With changing wage laws shaking up the economics of restaurant delivery, key players have begun changing their approach.
For instance, in California, a new minimum wage law requiring that fast-food workers receive at least $20 an hour, where previously the average hourly pay for fast-food workers in the state was $16.60, has quick-service restaurant (QSR) chain Pizza Hut rethinking its delivery strategy. Two operators’ decision to shut down in-house delivery has reportedly resulted in the layoffs of 1,200-plus delivery drivers, with consumers now having to turn to third-party aggregators to get the pizza brought to their homes.
Another fast-food minimum wage increase is about to go into effect in New York City, as well as Long Island and Westchester County, according to the New York State Department of Labor, with the hourly rate standard to increase by $1 to $16 at the start of the new year. As such, similar delivery changes may be seen on the East Coast as well.
Plus, in a greater change, New York City implemented a law earlier this year demanding that food delivery drivers must be paid $17.96 per hour, a figure that will go up to nearly $20 an hour in April 2025. As such, aggregators have been making changes to their tipping structures in the city, with DoorDash and Uber Eats both changing it so that the prompt to add gratuity is not shown until after consumers have already checked out.
Additionally, according to The Guardian, aggregators have also added new fees for consumers.
These changes can make a difference in aggregator customers’ loyalty as well as in restaurant customers’ choices of ordering channels, given that price already plays a role in diners’ decisions.
PYMNTS Intelligence’s report “Connected Dining: Rising Costs Push Consumers Toward Pickup,” which drew from a survey of more than 2,100 U.S. consumers, revealed that 58% of takeout customers said they pick up their own restaurant meals to save on delivery fees. Plus, 48% said inflation has made them more likely to choose pickup over delivery.
Moreover, the study found that about 4 in 10 restaurant orders are placed for pickup, and 1 in 10 are for delivery, with further PYMNTS Intelligence revealing that about half of those are made via third-party aggregators. Additional research revealed that half of all consumers believe aggregators are too expensive.
Pricing on aggregators can have ramifications for restaurants’ direct relationships with their customers, an effect that has contributed to full-service restaurant giant Darden pulling its Ruth’s Chris Steak House stores from delivery platforms.
“We still feel really confident about our decision to [stop] the third-party delivery, even if we had to price more to cover that,” Darden President and CEO Rick Cardenas told analysts on an earnings call Dec. 15. “Our consumer would see that as our price, not necessarily the price for delivery.”
Others may make similar decisions if aggregators further raise the fees they charge restaurants, in turn demanding that eateries inflate their prices on the platforms even higher.
The post New Wage Regulations Are Transforming the Economics of Restaurant Delivery first appeared on PYMNTS.com.
