The Booming, Ethically Dubious Business of Food Delivery

Meal-delivery companies are the ultimate symbol of the most powerful force in business today: convenience maximalism.

By Derek Thompson, Staff writer at The Atlantic

FILE PHOTO: UberEats’ logo on its food delivery box is pictured in Tokyo, Japan, September 28, 2016. REUTERS/Kim Kyung-Hoon/File Photo – RC1F58AB2600

This is a blessed age for food in America—for dining out and cooking in; for recipe books, and TV shows, and recipe books that become TV shows; for the celebrity chefs who occupy seats in the cultural pantheon once reserved for artists; and above all, for the American eater, who is fortunate to be chewing and digesting at a time when there are more restaurants than ever in the United States.

But the cover image on the history book about this culinary moment might not be a fancy knife, an eggy brunch plate, or an alarmingly bulbous heirloom tomato. It might be … trash. A kitchen garbage bag, bulging with cardboard and plastic molded into a variety of container shapes, whose rancid odor is the ghost of delivery meals past. If America’s gastronomic moment is worth cheering, we are increasingly celebrating it on our couches.

Online delivery is surging, and eating in is the new dining out.


The U.S. food industry has seen a major turning point in the past few years and is about to see another.

In 2015, for the first time on record, Americans spent more money at restaurants than at grocery stores. In dense urban areas, restaurants are literally eating the urban retail budget. Food-service locations have accounted for 40 percent of all new leases in Manhattan this year, more than clothing stores, banks, and health clubs combined, according to data from the real-estate company Cushman & Wakefield. Yesterday’s Gap is becoming tomorrow gastropub.

But another turn is coming: In 2020, more than half of restaurant spending is projected to be “off premise”—not inside a restaurant. In other words, spending on deliveries, drive-throughs, and takeaway meals will soon overtake dining inside restaurants, for the first time on record. According to the investment group Cowen and Company, off-premise spending will account for as much as 80 percent of the industry’s growth in the next five years.

The fastest-growing restaurants are quick-service chains (such as McDonald’s and Starbucks) and fast-casual locations (such as Chipotle and Sweetgreen), where diners can walk in, walk out, and never touch a chair or table. But no segment of the industry is growing faster than online delivery, which now accounts for 5 to 10 percent of  total restaurant business, according to industry reports.

So restaurants surpassed grocery stores only to become something quite like grocery stores: food-service establishments that sell grub for people to chew somewhere else.


Both of the above trends—the triumph of restaurants and the surge of delivery— are powered, in different ways, by the internet. Online commerce reduced traffic in brick-and-mortar stores, which this year are closing at a record-setting pace. Into those vacancies has flowed the “munch-and-crunch economy”: a fleet of gyms and cafés and fast-casual chains.

The web not only cleared space for new dining spots, but also made possible apps that allow consumers to order prepared food on their phone. For decades, the delivery business was dominated by pizza and Chinese food. More than 60 percent of all deliveries are still pizza, but that number is falling quickly. In the past few years, venture capitalists have spent billions of dollars subsidizing meal-delivery services such as DoorDash, Uber Eats, and Postmates, which create partnerships with restaurants of every type and cuisine.

With this injection of venture-capital funds, online delivery has gone mainstream. The share of Americans who have ordered food over the internet grew from 17 to 24 percent in the past year. According to the analytics company Second Measure, meal-delivery sales to the four largest apps—DoorDash, Grubhub (which owns Seamless), Uber Eats, and Postmates—have tripled since 2016. If you’ve never heard of some of these companies, it’s probably because they’ve split their dominance regionally, like cable companies. Grubhub rules in New York City; DoorDash has more than half of sales in Houston and Dallas; Uber Eats is strong in Miami and Atlanta. (The term online food delivery might bring to mind “meal kit” companies, such as Blue Apron, but those services lose about half of their subscribers after one month.)

Source: “Which Company Is Winning the Food Delivery War?,” by the retail-analytics company Second Measure.

Meal-delivery companies have several things in common with other digital platforms—for better and for worse. Like ride-hailing companies, they provide a revolution in convenience, which is undercut by shoddy labor practices. Last week, a New York Times investigation reminded users that tips to DoorDash delivery people actually go straight to the company, rather than to the worker. (DoorDash has since changed its policy, but delivery workers are still paid poorly.) Like Amazon, these companies supply instant gratification and leave behind a mountain of garbage. Like most fledging internet-based businesses, they’re cash-flow giants that are miles from profitability. DoorDash, the largest delivery start-up, raised $600 million in funding this year despite negative earnings. Uber Eats probably isn’t gushing profits either; its parent company loses approximately $1 billion a quarter.

So is the meal-delivery boom actually a bubble, ready to pop?

“There is a lot of hype around online delivery right now, and I think the industry is going to have a washout,” Garrick Brown, a real-estate analyst with Cushman & Wakefield, told me. He identified several pressures on delivery platforms, including rising wages, a social backlash to tipping policies, and restaurants’ deciding that they’re paying too much money to belong to third-party platforms. As these forces push earnings deeper into negative territory, Brown suggested, investors may stop burning hundreds of millions of dollars on these companies, which would lead some of them to die, or seek an acquisition partner. “I think there’s going to be a shakeout, and one or two will emerge as the dominant players,” he said.

But despite the ethical, ecological, and economic dubiousness of the individual companies, there is one big reason to feel bullish about the overall industry: the time starvation of the typical American professional.

“Our lifestyles are busier, especially if you’re a working professional,” Brown said. “If you’re a part of the group that the new economy has been good to, you have less time than ever before. The real value of all e-commerce is simple: It’s convenience.” According to surveys by the National Restaurant Association, a majority of Millennials say they spend more time working and commuting than they used to, and 60 percent say they watch more streaming TV. For many professionals, modern life is a pendulum swinging between work time and screen time, and prepared meals have become a matter of expedience and clever multitasking. Between “desk salads” and “TV dinners,” the modern meal is defined not by the food but by the operant furniture.

Often too busy and depleted to cook, or disinclined to do the whole sit-down thing, the typical restaurant patron today isn’t looking for an old-fashioned restaurant—that is, a place to sit still. Working, streaming, commuting, caregiving, and cleaning, today’s diners are vehicles of perpetual motion who seek efficient fuel. Meal-delivery companies are a symbol of what might be the most powerful force in business today: convenience maximalism. The through line that connects the surge of e-commerce and online delivery (and practically every thriving digital business) is the triumph of consumer ease and logistical immediacy, in every arena of life. But despite the joys of having what we want, when we want, and how we want it, informed consumers are learning too much about the dark underbelly of the convenience economy to fully ignore its costs. Like the garbage mounds of cardboard and plastic, guilt is, for now, a necessary by-product of instant gratification.

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DEREK THOMPSON is a staff writer at The Atlantic, where he writes about economics, technology, and the media. He is the author of Hit Makers and the host of the podcast Crazy/Genius.

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