How food delivery services work
Deliveroo, Uber Eats and Menulog give restaurants access to an online platform through which customers can order their food. The restaurants pay commissions of up to 35%. Orders are delivered either by the restaurants' own drivers or the platforms' third-party contractors.
What we think of Deliveroo, Uber Eats and Menulog
Deliveroo, Uber Eats and Menulog are very similar – they offer the convenience of a wide range of restaurant food available for delivery, all accessible from the one platform. The cons are the same as with any home delivery of food: the risk of an order being cancelled, wrong, or late.
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Menulog: We ordered a couple of pizzas, which arrived 15 minutes later than originally promised, though Menulog did keep us updated via text message and through online tracking. The restaurant accepted our request to remove an ingredient from the pizza.
Deliveroo: We ordered a tub of Gelato Messina ice cream from Deliveroo. It arrived – still cold – a few minutes early, and Deliveroo kept us updated via text message.
Uber Eats: Our sushi was supposed to arrive within 15–20 minutes, but it took 35. Uber Eats updated the delivery time while we waited, but was still five minutes off.
What customers think of Deliveroo, Uber Eats and Menulog
We spoke with several consumers who have used food delivery services.
Vanessa, who is 30 years old and lives in Wollongong, orders from Menulog one to two times a month, usually Friday or Saturday nights. "What I really love about Menulog is they have offers, so you can quite often get 20% or something off your first order," she said. "I've not seen discount offers on Uber Eats."
Laurel, a 28-year-old from Sydney, orders every couple of months when she doesn't have time to cook. But convenience comes at a cost. "I usually end up ordering more than I'd normally eat … Or you try to mount up your order so you get free delivery. I spent $26 last night for a meal just for one, and I could definitely make a meal myself for half that cost."
Michael, a 34-year-old from Sydney, orders regularly from Uber Eats, mainly when he doesn't feel like going out, and has even used the platform to order McDonald's as a special treat on a couple of occasions. Alas, his burger and chips once arrived cold.
Michael, Laurel and Vanessa all told us they'd at times discovered items were missing from their orders, but were refunded or given vouchers to compensate. Michael complained that drivers relying on Google Maps to get to his house often get lost en route, while Vanessa told us Uber Eats once canceled her order from a restaurant in Wollongong – after an hour's wait – due to a lack of drivers in the area.
Deliveroo vs Uber Eats vs Menulog
- Charges restaurants a commission, reportedly around a third.
- Claims to have a fleet of 6500 couriers and 7000 restaurants.
- Drivers pay an "administration fee" of 4%.
- Restaurants can use their own drivers.
- Charges restaurants a commission of up to 35%.
- Drivers pay a "service fee" of 30–35%.
- Claims to have 15,000 restaurants.
- Most restaurants use their own drivers and pay a 14% commission (they keep delivery fees).
- Recently launched third-party delivery service in Sydney and Melbourne.
- Claims to have 11,000 restaurants.
|How to pay
|| Credit card or PayPal.
| Credit card or PayPal.
| Debit or credit card, PayPal or (for some restaurants) cash on arrival.
|| Adelaide, Brisbane, Canberra, Geelong, Gold Coast, Melbourne, Perth, Sydney and Wollongong.
Adelaide, Ballarat, Bendigo, Brisbane, Cairns, Canberra, Geelong, Gold Coast, Hobart, Melbourne, Newcastle, Perth, Sunshine Coast, Sydney, Toowoomba, Townsville and Wollongong.
| Claims to cover 90% of delivery addresses.
Claims of dodgy business practices
With the sudden collapse of Foodora earlier this year, and Deliveroo getting bailed out by its UK parent company in 2017 to the tune of over $20 million, questions have arisen about the companies' business practices.
The bottom line is these companies charge restaurants large commissions and rely on third-party couriers who are offered few protections and can earn as little as under $7 an hour.
How much do food delivery services charge restaurants?
Menulog charges restaurants that use their own couriers (rather than the company's third-party couriers) a 14% commission for orders placed via its platform. The company has also recently launched a new delivery service using third-party couriers in some areas of Sydney and Melbourne, but said it is still working out its cost structure for that.
Uber Eats and Deliveroo didn't reveal what they charge restaurants, but according to the restaurateurs we spoke to it's typically 30 to 35%, depending on restaurant size, volume of orders and location. Deliveroo also recently launched its Marketplace+ service, which allows restaurants to use their own drivers with a lower commission, though a spokesperson didn't specify how much.
What the restaurateurs' say
Sydney's Petty Cash Café publicly broke ties with Uber Eats earlier this year, telling customers in a Facebook post that the 35% commission made it "virtually impossible for us to make a profit."
If things are so bad, why don't other restaurants follow suit?
"When third-party services first launched, many small store owners jumped on because it gave them a competitive advantage," says IBISWorld's senior industry analyst, Andrew Ledovskikh.
"However, once every store on the street has the service, that competitive advantage begins to erode, and suddenly you're just paying 5, 10, 15%, of your gross sales to Menulog or Uber Eats."
When that happens, businesses like Petty Cash Café who have grown unhappy with the relationship and want to opt out, run the risk of losing customers who have become accustomed to the service.
"Many stores in Australia will feel they have been effectively franchised by third-party online operators. And the longer-term picture is worrying," says Ledovskikh.
"The pressure on third-party operators to ensure large investments pay off, and the possible increased costs to these operators if they lose regulatory battles surrounding contractor delivery drivers, will likely lead to consumers and small businesses facing higher charges over the next five years."
John, who owns a Vietnamese restaurant in Sydney's Inner West, says he usually gets five to 10 orders through Uber Eats and Deliveroo each, per day, which has boosted business. He complained that the 30% commission he pays is too high, but says it was cheaper than hiring drivers himself.
Alex owns a café on Sydney's North Shore and signed up with Uber Eats to expand his business. He was able to increase his volume of sales without moving to a larger space with more seating. "It's really good as long as you work their cut into your margins," he says.
Some restaurants seem to only exist on food delivery apps. Welcome to the world of "dark kitchens", "ghost restaurants" or "super kitchens" – delivery-only commercial kitchens that cater exclusively to customers of food-delivery platforms.
Alex is considering leasing his kitchen to a delivery-only restaurant after hours. "I close at 3 in the afternoon, so my kitchen is just sitting there empty for most of the day. If I can rent it out, I can earn more without needing to actually be at work longer. It's a new revenue stream," he says.
How much do couriers earn?
Uber Eats couriers earn $5.50 per pick-up, $3.50 per drop-off, and $2.20 per kilometre. But Uber Eats also charges couriers a commission on their deliveries – 35% of their total fee if they're using a bicycle and 30% on a motorbike, scooter or car.
Menulog-contracted couriers (those hired by the company itself in Sydney and Melbourne, not those employed by restaurants) are paid based on factors including the delivery fee charged by the restaurant, distance and time. According to a driver CHOICE spoke to in Sydney, the minimum pay per delivery is $8, with an average of around $12–13. Deliveries further afield can bring in up to $20. Menulog doesn't charge couriers a commission.
Deliveroo couriers get $3.50 per pick-up, $1.80 per delivery, plus a variable fee based on a combination of distance and time. Some drivers may also be on an older-style fee structure and paid on a per-delivery basis, reportedly $9–$10. Drivers pay a 4% administration fee.
What the delivery drivers say
Food delivery drivers held a protest earlier this year to complain about low pay and poor conditions.
In a survey of drivers released by the Transport Workers' Union earlier this year, three-quarters said they earned less than the minimum wage – some as low as $6.67 per hour – and almost half reported knowing someone who had been injured on the job.
In September, the Victorian government, concerned about "widespread claims of workers being underpaid and poorly treated," launched a review into the on-demand workforce and gig economy.
CHOICE spoke with several food delivery drivers about their experiences.
Larry* is in his late 50s and was laid off from the public service last year. He's been driving his motorbike for Menulog for about four months to make ends meet and earns $8–$20 per delivery, with an average of five to six in a typical three-hour shift. "I think of it as my work for the dole program," he says. "It's OK, but I'd rather have a job with benefits and [paid] days off."
Mo* is an international student, and says he and many of his classmates work for Uber Eats because it fits around their schedules.
Wally* says he works nine hours a day from 1pm to 10pm, seven days a week for Uber Eats on his bicycle and earns between $1100 and $1200 a week.
Abe* is a Deliveroo bike courier, and has been working for food delivery services for the past year. He says he likes the work because it's flexible.
*Not their real names.