The Hidden Costs of Fast Food Delivery: Uncovering the Price Markup on Popular Delivery Platforms

1. Food ordered through delivery platforms like Uber Eats and Mr D can cost over 30% more compared to in-store or drive-through prices, excluding service and delivery fees.
2. Restaurants, including national fast-food chains, have largely ignored requests to set reasonable prices on delivery platforms, often passing on all additional costs to customers without transparency.
3. This pricing issue isn’t limited to South Africa; legislators in the US have raised concerns about the lack of transparency, leading to new regulations for disclosing price differences on delivery platforms in some regions.

Fast food delivery platforms like Mr D and Uber Eats have become increasingly popular as they offer convenience and accessibility to a wide range of food options. However, many consumers may be unaware that they are often paying a significant premium on their orders compared to purchasing the same items in-store or via drive-throughs. Recent study by NEWS24 reveal that major fast food chains are charging customers up to 30% more for items such as burgers, soft drinks, and fries on these delivery platforms, even before considering additional service and delivery fees.

Initially, the concept behind food delivery platforms was that restaurants would absorb the majority of platform fees, as the platforms would provide them with additional business opportunities. However, as these platforms gained popularity, it became apparent that restaurants were passing on these costs to consumers instead. This practice persisted despite appeals from some platforms, urging restaurants to maintain reasonable pricing and not to pass on all fees to customers.

The issue of transparency in pricing has been a growing concern worldwide. In the United States, legislators raised concerns about this issue in 2021, resulting in Uber Eats being required to clearly disclose price differences between items bought on the app and those paid for in restaurants in Washington, DC, and Pennsylvania.

In some markets, delivery platforms have introduced dynamic pricing models, which enable restaurants to pay varying fees based on their marketing needs. Uber Eats, for example, offers “marketing opportunities” such as advertisements, promotions, and sponsored listings to restaurants that pay higher fees. This practice may contribute to some stores charging significantly more for food ordered through the apps than others.

To determine the extent of the markup on food bought through South Africa’s leading delivery apps, News24 conducted a comparison of in-app costs to those at restaurant counters. The findings revealed a significant markup on food bought through Uber Eats and Mr D, with some restaurants charging considerably more than others. Interestingly, the markup was not uniform across all items, with main courses such as pizzas and burgers typically marked up more than side dishes and beverages.

The most significant increase was observed when ordering from McDonald’s through Uber Eats and Mr D apps, where every item checked by News24 carried a premium of around 30% before delivery fees. This means a Big Mac costs R15 more, a small Coke between R5 and R7 more, and regular fries as much as R8.90 more. Including fees, a single Big Mac purchased via Uber Eats would cost around R79.15, which is R29.25 (or 58.62%) more than the in-store price. The findings were nearly identical for the Mr D app.

Nando’s was the second-highest in terms of price markup, with most items marked up by about 25% when bought via third-party apps. KFC added a premium of approximately 20% to main courses on third-party apps, and although KFC offers in-house deliveries from some stores, it charges a surplus on these meals as well. However, KFC currently offers free delivery for orders above a certain minimum threshold.

Debonairs Pizza also had a markup of around 20% on items checked, but many stores now offer delivery at in-store prices via their app or website for a flat fee, similar to some other Famous Brands stablemates. Italian pizza and pasta franchise Col’Cacchio charged the least for items checked across the selected restaurants, with a Margherita pizza or bolognaise pasta ordered via the apps costing about 17% more.

The significant price markup on fast food ordered through delivery platforms highlights the importance of consumer awareness and transparency in pricing. As food delivery platforms continue to grow in popularity, it remains crucial for customers to understand the potential hidden costs associated with their convenience and make informed choices about their food purchases.

In light of these findings, consumers may want to consider alternative options to save money when ordering fast food. These alternatives could include picking up food directly from the restaurant or using the drive-through, as these options often come with lower prices than those found on delivery platforms. Additionally, some restaurants offer their own delivery services at more competitive prices than third-party platforms, which may be worth exploring.

To further promote transparency in pricing, legislators and regulators worldwide could consider implementing policies that require delivery platforms to clearly disclose price differences between in-app purchases and in-store prices. This would empower consumers to make better-informed decisions about their food purchases and encourage restaurants to maintain reasonable pricing.

Furthermore, restaurants should reconsider their pricing strategies on these delivery platforms and work towards a more transparent and fair approach. By offering competitive prices and not passing on all platform fees to customers, restaurants can foster goodwill, retain customer loyalty, and possibly attract new customers who appreciate fair pricing.

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