uber-eats-business-model

How Does Uber Eats Make Money? Uber Eats Business Model In A Nutshell

Uber Eats is a three-sided marketplace connecting a driver, a restaurant owner and a customer with Uber Eats platform at the center. The three-sided marketplace moves around three players: Restaurants pay commission on the orders to Uber Eats; Customers pay the small delivery charges, and at times, cancellation fee; Drivers earn through making reliable deliveries on time.

Uber Eats Background Story

Uber – The world’s largest ride-share company took an interesting turn in 2014 when it gave birth to “Uber Eats,” called initially Uber Fresh.

Getting food delivered from your favorite local restaurants became as easy as requesting a ride!

Fast forward to today, Uber is heavily investing in the Uber Eats model. The food delivery business is growing fast and gaining momentum around the world.

  • Why is Uber building the world’s largest food delivery platform?
  • Is it valuable for Uber to turn its drivers into a reliable delivery fleet?

In this post, you’ll learn why Uber is betting big on the Uber Eats business model, its value proposition, operational components, and what it means for the future of Uber.

Related: How Does Uber Make Money? Uber Business Model In A Nutshell

A 3-sided Marketplace Business

Uber Eats is a three-sided marketplace connecting a driver, a restaurant owner and a customer with Uber Eats platform at the center.

  1. Restaurants pay commission on the orders to Uber Eats.
  2. Customers pay the small delivery charges and at times, cancellation fee.
  3. Drivers earn through making reliable deliveries on time.

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Source: eng.uber.com

(Image credits: Restaurant-Partner: gst/Shutterstock.com, Delivery Partner: Kikuchi/Shutterstock.com, Eater: tigatelu/Depositphotos)

A six-point value proposition

  • Blazing fast delivery: Uber Eats promises to deliver within 30 minutes in most of the cities where they are currently operational. It works on the principle that “We don’t want your food traveling halfway across town.”
  • No minimum order concept: The customers can order their favorite snack instead of a full meal. The standard delivery fee ensures that all orders are fulfilled irrespective of the order value.
  • Existing customer base: Probably, the most valuable asset of all. They already have millions of active Uber users across the globe who can be potential Uber Eats users.
  • Better utilization of Uber’s resources: They already have cars/drivers on the road and an effective system to manage it. The inclusion of Uber Eats will only help to increase the utilization across Uber’s different verticals. For example, a cabbie who just finished a trip may handle a food delivery order right afterward.
  • A top class algorithm: The algorithm developed by Uber does a great job in neatly organizing the prime factors in online food delivery system. i.e., order management, order allocation and order dispatch.
  • The global presence: How hard it would be for them to leverage Uber’s global dominance to scale the business of Uber Eats? Not that hard! While they may face local competitors in every market they penetrate, a competitor with such a global stronghold would be hard to beat!

uber-eats-value-proposition

How ‘Uber Eats’ Makes Money

The chart below completely describes the revenue flow in the Uber Eats ecosystem:

  • Standard Delivery Fee OR Convenience Fee: Uber Eats charges a flat delivery fee from its customers irrespective of the order value. The charges vary from $1 to $5 depending on the market they are operating in.
  • Recurring Revenue Share from Restaurant Partners: Uber Eats takes a cut of 15% to 40% on every order that is fulfilled from the Restaurant partners. Uber Eats decides the percentage of the commission depending on the age and maturity of the market.
  • Marketing & Advertising Fee from Restaurant Partners: Uber Eats is helping their restaurant partners attract more customers and reach a larger customer base by offering customer-facing brand campaigns, relatable social posts and email marketing to Uber’s rider base.

How much Uber Eats pay for their delivery partners or drivers?

The delivery partner’s fee is mainly divided into three segments which are pickup fee, delivery fee and per mile fee also referred to as mileage fee.

The exact figures of these charges vary from region to region. A customer can tip the delivery partners if they want to and 100% of this tip would be allocated to the delivery partner only.

Uber Eats’ Cost-Saving Factors

You’ve heard the saying “Every Penny Saved is Every Penny Earned”? Uber Eats, with its unique three-sided marketplace business model, is both cost-effective and efficient than its competitors.

  • Lesser Customer Acquisition Cost (CAC) and Shared Marketing Expenses: The current marketing and advertising expense incurred by Uber Eats is comparatively less since it’s getting most of its users through cross-promotion on the Uber App.
  • Shared Network of Drivers & Riders: The drivers and riders on Uber double up to work as the delivery fleet, which eases the pain of setting up a delivery network from scratch.
  • Savings on Logistics Costs: A well-defined unit economics helps in saving big on the logistics cost as multiple food orders on the same route can be delivered in a single delivery run.

Uber Eats’ Unit Economics


YOU ordered an apple-pie from XYZ restaurant that is priced at $50 Order Value + $5 Delivery Charges. The order will be delivered by ME at your door and ME is currently 3 miles away from your location.

Approximately, this is how the unit economics should reflect:

  • Amount paid by YOU: $50 + $5 = $55
  • Amount received by XYZ restaurant: $50 – (30% commission on order) = $35
  • Delivery Charges: Pickup Fee + Delivery Fee + Per Mile Charges = $4 + $2 + ($2 x 3) = $12
  • Net Revenue for Uber Eats = ($55 – $35) – $12 = $8

The Future of Uber Eats

Currently covering 50% of the US population, it is set to cover more than 70% by the end of 2019. Uber Eats holds 27.9% of the revenue share of all top online food delivery services in the USA and is approximately valued at 20 billion USD.

Uber has been doing a great job in innovating and captivating new markets with its exceptional approach.

In a market which is already crowded with online food ordering and delivery platforms, how should we look at Uber’s presence in this space?

Is food delivery the real endgame, or are we witnessing the time-honored “sustaining innovation” curve leading to Uber Everything? Only time will tell!

Connected Business Models And Concepts To Uber Eats

Uber Business Model

uber-business-model
Uber is a is two-sided marketplace, a platform business model that connects drivers and riders, with an interface that has elements of gamification, that makes it easy for two sides to connect and transact. Uber makes money by collecting fees from the platform’s gross bookings.

Lyft Business Model

lyft-business-model
Lyft is a transportation-as-a-service marketplace allowing riders to find a driver for a ride. Lyft has also expanded with a multimodal platform that gives more options like bike-sharing or electric scooters. Lyft primary makes money by collecting fees from drivers that complete rides on the platform.

HyreCar Business Model

hyrecar-business-model
HyreCar is a peer-to-peer marketplace where owners of cars can rent their idle vehicles to drivers that want to make an additional income via ride-sharing services like Uber, and Lyft. As a two-sided marketplace, HyreCar makes money by charging drivers for direct insurance and a 10% fee on the weekly rental expense. And by taking a 15% fee from owners weekly rental income.

Uber Competitors

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uber-market-expansion

Uber Liquidity Network Effects

liquidity-network-effects

Food Delivery Business Models

food-delivery-business-model
In the food delivery business model companies leverage technology to build platforms that enable users to have the food delivered at home. This business model usually is set up as a platform and multi-sided marketplace, where the food delivery company makes money by charging commissions to the restaurant and to the customer.

DoorDash Business Model

how-does-doordash-make-money
DoorDash is a platform business model that enables restaurants to set up at no cost delivery operations. At the same time, customers get their food at home and dashers (delivery people) earn some extra money. DoorDash makes money by markup prices through delivery fees, memberships, and advertising for restaurants on the marketplace.

Grubhub Business Model

grubhub-business-model

Instacart Business Model

how-does-instacart-make-money
Instacart’s business model relies on enabling an easy set up for grocery stores, the comfort for customers to get their shopping delivered at home, and an additional income stream for personal shoppers. Instacart makes money by charging service fees, via memberships, and by running performance advertising on its platform.

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What type of business model is Uber Eats?

Uber Eats is a three-sided marketplace connecting drivers, restaurant owners, and customers. Drivers can leverage the existing Uber platform, to perform additional gigs, and therefore earn extra income on top of Uber. Restaurant owners can amplify their local service reach, by easily setting up delivery operations of food, thus gaining more customers. And customers can leverage the smoothness Uber platform to have the food comfortably delivered at home.

Is Uber Eats a profitable business?

The company reported that Uber Eats was profitable during the 2021 Q3, as per its earning calls. As of 2021, this makes Uber Eats the only profitable segment of the company. Indeed, as of 2020, Uber reported net losses were over $6.7 billion.

How does Uber Eats make their money?

As a three-sided platform, the company makes money by charging fees on top of the transactions that go through the platform. More precisely Uber Eats charges standard or convenience delivery fees (between $1-5 depending on the market). It also takes a cut on the restaurant owners’ revenues (anywhere between 15-40% of every order depending on the market). And it collects marketing and advertising fees from restaurant partners.

Published by

Liam Austin

Liam Austin is the founder of Entrepreneurs HQ. He is a Life-long entrepreneur, focusing on business development, strategy, content and anything else. A former professional soccer player, addicted to podcasts, surfing and burritos. Previous experience growing media companies in Australia and the UK

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