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Why Surge Pricing Could Hit Food Delivery Apps Next

That late-night pizza could get a whole lot more expensive

Gabriel Saldana/Flickr

Food delivery apps took a page from Uber's playbook when they began allowing users to track their delivery drivers in real time. Now, some are speculating that food delivery companies will take another cue from the on-demand driver service with the introduction of surge pricing.

According to Venture Beat, higher wages and increasing demand for more benefits will likely result in surge pricing among the majority of food delivery services"Food delivery companies need to somehow compensate for rising driver costs," writes Michael DiBenedetto, cofounder and CEO of food delivery search engine Bootler. "They can’t increase restaurant commissions. Most delivery companies take between 10 and 30 percent of each order depending on their model, and restaurants already operate on slim margins. Consumers will have to make up the difference by paying variable delivery prices."

Of course, surge pricing on food deliveries isn't exactly new. In 2014, Sprig announced the introduction of dynamic delivery pricing; company CEO Gagan Biyani said that dynamic delivery fees would "adjust up or down throughout Sprig's service based on how busy things get and how far away a delivery is."

Postmates made a similar announcement two years ago when it announced its Blitz Pricing structure. With the Postmates model, delivery fees can range from reasonable to incredibly high, depending on current demand.

Thanks to surge pricing, in some cases, users could be charged a higher delivery fee than the cost of the meal itself. Add to that a service fee and a tip — both of which are generally also required on top of the delivery fee — and you could be paying $30 for a $7 sandwich.

Reached for comment, a spokesperson for GrubHub says, "Grubhub does not utilize surge pricing and we don't have any current plans to do so. We are committed to presenting diners with transparent, accurate pricing and an unmatched variety of local options."

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