Food delivery wars topple dominoes: 80% of merchants see profit decline, supply chain begins to "hemorrhage"

After a year of takeout wars, 80% of restaurant owners have “wasted a year for nothing.” Orders increased, but profits didn’t—how should this game be played?

“Seeing backend orders surge, I thought spring had arrived, but profits halved” “After a year of effort, we’re actually losing money” “To compete on price, a roast duck shop replaced a 30-yuan fresh duck with a 10-yuan frozen white strip duck”… These are the real feelings of many restaurant owners over the past year.

Lixin Consulting’s survey data shows that since the subsidy battle began, 80% of businesses have experienced profit declines, over 70% have seen a drop in average order value, and dine-in scale continues to shrink.

Undeniably, the combined investment of over 100 billion yuan in subsidies by major platforms has indeed driven traffic growth for the restaurant industry. But more orders haven’t translated into more profits for restaurant owners.

Once traffic flows in, the challenge is how to turn orders into profits and repeat customers.

1. To survive, restaurant businesses start “cutting” their supply chains

A common understanding in recent years is that the growth dividend in the restaurant industry is disappearing, and an industry cycle “elimination race” is inevitable—what should be a fair competition and orderly clearing, with businesses’ survival rights determined by a normal market.

Capital giants, driven by traffic anxiety, launched subsidy wars, with “low prices” almost becoming the only criterion. When traffic rewrites the rules of the restaurant game, the risk of imbalance across the entire industry chain inevitably propagates and accumulates step by step.

The restaurant supply chain has already begun to feel the backlash. Data from Lixin shows that 20% of merchants are increasing the proportion of low-cost dishes on their menus, and 39% are switching to cheaper raw material suppliers.

A hotpot restaurant owner on social media said that previously, their hotpot base sold for over 30 yuan, but to lower the check size and costs, they now source from a small factory, paying only half the original price. “Customers ask how the taste has changed, I can only say the recipe has been upgraded. No choice, we can’t survive without adjusting prices.”

“As long as the price is low enough, quality can be relaxed appropriately,” a food supplier who wished to remain anonymous told Red Restaurant Network. He said that in the past, restaurant procurement required top-grade ingredients, but now second- or third-grade ingredients are acceptable. “Anyway, delivery is to the door, customers can’t tell.” In his view, this cost-cutting often comes at the expense of quality.

A duck restaurant owner in Nanjing also chose to compromise in this cost-cutting wave.

He told Red Restaurant Network that they used to use freshly slaughtered ice-fresh ducks, costing about 30 yuan each, with crispy skin and tender, juicy meat after roasting. But after the takeout war started, seeing competitors selling roasted ducks for 18.8 yuan with thousands of orders per month, he finally couldn’t hold on and switched to frozen white strip ducks, paying less than 10 yuan each wholesale.

“After the change, how does it taste…” he sighed, somewhat helplessly, “I know this isn’t sustainable, but there’s no other way.”

△Image source: TuChong Creative

The “price war” pressure from low prices is being transmitted through merchants as a “transit station” to upstream links like raw material production, processing, and circulation.

According to research by the China Material Industry Association, by the third quarter of 2025, most categories in the national food ingredient market will face price pressure, with overall declines of about 5-6% in seafood and meat trading prices.

Industry insiders point out that when many restaurant businesses switch to low-cost raw materials simultaneously, the demand for mid-to-high-end ingredients, which was previously mainstream, declines, forcing some suppliers to adjust their product structures and further lowering market average prices.

2. Even giants with thousands of stores can’t “withstand” it, and some businesses become casualties of the subsidy war

Why are restaurant owners so “torturing” themselves? The answer is simple: profits are gone.

In the past two years, life has been tough for restaurant owners. Consumer demand is unpredictable, rent and labor costs haven’t decreased, and price wars are raging. Many businesses are barely holding on at the edge of thin margins.

At this critical moment, the subsidy war has added fuel to the fire.

Over the past year, the high-frequency words in the restaurant circle shifted from “increasing revenue without increasing profit” to “growth without revenue increase,” even among the most resilient leading brands, it’s hard to stay unaffected.

Luckin Coffee’s latest financial report shows that its delivery fee costs surged by 4 billion yuan, severely squeezing profit margins; during the intense takeout war in the second half of the year, net profits declined for two consecutive quarters.

△Image source: Hongcan.com

TIMS Coffee also felt the pressure from the subsidy war. CFO Li Dong once said that affected by the industry’s internal competition driven by takeout subsidies, the company is forced to seek a balance among same-store growth, pricing, and profit margins.

If top brands are struggling, what about smaller street-side shops with weaker risk resistance? For them, it’s more than just business—it’s their livelihood. Stop, and they stop eating.

A hotpot restaurant owner shared his bill on social media—selling the same dish for 12 yuan dine-in, earning 6 yuan, but only 2.5 yuan profit for delivery. “If the takeout war doesn’t end, my small shop’s life will be over.”

A coffee shop owner in Guilin calculated for Red Restaurant Network that a cup of coffee sold for 9.9 yuan in her shop, but on the delivery platform, selling for over 20 yuan, still isn’t profitable.

She showed a screenshot of the platform backend: a 20-yuan latte, with nearly 13 yuan in platform subsidies, and after deducting commissions and delivery fees, the actual income is less than 3 yuan. “Consumers think the platform is giving benefits, but in fact, a large part of it is us merchants paying the bill.”

△Image source: Red Restaurant Network

What’s even more troubling for restaurant owners is that the subsidy war is quietly eating into offline business.

“Before, during lunchtime, the shop was full. Now, it’s half empty,” a beef noodle shop owner in Guangzhou told Red Restaurant Network. “Since the subsidies started, more and more customers choose takeout instead of dining in.” “Some people sit at the door, take out their phones, and order just to use the discount coupons.”

This phenomenon isn’t isolated. Lixin’s survey shows that since the subsidy war began, 65% of restaurant merchants have seen a reduction in dine-in scale. Old shops that relied on dine-in are being forced into the takeout traffic game.

With large subsidies, more people are used to simply clicking to order food rather than going out to find a restaurant. This shift in consumer behavior is gradually eroding the foundation of offline dining.

A more insidious damage comes from changing customer price expectations—takeout wars have reshaped consumers’ definition of “cheap.” After the price chaos, brands of all sizes face a dilemma: raise prices and risk losing customers, or keep prices low and struggle with rising costs.

3. Over 80% of merchants call for an end to internal competition—“Focus on quality and service if you want to compete”

After a year of takeout wars, what has this market battle, costing billions by capital giants, truly brought to the restaurant industry?

In a market environment already facing declining check sizes and demand, excessive subsidies have indeed given a short-term boost, creating a fleeting prosperity appearance.

But when the money-burning illusion of capturing market share shatters, and the noise subsides, the competitive landscape among takeout platforms remains unchanged. Instead, it drags restaurant merchants into an internal competition pit, leaving chaos and debris behind.

Now, the pain is spreading from the end consumer to the upstream supply chain, which is beginning to “bleed.” If the takeout war continues, the accumulating risks of industry imbalance will make the entire physical restaurant economy difficult to sustain.

Fortunately, this escalating subsidy chaos may finally see a turning point. With regulatory authorities stepping in, the “internal competition” of subsidy, price wars, and flow control is being explicitly halted. The game of burning money for market share should come to an end.

Merchants are now more aware than ever—traffic gained through subsidies cannot be retained in the long run. Lixin Consulting’s survey shows that 84% of restaurant merchants are calling for an end to price wars, hoping to return to healthy competition based on product quality, service experience, and technological efficiency.

△Data source: Lixin Consulting

In fact, some brands have proven through practice that they can thrive without price wars.

Kao Jiang’s rise is a prime example. In early 2026, Kao Jiang’s first store in Shanghai opened, with over 6,000 diners queuing up, making headlines. While most competitors focus on price, Kao Jiang chose to focus on social scenarios and service tailored to young people, with a membership repurchase rate of 22.3%.

In 2025, Green Tea Group is expected to achieve a net profit of 460-508 million yuan, a year-on-year increase of over 30%. Their growth isn’t driven by low prices but by managing supply chains to maintain relatively stable product quality at a check size of 50-70 yuan.

As Yu Yihong, founder of Future Food Restaurant Strategy Consulting, said, “Make good products, deepen the experience, improve efficiency, and let customers feel that ‘expensive but worth it,’ not ‘cheap and poor quality.’”

This sounds simple and is common sense, but over the past year, many have overlooked it.

When the tide recedes, the traffic gained through price wars will inevitably flow away. Only those who stick to quality, service, and efficiency can survive the internal competition.

The restaurant industry shouldn’t be a battlefield for giants fighting over traffic but a market where genuine quality creates competitiveness.

This article is an original first publication by Red Restaurant Network (ID: hongcan18), authored by Zhou Lixi; edited by Wang Xiuqing. Cover image source: TuChong Creative.