by using these delivery apps?

We’d love to hear your thoughts. Feel free to drop us a comment in the section below.

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FAQ

What’s the best food delivery app?

The best food delivery app for you depends on what you want to eat, where you live, and how much you’re willing to pay. Since each food delivery app has a directory of restaurants and menus unique to them, the best app is likely the one that includes your desired restaurant. Plus, premium subscriptions like DashPass or Uber Pass can save you some money.

How much are meal prices marked up by food delivery services?

Meals are marked up significantly by food delivery services, especially when you consider the price of delivery, service fees, and tips. On large orders, the markup is smaller, between 30% and 50%. On especially small orders, the markup can be close to double or triple the price of the order.

Are Canada food delivery apps worth it?

If you’re unable to travel to get the food you want, then food delivery apps are certainly worth the cost. However, if you can get the food yourself, it’ll always be cheaper this way. Some chain restaurants even have their own apps with specials, promos, and discounts for those who order directly from them and/or do their own pickup.

What percentage do food delivery apps take?

Food delivery apps take a big percentage of your food delivery costs. Even without tipping the delivery driver (an option some apps make difficult or inconvenient to bypass), your meal can be marked up 20% or more – and with a tip, it can be well over 30%.