Hidden food delivery fees risk breaching the Fair Trading Act

Have you noticed a higher price on the same items when getting your meal delivered? It’s because your delivery basket is being weighed down with hidden fees.

Restaurants around the country hike up their food prices when being delivered. This means not only are you paying for the delivery and service fee, but you’re also paying more for the food itself on top of that. If the true cost of delivery is higher than what’s being advertised, why don’t they just say that instead of leading customers to believe they’re only paying a set delivery fee, when they aren’t?

Pizza delivers hidden fees

After receiving complaints from irked customers, Consumer NZ recently looked into misleading pizza delivery prices, uncovering that major pizza brands Pizza Hut and Domino’s were serving up undisclosed fees with their delivered pizzas. Both businesses increase the cost of every item in a customer’s cart when ordering for delivery compared with pick-up.

At Domino’s the cost of delivery is integrated into the price of each pizza to cater for the extra labour and fuel charges required for a delivery. This integration means that the price of a delivered pizza will increase when compared to the price of a pick-up pizza. In theory this is fine, except for the part where they forget to tell the customer this – it’s not stated anywhere on the website.

We asked Domino’s for a follow-up comment but received no reply. However, after our report on the hidden fees, it has since announced an additional fee – a delivery service fee. A bulk email to all customers on its database included the following message:

“We have held off introducing this for as long as we could even as it has become standard in our industry, but this small fee will help our local Domino’s store owners cover the cost of operating a delivery business in the current environment and allow them to continue to provide the great delivery service you know and love.

The announcement fails to mention that it has already been charging customers additional delivery fees for years without it being clearly stated. Their website has now been updated to mention in the small print that a delivery fee is baked into every online delivery order.

Pizza Hut, on the other hand, does have a clear set delivery fee of $7.99. However, it still increases the price of each item in the cart when being delivered – meaning the true cost for delivery is dearer than what’s advertised.

We reached out to Pizza Hut again for a comment but received no reply.

Full belly, light wallet

Graham, a Pizza Hut customer, contacted us after noticing the pricing differences between pick-up and delivery when placing an order online. On Pizza Hut’s website he inadvertently selected delivery rather than pick-up and was surprised to see that the price of each pizza was dearer than what he normally paid. Realising he had selected the delivery option by mistake, he corrected the order to pick-up, only to see that each item in his cart changed price – not the delivery price, but the items themselves.

“My immediate reaction when I realised there was a pricing difference was feeling both misled and annoyed,” Graham said. “For a large company like Pizza Hut to not be upfront about additional costs, I thought, was unethical and misleading.”

The general consensus among complaints we received from annoyed pizza consumers was that they have no problem with a higher delivery fee if that is the true cost of the service. The issue is with the higher prices not being clearly disclosed.

And it’s not just pizza ...

These alternating prices are common practice across New Zealand’s food delivery sector. Most consumers are aware that they pay more for delivery, though some may not know how much the costs actually are.

Restaurant Brands is a corporate franchisee that operates the New Zealand franchises for KFC, Pizza Hut, Carl’s Jr and Taco Bell. They have 137 stores across New Zealand between them. Each brand shares more in common than just being a fast-food joint: They all tack hidden fees onto your cart when ordering for delivery.

We contacted Restaurant Brands for a comment but received no reply.

Note: The prices listed below may vary slightly between regions.

KFC

At KFC, a Zinger box meal costs $15.89 to pick up in store, yet will set you back $18.49 if you opt for delivery. The real zinger is that you end up paying $10.59 for delivery, not the $7.99 as advertised.

Taco Bell

At Taco Bell, a Grande Burrito (beef), jumps from $12.60 pick-up to $15.00 delivered. That’s a $2.40 increase on a single product. Add the $7.99 delivery to that, and the true cost of delivery is $10.39.

Keep adding more items to your cart and watch the hidden fees – and thus the true delivery price – keep climbing.

Carl’s Jr

The last Restaurant Brands franchise to mention is Carl’s Jr, which only offers delivery through its website in one place: Pukekohe, south of Auckland.

An original Big Angus Combo costs $20.20 plus the $7.99 delivery fee, so $28.19 in total.

If you consider that ordering the same combo for pick-up in Pukekohe will only set you back $17.30, there’s (yet again) an unexplained difference in the menu pricing.

If you live elsewhere in the country and are a Carl’s Jr fan, depending on what city you’re in, you can order from third-party delivery service apps UberEats, MenuLog or Deliver Eats.

But this comes with their own rising prices, and rising questions.

What about third-party delivery services?

Many consumers have noticed this same behaviour when ordering through third-party delivery services such as UberEats, DeliverEasy, and Menulog.

Jeremy, from Wellington, noticed the pricing differences between picked-up and delivered foods when looking at various menus online with his flatmates.

He said he’s very unlikely to order delivered food now.

“I have been put off because I can't understand how much I am actually paying for delivery, and due to constant mistakes with what arrives.”

Pricing does not seem transparent or fair, he said.

“Prices seem to be hidden in the food prices. The prices don't reflect the actual retail price of the store menu. They also don't explain this mark-up clearly in the app. It seems they're trying to hide some of their fees by increasing the price of their items. But where is this money going? To Uber, the store or the driver?”

If we look at the same Carl’s Jr Original Big Angus Combo from above, it was $17.30 for pick-up through the website, but comes to $23.40 for the item alone through UberEats. Plus, a $5.99 delivery fee and a $2.34 service fee which puts the total order at $31.73. The true cost of having the item delivered is $14.43 for this burger combo.

So, customers are being sold the exact same product at three different prices.

How delivery apps make money is through charging restaurants and hospitality providers a commission on every order placed through its platform.

UberEats charges businesses around 30% of the order price for using its delivery service. Then it leaves it up to individual restaurants to set their own pricing through the app.

Platforms like UberEats also charge service fees equal to 10% of the order’s value, with a minimum of $1 and maximum of $4 for using the platform, on top of the increased item price and the delivery fee.

As for those restaurants earning slim pickings on their food, with a 30% cut, it’s no wonder they are forced to increase prices for delivered food or they’d end up losing money on each order rather than making a small profit.

Customers are left facing higher fees across the board.

We asked Uber for a comment but were offered no insights, only being pointed to its website.

However, this still doesn’t explain why the businesses which offer their own delivery service, away from third-party delivery services, still feature a price increase.

Some businesses may argue that the differing fees are not misleading, as all fees are ‘clearly displayed ahead of the checkout process’. But what isn’t displayed or mentioned anywhere, not even the tiniest of fine print, is that there are two prices for the same menu, regardless of whether there is a set delivery fee.

The customers we spoke with perceived it to be purposefully misleading to have two sets of prices for the same menu, without informing the customer of this.

Breaching the Fair Trading Act

“You’d think the only additional cost you’d pay for delivery is a delivery fee,” Consumer NZ chief executive Jon Duffy said. “But we’ve found major price differences that aren’t clearly disclosed to the customer.

“We think businesses should be upfront about any additional fees so the customer can make an informed decision.

“The Fair Trading Act is in place to protect consumers from misleading and deceptive behaviour by traders,” he said.

“The fact that these companies aren’t being upfront about the true cost of delivery means they risk breaching the act.”

Section 13(g) of the Fair Trading Act states: “No person shall … make a false or misleading representation with respect to the price of any goods or services.”

Consumer considers that these pricing practices risk breaching the Fair Trading Act and will be lodging a complaint with the Commerce Commission to let them know.

We’re calling for businesses to be upfront about their pricing practices so customers can make informed purchasing decisions.