Over the years, we’ve had things modernized into increasing comfortability. From the idea of online shopping to rideshare and now food delivery.
However, while the services are good, flexible, and comfortable, they usually require extra expenses.
For a platform like Uber Eats, the service fee is just one of those fees you need to clear up while making orders. But what does it actually do? How is it calculated? and why is it always high or volatile?
Understanding How Service Fee Works
Before 2019, there was no such fee as a service fee on Uber Eats. You may only find it on other delivery platforms, say DoorDash, etc.
However, courtesy to me-too marketing, Uber Eats as well as other companies, joined the train to impose the fees.
For Uber Eats, the service fee was gotten from the splitting of the booking fee (the only fee Uber Eats charged prior to the change) into the delivery fee, service fee, and small order fee (for orders below $10).
So what does the Service fee cover? At least, customers are already charged a delivery fee, why do they need to pay a service fee again?
To begin, let’s establish what the service fee isn’t.
It isn’t a delivery fee — Drivers have no percentage in them. It’s also not a tip, which is an additional amount you can choose to give to the driver for their service.
According to Uber Eats, the service fee is a fee that goes into the operational cost of running the platform.
This includes things like app development, customer support, and payment processing, among other expenses.
The fee is usually a percentage of the sub-total of your order, that varies based on the value of your order.
But why a percentage?
The rationale is most likely since your order value increases, the resources (like customer service time, transaction processing, etc.) would also increase, as a result, justifiable (to them ;)).
How Is Uber Eats Service Fee Calculated?
It’s important to understand that there’s no official standard or calculation known to the public to determine the service fee of an order.
However, from the company notes and our experience, we know that there are some factors that influence this fee.
Firstly, we know that the service fee is a percentage of the order subtotal.
According to Uber Eats, this is calculated before any promotions or discounts are applied to you.
In other words, having a discount or promotion added to your charge doesn’t necessarily reduce or increase the service fee.
The exact percentage can vary, and Uber Eats doesn’t provide a fixed rate for all regions or at all times.
But as we said, there are factors that influence this, such as:
- How much your order is worth – the more expensive it is, the higher the likelihood of a higher service charge. Remember, it’s a percentage, not a fixed value (that only varies place to place as the company advertises).
- Regional Variation – issues like government regulations can make deliveries harder for food delivery companies. Companies would usually opt to charge a higher fee (in this case, the service fee) in unfavorable government policies.
- Agreement and Policy Uber Eats have with the Restaurant you order from – Just as some restaurant increases the price of their menu to cover the costs of staying on delivery platforms. If Uber Eats has a less favorable agreement with a restaurant, they might decide to charge a higher service fee. For the records, DoorDash does something similar with their delivery fee.
- Promotion and discount – In the next section where we talk about why Uber Eats service fee can be high, we’ll explain this properly.
For the most accurate understanding of the service fee applied to your order, it’s always best to check the breakdown at checkout.
Why is the Uber Eats Service fee so High?
The biggest complaint of the service fee is not just about its presence, but how volatile it can be.
You can make an order today and get a service fee of a few dollars (e.g. $1) and the next day, you come and get a fee of $10.
And for some people, their service fee is forever on top. In other words, on the higher end like the scenario we gave below.
So why is this so?
Well, to be honest, how the service fee is calculated is at Uber Eats’ discretion.
However, we have a theory as to why the service can be high sometimes:
Firstly, you added a promotion or any sort of discount.
From the hundreds of screenshots about high service fees we’ve seen and interviewed so far, one thing has been consistent — there is a sort of discount on these orders.
A snapshot of an order with promotion and the service fee…
Another without promotion…
And if we give this a second thought it’s justifiable ;).
The service fee should cover the operational costs of running the platform for your order.
Adding a discount probably increases this operational cost since the company earns less profit from your order with a discount. As a result, the service fee should do the magic for them 😉
Who knows? This may be the reason Uber Eats doesn’t tell us how the service is calculated.
The second reason we have are the factors that influence the service fee, as mentioned earlier. This includes:
- How much your order is worth
- Regional variation
- Agreement or policy with the restaurant you ordered from
You can go back to read how each of these influences the service fee in detail.
That’s a wrap.
The service fee is one mandatory fee on Uber Eats and many other food delivery companies, that people struggle to pay.
While you can’t actually do anything about it (since it’s mandatory), having the knowledge about how it works could help your out.
Thanks for reading!