Food-delivery startups experienced explosive growth between 2017 and 2021. Millions of customers shifted to app-based ordering, restaurants embraced online demand, and investors poured billions into the sector. The pandemic created a temporary surge that convinced many founders that the industry would offer unlimited scale.
However, the same industry now forces many food-delivery startups to shut their doors. Even in 2024 and 2025, the market continues to record exits, workforce cuts and heavy losses across countries.
The global food-delivery industry still looks huge on paper. Analysts valued the worldwide online food-delivery market at USD 289 billion in 2024, and they expect it to cross USD 500 billion by 2030. India alone reached USD 31.8 billion in 2024, and it continues to grow every year. But size does not guarantee survival. Many players continue to burn money without fixing their underlying unit economics.
Below, I break down the main reasons food-delivery startups shut down, backed by recent examples and the latest industry data.
1) Delivery costs stay high and margins stay too thin
Food delivery looks like a simple marketplace business, but each order carries heavy operational expenses. Every company must pay delivery partners, fuel reimbursements, customer support teams, packaging support teams, and technology infrastructure costs. A typical startup earns only a small commission from restaurants and a convenience fee from customers.
When a startup spends ₹50–₹90 on delivery but earns only ₹25–₹35 in net revenue per order, losses pile up quickly. Many founders focus on increasing the number of orders, but more volume does not fix negative unit economics. Large companies across North America, Europe and Southeast Asia reported “core losses” in 2024 even when their gross order volume grew. This shows that scale does not solve the problem. A startup must fix its order-level profitability early, or it eventually dies.
2) Intense competition crushes smaller players
Food delivery runs on strong network effects. A platform grows faster when it attracts more restaurants, more customers and more delivery partners. Once two or three big players dominate a market, smaller startups struggle to match them.
Large companies run deeper discounts, negotiate better restaurant commissions and spend heavily on advertisements. Smaller startups cannot fight this for long. Many new entrants burn cash for 12–18 months and then shut down after their investors refuse to provide more capital.
In 2024 and 2025, several regions saw consolidation. Bigger firms acquired weaker ones, while others exited entire countries. This consolidation leaves no room for small or mid-sized startups unless they build extremely unique offerings.
3) The funding winter makes survival difficult
Between 2017 and 2021, investors funded food-delivery startups aggressively. When global markets tightened in 2022, investors changed their approach. They demanded profitability, cleaner balance sheets, and disciplined spending.
Startups that depended on external capital failed to adapt to this shift. Many founders expected new funding rounds every year, but they faced rejection after rejection. Without fresh capital, they could not fund discounts, marketing, fleet management systems or customer acquisition.
A wave of layoffs hit the global food and grocery delivery sector in 2024 and 2025. Multiple companies restructured their teams or shut down unprofitable cities because they could not raise new funds.
4) New regulations increase costs and reduce flexibility
Food-delivery startups rely heavily on gig workers. Governments across the world started introducing new rules around minimum pay, insurance, safety, and employment benefits for gig workers. These rules raised the cost per delivery.
Companies also faced pressure to improve safety measures, provide training, manage accident claims and offer better support. Every new regulation increased the financial burden on startups still trying to achieve break-even.
Some companies exited markets because the new regulations removed their cost advantages. When the cost of compliance rises faster than the revenue per order, a startup loses its competitive strength and eventually shuts down.
5) Quick-commerce and super-apps take market share
Food-delivery startups once competed only with each other. After 2022, quick-commerce platforms entered the scene with 10–30 minute delivery of groceries, snacks, beverages and essentials. Customers shifted a big part of their spending to these platforms because they offered speed and convenience.
Super-apps also started combining food delivery with payments, grocery delivery, transport and more. This multi-service approach increased daily app usage and reduced the relevance of standalone food-delivery apps.
When customers split their spending between multiple categories, pure food-delivery startups lose order frequency and eventually fail to retain users. Lower frequency reduces revenue, and lower revenue increases pressure on margins.
6) Operational challenges overwhelm inexperienced teams
Successful food delivery requires strong execution. Many founders underestimate the complexity of:
- route optimization
- real-time tracking
- restaurant onboarding
- quality control
- refunds and complaints
- partner reliability
- peak-hour capacity management
- last-mile delivery planning
A small mistake in operations — slow delivery, inaccurate orders, or inconsistent service — pushes customers away. High churn kills a startup faster than lack of funding. Startups that lacked experienced operations leaders, reliable tech systems or strong SOPs eventually collapsed.
Multiple case studies from failed startups show one pattern: the idea looked strong, but execution failed.
7) Economic slowdowns reduce demand
Inflation, rising fuel prices and slower economic growth directly affect food delivery. When customers cut discretionary spending, order frequency drops. They cook at home more often, look for cheaper alternatives, or reduce weekend ordering.
During inflationary years, customers also switch to dine-in promotions, which sometimes offer more value than delivery. When order frequency drops, startups with weak financial buffers collapse the fastest.
Industry trackers recorded more shutdowns and layoffs in 2024–25 because of these economic pressures.
Recent examples from 2024–2025
Menulog (Australia) chose to close its operations in 2025 after facing intense competition and rising labor costs. Thousands of riders and employees lost their roles, and the closure removed a major competitor from the Australian market.
Grubhub (U.S.) underwent restructuring after an acquisition in 2025. The company cut several hundred roles because the new ownership aimed to increase efficiency and reduce losses. This restructuring showed that even well-known brands struggle in the current environment.
Other smaller regional startups in Asia, Europe and the Middle East quietly shut down after failing to raise new capital or maintain operations.
Key lessons for founders
- Fix unit economics early. A founder must know the exact cost per delivery, break-even point and contribution margin.
- Create differentiation. A startup must offer unique value — better quality, niche cuisine, subscription models, or hyper-local specialization.
- Prepare for regulation. Every founder must forecast how labor laws and insurance requirements affect their cost structure.
- Focus on operational excellence. Strong SOPs, data-driven routing, and restaurant SLAs improve customer retention and reduce costs.
- Remain open to early exits. In a consolidating market, early M&A can save value. Waiting too long often leads to shutdown.
Conclusion
The food-delivery industry still grows globally, but growth alone cannot protect a startup. Delivery costs stay high, investors demand profitability, competitors fight aggressively, and regulations raise expenses. Quick-commerce platforms attract younger consumers, and customers reduce ordering when economic pressure rises.
Startups that understand these realities survive. Startups that ignore them shut down.
Also Read – Lean Startup Stories That Changed Industries