Deep Dive: Why Aggregators Are Both a Saving Grace and a Sacrifice for QSRs

How consumers’ evolving use of food delivery aggregators is affecting restaurants

Food delivery service use skyrocketed when dining rooms closed, and consumers’ appetites for these services show no signs of waning.

A January study found that food delivery sales soared 164% year over year, and 25% more Americans reported using food delivery aggregators such as DoorDash, Grubhub and Uber Eats. Sales for these services were still growing in October.

Consumers consistently cite convenience as the top reason for turning to aggregators, and many are willing to pay a premium for this benefit. PYMNTS’ latest research, however, showed that most U.S. consumers still do not regularly use aggregators. In the last three months, 44% of respondents who ordered delivery or pickup went through a restaurant’s website or app, while only 17% of regular restaurant customers used an aggregator at least once.

Cost is a big factor for those who do not use aggregator services, and those costs affect restaurants as well. Restaurants operate on tight profit margins, and aggregator commissions and fees can take a sizable bite — or even all — of that share. Delivery options kept many restaurants afloat during pandemic closures and restrictions, but aggregator-related costs made some restaurants’ margins negative.

The following Deep Dive examines drivers of food delivery aggregator use for both consumers and restaurants. It also explores how aggregators can provide a double-edged sword of revenue growth and high costs that complicates their relationship with QSRs.

Convenience Motivates Aggregator Use

Sixty-five percent of respondents in PYMNTS research said they use aggregators for their ease and convenience, whether ordering from a QSR or a table-service restaurant. Most of the other top reasons cited related to convenience as well. Diners chose aggregators in 34% of cases because there were no other delivery options for a particular restaurant, and 32% said they believed it was faster to order through an aggregator.

Aggregator users are also socially conscious, and another report showed that most are willing to deal with both higher costs and longer wait times to support better working conditions for delivery workers. Eighty-two percent of respondents said they would wait 10% longer, and 62% said they would wait 30% longer. Fifty-five percent of respondents would even pay 10% more to support better working conditions.

Food delivery sales grew 164% year over year in 2020, with approximately 45 million consumers in the U.S. using food delivery aggregators — up by 25% year over year. A loosening of pandemic-related restrictions could reduce consumer interest in delivery services, according to the report, but convenience will likely continue to drive delivery demand.

Even without any price increase to help delivery workers, diners pay more for food delivered by aggregators. These costs were the main deterrent to aggregator use, according to PYMNTS research. Fifty-three percent of those who had not used an aggregator in the past 15 months said they were put off by the costs.

Covering the Costs of Convenience

Restaurant commission fees, customer delivery fees and customer service fees are aggregators’ main revenue sources. Restaurants typically operate on profit margins of only 7% to 22%, however, and aggregator commissions and fees can easily eat up those margins. In both the U.S. and Canada, restaurant owners have clamored for permanent extensions of aggregator commission caps created during the pandemic. Aggregator operators oppose these caps, regularly claiming that such caps would harm their bottom lines. Some say that such caps would put them out of business.

A U.K. survey found that aggregators charge restaurants between 15% and 35% in commissions. To cover these costs, restaurant operators may increase what they charge for orders delivered through aggregators, even before delivery fees. The average meal delivered by an aggregator in the U.K. costs 23% more than the same order made directly through a restaurant.

Some major QSR chains are likewise passing aggregator costs directly on to customers. One analyst detailed an average 15% higher cost for orders through aggregator apps across 25 restaurant chains, finding that QSRs charge the most. Chick-fil-A had the highest markup, charging an average of approximately 30% more for aggregator orders than for pickup orders. McDonald’s and Starbucks hovered around 20%. Comparatively, table-service restaurants such as Chili’s, Outback Steakhouse and Applebee’s averaged approximately 3% higher ticket sizes for aggregator orders, and some did not charge a higher price.

Individual restaurateurs may be reluctant to pass on these costs, but with aggregators consuming their profits, many say they are left with limited options. Restaurants depend on volume to make money, so delivery companies have been both a blessing and a curse to many during the pandemic.

Until restaurants develop their own delivery apps, the promise of aggregator-fueled revenue growth will continue to drive restaurants’ use of these services. Profit declines due to aggregator costs, however, may become harder for QSRs to swallow.