With just a few taps on a smartphone, hungry customers can browse menus and order meals delivered right to their door. The convenience of food delivery apps like DoorDash and Uber Eats is undeniable. But for restaurants, the story is far more complicated. Behind the scenes, food delivery apps are intensifying competition, squeezing profit margins, and forcing many restaurants to close.
“Our research demonstrates that the emergence of these platforms significantly increases the likelihood of restaurants closing their doors,” said Wharton assistant management professor Manav Raj. In a recent study co-authored with J. P. Eggers, dean of the NYU Stern School of Business, Raj illuminated the effects of food delivery platforms on the U.S. restaurant industry from 2012 to 2018.
Delivery platforms first emerged in the early 2000s as companies like Grubhub and Seamless offered a way to place orders online instead of calling restaurants directly. But it was the smartphone revolution of the 2010s that truly propelled the industry. Apps such as Uber Eats introduced features like GPS tracking and real-time delivery updates.
These features didn’t just make ordering easier; they changed how people think about dining. “If you wanted Chinese food before, you’d pick the nearest option,” Raj said. “Now, you can order from anywhere in the city and it arrives at your door. Location is less valuable in a world where delivery is king.”
This ease of access has broadened consumer choices but also created new challenges for restaurants. Raj’s paper shows that the arrival of digital platforms increases competition in two key ways: “There’s horizontal competition — restaurants now have to compete across much larger geographic areas. And there’s vertical competition, where platforms impose fees, creating margin pressure.”
Behind the scenes, delivery platforms charge restaurants a basket of fees that can add up quickly. These include commission fees of typically 15 to 30 percent per order, delivery fees, and payment processing fees. Marketing services to boost visibility on the app add costs. Restaurants face mounting pressure to compete on a larger scale while also absorbing these costs imposed by the platforms. For some, it’s a losing battle.
While the overall market has become tougher, not all restaurants are affected equally. Younger and smaller independent restaurants often struggle more, Raj said: “Familiarity plays a big role. People order from their favorite restaurants because they trust them, not just because they’re close by. Newer restaurants lack that level of consumer trust and recognition, making it harder for them to compete.”
The study also underscored the importance of restaurants adapting to the on-demand economy. “Invest less in prime locations, and focus more on efficiency,” Raj advised restaurants. “And above all, position yourself in a way that adds value beyond what the delivery apps provide.”
All told, delivery platforms have reshaped how restaurants compete, operate, and, ultimately, survive. For restaurants, the challenge is clear: Adapt to the platform-driven market or risk being left behind. As Raj put it: “The food delivery apps are here to stay. The question now is how restaurants and platforms can work together.”
Published as “Are Food Delivery Apps Hurting Restaurants?” in the Fall/Winter 2025 issue of Wharton Magazine.
