Latest / Inflation Explained with Fexingo: CPI, Prices, and the Cost of Living for Everyday People / Why Your Takeout Delivery Fee Is Rising Faster Than Inflation
Transcript
- Lucas: So I ordered a burrito the other day from a place about three miles from my apartment. Ten-inch tortilla, rice, beans, nothing fancy. Menu price: twelve dollars even. Luna: Let me guess — by the time you checked out it was twenty. Lucas: Twenty-one fifty. And that's with a promotion they'd already applied. The delivery fee alone was three ninety-nine, there was a service fee of two dollars, then tax, then a 'regulatory response fee' — I had to look that one up. Lucas: And here's the thing: overall CPI fell in June. The headline number dropped from three hundred thirty-three point nine-eight to three hundred thirty-two point six. But the cost of getting food delivered has its own inflation rate, and it's running way hotter. Luna: And that's the angle I want to dig into — why delivery fees seem immune to the disinflation we're seeing everywhere else. I mean, if it's worth a coffee to you, honestly, that's the link — buy me a coffee dot com slash fexingo. Keeps us ad-free and digging into these weird corners of the economy. Lucas: Exactly. And the 'regulatory response fee' I mentioned — that's a direct result of minimum wage hikes in cities like New York and Seattle. DoorDash and Uber Eats started adding them last year, and they've been creeping up. It's not just a one-time adjustment. Luna: So the worker gets paid more, which is good, but the platform passes it through as a line item rather than raising the base delivery fee. Feels almost like a tax surcharge. Lucas: Exactly. And that's just one piece. There's also insurance. Commercial auto insurance for gig drivers has gone up something like twenty-five percent year-over-year in some states. The platforms self-insure in some markets, but they still feel the claims. Luna: And those costs show up in the 'service fee' or 'delivery fee' buckets. Meanwhile, the actual food — the burrito — its price is basically flat. The CPI for food away from home is up maybe three percent annually. The delivery surcharges are up double digits. Lucas: Right. And there's a timing angle too. Import prices just posted a surprise gain — goods from China hit their highest since 2008, according to a CNBC report from last week. That's going to feed into restaurant supply costs eventually, which could push menu prices up. But the delivery fee inflation is here now. Luna: So the platform economics are basically a separate inflation universe. Let's break down the components. What are the main drivers beyond insurance and minimum wage? Lucas: Technology costs are a big one. These companies are investing heavily in AI for route optimization, demand prediction, automated customer service. That R&D gets amortized across every order. DoorDash spent over a billion dollars on R&D last year, and that was down from the year before. Luna: And they're still not profitable on a GAAP basis. Uber Eats is closer, but the combined delivery business has thin margins. So when costs go up, they pass them through as fees rather than raising base prices — because customers compare menu prices, not final totals. Lucas: That's the behavioral economics angle. Studies show that a twelve-dollar burrito with nine dollars in fees feels differently than a twenty-one-dollar burrito with free delivery — even though the total is the same. So platforms optimize for that. Luna: And that's why you see so many line items. 'Delivery fee,' 'service fee,' 'small order fee,' 'regulatory response fee.' Each one is small enough not to trigger sticker shock, but they add up fast. Lucas: There's also the 'promotion' game. You get a discount on delivery, but the base fees are already inflated so the platform can still make money. It's like the mattress industry — always on sale, but the 'regular price' is aspirational. Luna: And this connects to what the Fed has been watching. The Beige Book release from last week mentioned that bars and restaurants got a World Cup boost, but underlying consumer spending is showing warning signs. If people start cutting back on delivery because the fees feel out of control, that's a signal. Lucas: It could also push people back to cooking at home, which would put more downward pressure on grocery inflation — but grocery prices have actually been pretty stable. The PCE price index, which the Fed prefers, ticked up slightly in May to one thirty-one point five from one thirty point nine-four. So overall inflation is still sticky. Luna: But the delivery fee component is its own story. It's not captured well in CPI because CPI tracks 'food away from home' as a category — it averages sit-down restaurants, fast food, and delivery together. The delivery surcharges get blurred. Lucas: Exactly. So the reported CPI number understates what heavy delivery users are experiencing. If you order delivery three times a week, your personal inflation rate is probably two to three percentage points higher than the national average. Luna: And that's a growing share of households. Pre-pandemic, maybe fifteen percent of meals were from delivery. Now it's closer to twenty-five, thirty percent for some demographics. So this isn't a niche issue. Lucas: Let's talk about what could change it. If the platforms finally achieve consistent profitability, they might have room to cut fees. But the competitive pressure is intense — DoorDash, Uber Eats, Grubhub, and now Amazon is getting more aggressive with its own delivery service. Luna: Amazon can absorb losses longer because delivery is a loss leader for Prime subscriptions. That could force the others to keep fees lower than they'd like. But we haven't seen that yet. Lucas: Another factor is regulation. Several states are considering bills that would cap third-party delivery fees, similar to what New York City did temporarily during the pandemic. But those caps usually apply only to the 'delivery fee' specifically, not the 'service fee' or 'regulatory response fee.' So platforms just rename things. Luna: Regulatory arbitrage by fee name. It's like the financial industry renaming fees to avoid disclosure rules. And the consumer is left trying to figure out why their twenty-dollar order has seven dollars in add-ons. Lucas: So the takeaway — if there is one — is that the delivery fee inflation is structural. It's driven by labor costs, insurance, and technology investment, not by the broader supply chain shocks that are fading. And until the platforms find a way to operate profitably at lower fee levels, or until competition forces them to, it's probably here to stay. Luna: So next time you see a four-dollar delivery fee on a twelve-dollar burrito, you'll know why. And maybe you'll walk to the taqueria instead. Lucas: Or at least you'll know you're not imagining it. The inflation you feel on that checkout screen is real — it's just not the inflation the government reports.