Why you should care
Because you might go hungry if this brewing tension escalates.
When DoorDash announced in mid-February that it had raised $400 million at a $7.1 billion valuation, it seemed to be the latest chapter in the rapid growth of America’s largest food delivery app. But a crisis was slowly simmering. Earlier that month, two DoorDash employees joined other food delivery workers in filing a class action suit, accusing the company of indirectly pocketing their tips under a complex compensation scheme.
The allegation exploded. In March, tech workers threatened to boycott the firm, much as Uber drivers have repeatedly gone on strike to protest what they allege are unfair practices by the ride-sharing giant. Under pressure, DoorDash acknowledged that in 85 percent of cases it was using tips customers had shelled out for drivers — called Dashers — to subsidize the basic pay it promised them. In effect, drivers were paying themselves.
The firm’s not alone. Across the world’s biggest markets, food delivery apps that have disrupted the restaurant industry now face an unexpected threat, as workers and eateries fight back against what they allege are predatory practices. In China earlier this year, food delivery workers in at least four cities went on strike protesting pay cuts. According to China Labour Bulletin, which tracks labor movements in the country, there were at least 33 strikes by food delivery workers in the first half of 2019. That’s compared to 48 across all of 2018 and just eight in 2017, says Aiden Chau, a researcher at the bulletin.
In the U.S., grocery delivery firm Instacart faced allegations similar to those against DoorDash earlier this year, and quickly changed its policies. Under pressure, Tony Xu, the CEO of DoorDash — which serves 3,300 cities — took to Twitter in July to acknowledge they had erred. “It’s clear from recent feedback that we didn’t strike the right balance,” he tweeted.
As the number of gig economy workers rapidly increases — they numbered 55 million in the U.S. in 2017 — their protests will become harder for politicians to ignore.
And in India, workers of leading food delivery app Zomato took to the streets to protest a wage cut this past summer. Meanwhile, the National Restaurant Association of India (NRAI) is campaigning to boycott delivery apps, arguing that the bargains these services insist on offering are killing their margins. At least 300 restaurants in New Delhi’s satellite city of Gurugram have “logged off” from the apps, according to the NRAI. The association’s message to restaurants? “Offer right quality at the right price, rather than falling for such discount gimmicks,” said NRAI President Anurag Katriar, in a September press statement.
That’s not an easy choice for many in the food industry. In the U.S. and other tech-driven societies such as India, a series of eateries only accessible through food delivery apps have emerged since 2015. These so-called “ghost kitchens” have fancy menus and branding you can view online or on Facebook — but they don’t advertise a physical address you can visit. The model works well for small enterprises with few resources to invest in a physical restaurant. In India, this has helped revive traditional cuisines that were dying — while opening up economic opportunities for homemakers who can’t step out to work but can cook in their kitchens.
But for established restaurants, the impact of these apps has been more complex. Between 2018 and 2023, online food deliveries are expected to grow at five times the rate of on-premises restaurant sales in the U.S., according to strategic consulting firm LEK.
So restaurants must make themselves active on delivery apps — or will miss out on a growing chunk of customers. But because their financial model involves receiving a commission of all earnings from member restaurants, discounts that these apps apply mean restaurants earn less per order than they otherwise would. In the U.S. this past summer, a fresh controversy emerged, when Google launched an “Order Online” button, where it partnered with delivery firms like DoorDash and ChowNow but cut out any online ordering systems that some individual restaurants have set up for themselves. Many of these restaurants have since protested Google’s move.
A distrust of food delivery apps has also spread to workers. In February in China, workers for major food delivery platforms Meituan and Ele.me stopped taking orders in the cities of Dongguan, Pinghu and Qingdao and in a town in the eastern province of Shandong. The workers alleged that they were being underpaid and overworked. Chau says at least 90 percent of food delivery worker strikes are the result of sudden wage cuts, in some cases by half.
Food delivery apps are aware of their growing clout. So far they’ve refused to negotiate with NRAI in India and, responding to worker protests, Zomato founder Deepinder Goyal wrote in an internal email to employees that the concerns were “confined to a handful of delivery partners.” In China, Meituan has blacklisted the workers who organized the protests.
But workers are finding ways to ensure that public attention remains focused on their protests. In India, Zomato workers have claimed that the firm was also forcing them to carry food that offends their religious sensitivities: beef for Hindus and pork for Muslims (Goyal has responded that pay cuts, not religious sensitivities, are behind the protests).
As the number of gig economy workers rapidly increases — they numbered 55 million in the U.S. in 2017 — their protests will become harder for politicians to ignore. It’s a lesson the ride-sharing industry is already learning. On the eve of Uber’s IPO, its drivers in 12 cities went on strike seeking better wages and drawing support from Democratic presidential candidates Bernie Sanders, Elizabeth Warren and Pete Buttigieg, among others. It might be food delivery apps next.
(Correction: This story has been updated to reflect comments of NRAI President Anurag Katriar based on a September press statement, instead of the group’s Secretary-General Pratul Kumar, who had not spoken with OZY.)