Takeout Sticker Shock

Skyrocketing app fees and labor hiccups are making takeout food a luxury. Here's why it's hitting your wallet hard.

Say you place a takeout order going to the Web page for your favorite local pizzeria and selecting a large pepperoni/ mushroom pizza. You know it costs $19 when you dine in, but on the takeout menu, the price is $23. Then there is a delivery fee because that delivery is organized through a third-party platform like Uber Eats or Grub Hub. In addition, there's another service charge — and don't forget the 20% tip. Your pizza delivery comes to a whopping $48, please. Cha-ching.

Higher take-out menu prices, increased delivery fees and the proliferation of mysterious service charges have left many diners feeling "slamjacked" by the rising cost of to-go food, as a recent Reddit thread suggested, and driven others to cook more at home. Convenience costs and we're paying dearly for the privilege of food delivery.

What's going on?

"We hear a lot about inflation slowing down or it being lower, but lower inflation doesn't mean lower prices; lower inflation means prices go up less quickly," says Sean Cash, chair of the division of agriculture, food and environment at the Friedman School of Nutrition Science Policy at Tufts University in Boston. "The rate of change has slowed down, but prices are still actually going up on average."

That can be painful for people whose wages aren't rising as fast as prices, have a fixed income or live in a place where labor is really short, causing labor costs to skyrocket.

Restaurants are labor intensive. One of the most significant areas of inflation has been labor costs, particularly for hospitality work. On one hand, that's good for hospitality workers who tend to have some of the lowest incomes, but it translates to higher costs for consumers.

"Getting workers has been the pain point for a lot of restaurant owners, and that's one of the things that has driven prices higher faster whether you dine in or take out," says Cash. So, if it feels like prices have gone up faster in restaurants than at the hardware store, it's because they have.

While we have sorted out most of the supply chain issues that disrupted the economy at the peak of the COVID pandemic, the price of consumable goods and supplies is still higher than before. Things like cooking oil and fresh ingredients cost more on average than a few years ago.

Delivery orders also can require extra packaging and handling, raising the overall cost further relative to dining in. Businesses that have to pay more to attract employees and secure supplies naturally have to raise prices.

"The consumer demand for takeout has been very strong, and what you're seeing are the rates reflecting a kind of new normal about where we are in terms of our expectations for convenience like takeout," says Cash.

He explains that a big part of increased demand for convenience was due to the pandemic — the same pandemic that helped inflation take off for several years. When we were stuck at home, we got more comfortable ordering things online.

Though takeout has existed for a long time, what really changed during the pandemic was that it happened at the same time that third-party platform delivery services like Uber Eats, Grub Hub and Door Dash were taking off as well.

All of a sudden, restaurants that never offered takeout and delivery were getting into that space to compete with restaurants that did and signing up with a delivery service was an easy way for restaurants to get their food delivered.

"Traditionally, ordering food online from your favorite fast food or a local restaurant or even your groceries was something younger, more tech-savvy people would do. But we all had to get more comfortable with technology," says Cash.

"Now we live in a world where we're used to having more things delivered, all sorts of things, and these third-party systems made it more convenient and more universal," he says.

"Your delivery sushi order costs way more than eating in because restaurants are dealing with a triple whammy — they're paying higher wages, food costs are up and delivery apps take a massive cut of each order," says David Kindness, a CPA who works with restaurant clients, as well as a tax professional and personal finance writer.

"My local pizza place actually showed me their books — they make less profit on a $50 delivery order than a $35 dine-in order," he says.

When you order takeout food from a third-party platform, know that the item that typically costs $19.99 costs $25 on the Uber Eats, Grub Hub or Door Dash platform, a double margin. Every menu item has a markup on the price. Plus, delivery platforms tack on service fees. Some restaurants have also raised their delivery menu prices to cover extra overhead costs, especially given the hefty cut that food apps take.

Unfortunately, restaurants often can't make the math work without shifting some of those costs to customers.

One sneaky thing Cash mentions is to make sure you're even on your local restaurant's website when ordering takeout online. Now, when you enter the restaurant's name into your web browser, you're likely taken to a third-party platform instead.

Because of paid ads and the popularity of delivery services, a restaurant's website may now be sixth or 12th on the list of choices when you plug their name into your browser. Look at the address bar and ensure you're on the real restaurant website, which can help you avoid some of the extra markup.

If your local pizza or sushi place has its own delivery people, support them by ordering from there. You may also save on third-party fees and double margins, which significantly increase your total.

"I want the Uber [Eats] driver to make a living too, nothing against them," says Cash. "But as a consumer, I'd rather pay the restaurant and cover their profit and cost of doing business than have to pay the restaurant plus Uber's need to make a profit, plus the driver who's sitting in the car waiting to get your order who needs a cut, too."

Also, try calling to order. They might direct you to a platform or their online service, but sometimes, it could be cheaper to call in your order. Avoid peak lunch and dinner hours, especially on Fridays and Saturdays, since delivery apps may add surge pricing at busy meal times, too.

If you're going to stick with a delivery service and you order takeout often, consider becoming a subscriber, if that is an option. Subscribers can be offered exclusive deals, coupons and discounts. Other money-saving options include ordering from restaurants with their own drivers, picking up the food yourself or ordering out less frequently.

"I don't think food prices are coming down in a big way, but I think we might be hitting a tipping point of absurdity in consumers' minds," says Cash. It's frustrating when the $12 sandwich costs $30 when delivered.

Third-party platforms can't keep growing forever. Somebody's buying that $48 pizza, but who's going to buy a $65 pizza? As prices increase, more and more people will drop off at each new price point until those higher prices become unsustainable.

At that point, you may see restaurants reduce or eliminate delivery fees or go even further: Pick it up yourself and get a 10% discount!

Jennifer Nelson is a Florida-based writer who also writes for MSNBC, FOXnews and AARP. Read More