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How does anyone expect food delivery services to survive with only 5% fees? That's insanity. Uber has to also pay for engineers, sales/marketing to get customer

by colmvp 6y ago

How does anyone expect food delivery services to survive with only 5% fees? That's insanity. Uber has to also pay for engineers, sales/marketing to get customers/restaurants onto the platform, online infrastructure, customer service for both sides of the market, etc. Delivery is expensive. It's time-consuming, and customers are rarely willing to pay the true cost of it. Most of the restaurant delivery services were bleeding hundreds of millions of dollars last year. They've had a resurgence because of the Covid-19 but that's a blip compared to a normal situation. If people think it doesn't cost that much money to operate, then all restaurants shouldn't have a problem having their own delivery service.

ApolloFortyNine 6y ago
Dining out is already a luxury. Paying 20% more just for someone to deliver the food to my door is even more of a luxury, and without the 'dining out' experience. Honestly I don't expect delivery services to survive, and I don't think it would be a tragedy if they ceased to exist.
- chongli 6y ago
  It certainly would be a tragedy for all of the drivers who lost work and may struggle to feed their families. Many of the drivers are immigrant men who have few other prospects for work.
  - jimktrains2 6y ago
    And maybe that's a societal problem we should be addressing instead of expecting people to give money to silicon valley companies. Don't get me wrong. I've used and use these services at times. I'm not morally opposed to them. I just think that saying that telling someone by not using them they're hurting immigrants is just a whole lot of backwards.
    - chongli 6y ago
      telling someone by not using them they're hurting immigrants is just a whole lot of backwards Backwards? What's backwards about wanting to inform people of all the consequences to their actions? Life is messy and complicated. Far too often people don't want to think about all the consequences to their actions so they can erase that complexity. As an aside, not all of these companies are Silicon Valley-based anyway. SkipTheDishes, the one I use, is a Canadian company.
      - jimktrains2 6y ago
        You can say the same thing for every food truck or small restaurant you've ever passed. The simple act of ordering food from one place instead of another risks putting the other out of business and that family out on the streets. At some point we need to fix societal issues instead of worrying that not consuming goods or services is harmful.
        chongli 6y ago
        I'm not saying "don't fix societal issues." Some people lean on the "fix societal issues" line to the exclusion of all else though. They let the perfect be the enemy of the good.
  - VLM 6y ago
    If delivery driving is going to be socialized as a jobs program, is it the ideal jobs program? I think not. There must be unprofitable business activities that would make better jobs programs. Student stipends, vocational training, teachers aides for natives learning foreign languages, subsidized English language lessons, almost anything would be a better investment for immigrant men than subsidization of unprofitable delivery services. Arguably just handing out money and skipping the unprofitable business activity would cause less damage and waste to the environment.
    - WC3w6pXxgGd 6y ago
      If something is unprofitable, that is a signal that resources are being misallocated.
- ApolloFortyNine 6y ago
  I can't edit my post any more, but it makes me sad that this is sitting negative, when what I did was point out that food delivery is a luxury. This whole business of delivering everything has only really taken off in the last 3 years. If you want to create an echo chamber, this is how you do it.
  - CamperBob2 6y ago
    Everything beyond the most rudimentary food, clothing, and shelter is a luxury. It's not very insightful to stick your nose in the air and loftily proclaim something a "luxury," as if your opinion should be taken into account in the boardrooms and executive suites at Uber.
    - ApolloFortyNine 6y ago
      >Delivery is expensive. It's time-consuming, and customers are rarely willing to pay the true cost of it. >Most of the restaurant delivery services were bleeding hundreds of millions of dollars last year. They've had a resurgence because of the Covid-19 but that's a blip compared to a normal situation. >If people think it doesn't cost that much money to operate, then all restaurants shouldn't have a problem having their own delivery service. This is the comment I was responding to. Someone was discussing how much it costs to deliver and why people should be willing to pay more than 5% fees. And my comment that it's a luxury on top of a luxury is nothing more than an explanation of why people aren't willing to pay more. >It's not very insightful to stick your nose in the air and loftily proclaim Honestly I'm not sure why you took a comment calling food delivery a luxury so personally, I'm sorry it offended you.
      - CamperBob2 6y ago
        It didn't offend me, no worries. But I do use these services quite a bit, I appreciate the role of the driver (and tip accordingly), and I would prefer that the companies in question survive and prosper. Is it a "tragedy" if food delivery services cease to exist? Not to me personally, but it would be an inconvenience, and likely something much more serious to the people who work there and to those who drive for them. It's unlikely that those people appreciate being dismissed as unnecessary. In a capitalist society, the fact that they are a luxury doesn't have any bearing on whether they deserve to earn a living. I'm sure you indulge in more than a few luxuries yourself, just not this particular one, and that's OK. (My comment was) nothing more than an explanation of why people aren't willing to pay more. Except you went a bit further than that, didn't you? Honestly I don't expect delivery services to survive, and I don't think it would be a tragedy if they ceased to exist. You were probably downvoted for appearing insensitive. It happens. Take the 'L' and move on. I usually shoot for a long-term baseline of zero, myself, because I agree with your criticism that HN tends to sound like an echo chamber.
kkotak 6y ago
No one expects them to survive. The business model is unsustainable on unit economy basis. Uber has always lived on borrowed time.
deleted 6y ago
[deleted]
nathanvanfleet 6y ago
Weird somehow many restaurants did and do have their own delivery service. I have heard many pizza places do this
- gizmo686 6y ago
  The question is, how much do those restaurants charge themselves in a delivery fee? It wouldn't suprise me if they spend more than 5% the value of the purchase on making the delivery; in the same way that I expect more that 5% of a typical dine-in meal to go to fund the in-restaurant eating space.
  - gamblor956 6y ago
    The delivery driver is an hourly employee, so the % they pay depends on how many pizzas (or meals, if not a pizza joint) that driver delivers. For this reason, most mom-and-pop restaurants limit their delivery radius to places their delivery drivers can reach within 10 minutes or less of driving (so the driver can make at least 2 deliveries an hour).
  - Mikeb85 6y ago
    > The question is, how much do those restaurants charge themselves in a delivery fee? Usually not much, if anything. They keep the employees on the clock, and factor in labour cost much like a dine-in restaurant factors in the cost of your server.
    - gizmo686 6y ago
      They may not have a literal line item on an internal spreadsheet corresponding to how much of each bill goes towards delivery, but they are still paying for performing the delivery. When they outsource this service, they pay a third party for doing it, but save on the costs of doing it themselves. When you consider how expensive the third party is to the restaurant, you also have to consider how much they would be spending if they do it in-house.
      - 6y ago
Retric 6y ago
Delivery apps have a vastly higher overhead because the drivers are not based out of a single high volume restaurant. With traditional deliveries operating over a tiny radius back to base. Drivers can do multiple deliveries at the same time. Pick up a new stack of orders and quickly be out the door again, this means they need fewer people during rush and thus much lower overhead. Some people are willing to pay 10+$ an order to have a much wider selection of restaurants from a huge area. But, that doesn’t scale to the kind of volume these companies expect.
- c22 6y ago
  For what it's worth, these ride-share delivery drivers also grab multiple orders at a time if they can. It's one of the reasons delivery takes so long. I've observed drivers putting in additional orders that just came in (and waiting for them) while they are picking up. I also think they'll swing by (and often wait at) two or three places to get orders before heading out to deliver.
  - FartyMcFarter 6y ago
    There's a limit to this though. If the food gets cold or otherwise bad due to waiting too long, people will ask for money back or orders will go down.
    - munk-a 6y ago
      Compare this to a restaurant running their own service that can chose not to prepare meals while waiting for more orders to roll in - so the delivery might not be as quick as it potentially could be, but the food is fresher.
      - rightbyte 6y ago
        The main edge the restaurants with their own delivery has. UberEats just black boxes the restaurant excepting it to treat the delivery guy as a ordinary customer. That process has to be so wasteful compares to bulk preparation and delivery.
mpol 6y ago
If Uber cannot afford this, maybe it is not a viable business. If either the restaurant has more cost than income, or Uber has more cost than income, it seems not to be working really.
malcolmgreaves 6y ago
Maybe food delivery services isn't solvable using the Silicon Valley method -- use insane amounts of rich people's money to subsidize product hyper-growth to only later monopolize said market to re-coop earlier losses. If these businesses would grow more sustainably (i.e. slower), they wouldn't need such large sums of money to operate. They wouldn't over hire at sales / marketing / engineering / design / operations/ literally every role. In turn, they would be forced to set rates that can cover their actual costs while being a good business deal for restaurants, as they'd have to be around long enough for the delivery company to have any real growth. There should be economies of scale wrt. a centralized delivery platform that services all kinds of restaurants. The fact that, say, Dominos has been offering delivery for _decades_ means that it's absolutely possible to have a sustainable national food delivery business on $8 medium pizza deals and $4 delivery charges. The tech delivery companies are just plain greedy: I surmise it's their quest for "f u" money that kills their business model right off the bat.
- thebean11 6y ago
  Are you sure Dominos actually profits on the delivery itself, or do they just offer it at/below cost to sell more pizzas?
  - bthater 6y ago
    Delivery is profitable for dominos. But the real money, well that is in garlic bread.
    - nerfhammer 6y ago
      all restaurant business is just a ploy to get people to buy soda
      - godzillabrennus 6y ago
        Alcohol and coffee are also helpful.
      - 6y ago
fock 6y ago
I guess, you can operate a very good and featureful food delivery SaaS for a lot less if you skip GoogleAds, ridiculous mid 6 figure salaries (for a similar job in every place except SV) and building an exploratory machine learning arm to compete with the adtech companies you're anyway spending money on in this scenario. If you then host your servers in some coloc (because you'll have what: a 4 times surge capacity on holidays compared to a regular friday?) you can even reduce your computing bill (given that without needless data collection for your analytics and ML efforts your computing power needs will shrink fast...). Around here most restaurants still use this kind of service (often hosted by some lowly webdev).
- harryVic 6y ago
  That sounds like a great idea. Why don't you do it?
  - gamblor956 6y ago
    You missed his sarcasm. It's what most restaurants are already doing: putting up a webpage and having customers call them. Any restaurant worth its salt is already tracking what its customers order (on an aggregate basis) because that's how they now what supplies to reorder and when.
  - fock 6y ago
    because it's not interesting too me currently. Also, the market is saturated and competing on such a market (especially if it's invaded by cash-burning startups) isn't fun for sure.
  - freeone3000 6y ago
    He says most restaurants are. There's no money in one-off webdev consulting for low-margin businesses, which is why you won't hear it as a pitch - it's solved with a single webpage with a phone number, or maybe a Google Sheets frontend. There's so much human in the backend there's not a ton of point automating the frontend.
    - 6y ago
JeremyNT 6y ago
My local restaurant has a couple of employees who own old beater cars. I call the restaurant, then they send out one of these employees with the food. The restaurant charges nothing extra beyond the tip, which I select on arrival. This is how delivery used to work. The lie and promise of the startups trying to "disrupt" this is that it's somehow going to be better to proxy these interactions through a faceless megacorp rather than a small local business. Well, is that really happening? If I use Uber Eats I get more expensive, worse service than calling my local place directly. So maybe these delivery businesses shouldn't survive, at least not as currently envisioned, because they offer something that doesn't actually have that much value to most people.
- eddieplan9 6y ago
  You know back in the days you can also go to farmer Joe and buy a chicken and pay no middle man. Jumping from that fact to the conclusion that food supply chain has not much value is, naive, to say the least.
  - VLM 6y ago
    His argument seems to be that unlike supermarkets and wholesalers which provide positive value from which some profit can be siphoned off, delivery megacorps provide negative value so there's not much profit to siphon. Your argument seems to be that food middlemen should exist in some form, although you provide no reason; However, the existence and fetishization (for better or worse) of "local farmers markets" seems to point in the opposite direction. My local pizza place delivers; there doesn't seem much room to create value to pay some engineer's salary and some VC profits a thousand miles away. Or rephrased, VCs and engineers are expensive, and their offerings can be undercut by every local restaurant in the country that has a phone and a teenager with a car, which is not exactly the strongest network effect or vendor lockin I've ever seen in a marketplace. The delivery market seems to be of the form "We all need an offering in the market to stay competitive with everyone else losing money on every delivery". The best possible exit for a delivery startup seems to be improving something in the already adequate infrastructure then pray Dominos Pizza acquires them. The uphill battle is the main complaints people have about fast food is the cost is high, few choices, and the food is unhealthy. Nobody seems bothered by logistics problems like pizza taking a half hour to arrive or routes not being optimized to minimize gasoline consumption. Its true that customers are bad product designers, thinking of the anecdote of Ford's customers wanting a better horse, not a model T. However a business model of door to door horse feed delivery, logistics optimized by telegraphs in California, was also not a winner.
dragontamer 6y ago
Foodsby has a cool model. 1. Set a time. Say 11:00 or 12:00. The food will be delivered at this time, no other time. 2. Set a location, a little table in the lobby of various buildings where the Foodsby driver drops off the food. 3. One driver goes to the various restaurants, and goes to the various dropoff points. One trip at one time can serve hundreds of customers. ------- Every foodsby trip is synchronized to the time. As such, all orders and deliveries are batched together, saving time and effort on all parties involved.
ragebol 6y ago
> Delivery is expensive. It's time-consuming, and customers are rarely willing to pay the true cost of it. I think that's the main problem. Delivery isn't free and so far has been subsidized by Uber's investors or draining the restaurants. Which didn't have a choice because they where being undercut. We'll end up with either paying a reasonable price for delivery or picking it up yourself. Or maybe robots, but those aren't free either.
deleted 6y ago
[deleted]
gamblor956 6y ago
Pizza parlors and Chinese restaurants have successfully been delivering food for decades with their own delivery staff. It's only the Silicon Valley delivery services that are unable to profit from delivery, because they insist on paying executives and engineers 6+ figures when all of the value is in the delivery drivers, not the wasteful overhead.
- i_am_proteus 6y ago
  This. I have a family member who runs a restaurant and employs his own delivery drivers, and has been profitable for decades. He lists food on GruHub as well, but charges all of the markup through to the customer. He includes a flyer with the delivery that says in large text "We have our own drivers! Call us with your order and save 20% compared to GrubHub!"
  - syshum 6y ago
    >>Call us with your order and save 20% compared to GrubHub! He should probably invest in his own online ordering system, they are not complex is should not cost that much. personally I hate calling in orders, this holds true even if I am just picking it up, I prefer to use an Online order system.
    - ghaff 6y ago
      I'm not sure what the big deal is in calling if I'm just calling in to order a pizza or a sub. That aside, at least part of the value of the aggregators is a lot of people apparently want to just go to one place and order from a variety of restaurants. Personally, I don't really get it--I just have menus from the very limited number of decent takeout options around where I live--but setting up your own site doesn't help with that.
      - Leherenn 6y ago
        A lot of people simply dislike calling, no matter the reason.
      - 6y ago
deleted 6y ago
[deleted]
Mikeb85 6y ago
> If people think it doesn't cost that much money to operate, then all restaurants shouldn't have a problem having their own delivery service. Many already do and more are pivoting to delivering themselves. The delivery services are terrible and not worth their fees.
calvinbhai 6y ago
The cost for Uber is to process the cc transaction, cost of transportation (the close to minimum wage "net pay" to the driver). I agree Uber has other costs, and I'm not saying it should act like a charity and not recover those costs. So whatever is uber's costs + profit needed, add it as a fee for using the app. Eg: If I order a 2 large pizzas at my neighborhood pizza shop, and on their printed menu it is $40 (assume including taxes), I'd like to see the same price displayed to me. Uber can charge me processing fee and delivery fee of say $20 or $30 on top of this (to recover Uber's costs + profit). Sadly, this is not what actually happens. Ordering the same item through delivery app, I see that each menu item is costing $1 to $5 more already (happens with Instacart too). On top of this I pay a processing fee and a delivery fee. In addition to this, the pizza shop guy pays 40%. Obfuscating price at every step and then proclaiming to be a saviour of my neighborhood restaurants, is exactly what ticks me off. Again, I'm not saying delivery apps should be charitable. I just want some transparency. The reason I go to a local pizza shop, (in addition to satiate hunger and enjoy tasty food) is to support the local economy. Uber can charge the same total amount to me while providing the same service, provided they clearly show how much goes to Uber and how much goes to restaurant and delivery person.
mulmen 6y ago
Sounds like Uber has a bad business model then. Restaurants already offered delivery, it’s not like Uber invented that or even exclusively enables it. Somehow they invented a model where nobody is making any money and convinced investors to enable it.
puranjay 6y ago
> Uber has to also pay for engineers, sales/marketing to get customers/restaurants onto the platform I really wonder how much of this is a self-created problem. Would Uber really need that many engineers if it wasn't processing data at a massive scale to find the ideal surge price for every trip and maximize revenue? Maybe Uber would make less money without surge pricing (and the large scale data crunching it involves), but then maybe Uber also wouldn't need to pay for so many engineers. Similarly, would Uber really need to pay for marketing if it attracted growth organically instead of trying to dominate the world within half a decade? We live in rather strange time for business. It used to be that if you wanted to build a $100B company, you spent decades in the trenches, reinvesting profits and attracting growth organically. Even a true "unicorn" (not that I care much for that term) like Microsoft was worth "only" $35B in 1995, 20 years after it was founded. We've all somehow assumed that this order of things is natural when it is far from how the rest of the business world functions
- usrusr 6y ago
  > I really wonder how much of this is a self-created problem It's part of the overfunding game: you can't just take the money and go "yay, 300 years of runtime because we stay lean". Investment is meant to be spent. Burning it all purely on buying market would also be a little too transparent, investors want to believe that they are getting more than that and they need others to believe that as well should they ever desire for greater fools. But once you add an army of well paid talent to the mix it gets much easier to claim that there's more to your growth than buying market. Even if all they do is cosplay unassailable technological lead.
RoyTyrell 6y ago
f you can't provide a product or service to customers at a price they want to pay, too bad but that's capitalism. Not every business is viable even if the 'goals' are.
Nextgrid 6y ago
5% fees on top of the true cost of delivery is enough for what is essentially an automated process. Maybe it's not enough for "growth" and "engagement" and maintaining an engineering blog about their overengineered stack (I call those "engineering playgrounds") but guess what? None of those things benefit users.
megaframe 6y ago
Sometime back Uber added this $0 delivery for a set of rotating restaurants. In my mind what I figured they were doing was clumping orders together to drive down costs... in practice I don't know what they're doing, but I like that idea. Maybe when this price war ends normal delivery will be something much higher and they offer some kind of flash or pre-order pricing deals on clumped orders. Like $5 delivery for pre-ordering a pizza for that evening from this one restaurant so only one driver needs to go out there. Uber-Pool for your food if you will. Or you place your order at a higher price and if some more people hop onto the order from the same restaurant they cut your delivery price a bit.

by colmvp 6y ago

ApolloFortyNine 6y ago

Dining out is already a luxury. Paying 20% more just for someone to deliver the food to my door is even more of a luxury, and without the 'dining out' experience. Honestly I don't expect delivery services to survive, and I don't think it would be a tragedy if they ceased to exist.

chongli 6y ago
It certainly would be a tragedy for all of the drivers who lost work and may struggle to feed their families. Many of the drivers are immigrant men who have few other prospects for work.
- jimktrains2 6y ago
  And maybe that's a societal problem we should be addressing instead of expecting people to give money to silicon valley companies. Don't get me wrong. I've used and use these services at times. I'm not morally opposed to them. I just think that saying that telling someone by not using them they're hurting immigrants is just a whole lot of backwards.
  - chongli 6y ago
    telling someone by not using them they're hurting immigrants is just a whole lot of backwards Backwards? What's backwards about wanting to inform people of all the consequences to their actions? Life is messy and complicated. Far too often people don't want to think about all the consequences to their actions so they can erase that complexity. As an aside, not all of these companies are Silicon Valley-based anyway. SkipTheDishes, the one I use, is a Canadian company.
    - jimktrains2 6y ago
      You can say the same thing for every food truck or small restaurant you've ever passed. The simple act of ordering food from one place instead of another risks putting the other out of business and that family out on the streets. At some point we need to fix societal issues instead of worrying that not consuming goods or services is harmful.
      - chongli 6y ago
        I'm not saying "don't fix societal issues." Some people lean on the "fix societal issues" line to the exclusion of all else though. They let the perfect be the enemy of the good.
- VLM 6y ago
  If delivery driving is going to be socialized as a jobs program, is it the ideal jobs program? I think not. There must be unprofitable business activities that would make better jobs programs. Student stipends, vocational training, teachers aides for natives learning foreign languages, subsidized English language lessons, almost anything would be a better investment for immigrant men than subsidization of unprofitable delivery services. Arguably just handing out money and skipping the unprofitable business activity would cause less damage and waste to the environment.
  - WC3w6pXxgGd 6y ago
    If something is unprofitable, that is a signal that resources are being misallocated.
ApolloFortyNine 6y ago
I can't edit my post any more, but it makes me sad that this is sitting negative, when what I did was point out that food delivery is a luxury. This whole business of delivering everything has only really taken off in the last 3 years. If you want to create an echo chamber, this is how you do it.
- CamperBob2 6y ago
  Everything beyond the most rudimentary food, clothing, and shelter is a luxury. It's not very insightful to stick your nose in the air and loftily proclaim something a "luxury," as if your opinion should be taken into account in the boardrooms and executive suites at Uber.
  - ApolloFortyNine 6y ago
    >Delivery is expensive. It's time-consuming, and customers are rarely willing to pay the true cost of it. >Most of the restaurant delivery services were bleeding hundreds of millions of dollars last year. They've had a resurgence because of the Covid-19 but that's a blip compared to a normal situation. >If people think it doesn't cost that much money to operate, then all restaurants shouldn't have a problem having their own delivery service. This is the comment I was responding to. Someone was discussing how much it costs to deliver and why people should be willing to pay more than 5% fees. And my comment that it's a luxury on top of a luxury is nothing more than an explanation of why people aren't willing to pay more. >It's not very insightful to stick your nose in the air and loftily proclaim Honestly I'm not sure why you took a comment calling food delivery a luxury so personally, I'm sorry it offended you.
    - CamperBob2 6y ago
      It didn't offend me, no worries. But I do use these services quite a bit, I appreciate the role of the driver (and tip accordingly), and I would prefer that the companies in question survive and prosper. Is it a "tragedy" if food delivery services cease to exist? Not to me personally, but it would be an inconvenience, and likely something much more serious to the people who work there and to those who drive for them. It's unlikely that those people appreciate being dismissed as unnecessary. In a capitalist society, the fact that they are a luxury doesn't have any bearing on whether they deserve to earn a living. I'm sure you indulge in more than a few luxuries yourself, just not this particular one, and that's OK. (My comment was) nothing more than an explanation of why people aren't willing to pay more. Except you went a bit further than that, didn't you? Honestly I don't expect delivery services to survive, and I don't think it would be a tragedy if they ceased to exist. You were probably downvoted for appearing insensitive. It happens. Take the 'L' and move on. I usually shoot for a long-term baseline of zero, myself, because I agree with your criticism that HN tends to sound like an echo chamber.

kkotak 6y ago

No one expects them to survive. The business model is unsustainable on unit economy basis. Uber has always lived on borrowed time.

deleted 6y ago

[deleted]

nathanvanfleet 6y ago

Weird somehow many restaurants did and do have their own delivery service. I have heard many pizza places do this

gizmo686 6y ago
The question is, how much do those restaurants charge themselves in a delivery fee? It wouldn't suprise me if they spend more than 5% the value of the purchase on making the delivery; in the same way that I expect more that 5% of a typical dine-in meal to go to fund the in-restaurant eating space.
- gamblor956 6y ago
  The delivery driver is an hourly employee, so the % they pay depends on how many pizzas (or meals, if not a pizza joint) that driver delivers. For this reason, most mom-and-pop restaurants limit their delivery radius to places their delivery drivers can reach within 10 minutes or less of driving (so the driver can make at least 2 deliveries an hour).
- Mikeb85 6y ago
  > The question is, how much do those restaurants charge themselves in a delivery fee? Usually not much, if anything. They keep the employees on the clock, and factor in labour cost much like a dine-in restaurant factors in the cost of your server.
  - gizmo686 6y ago
    They may not have a literal line item on an internal spreadsheet corresponding to how much of each bill goes towards delivery, but they are still paying for performing the delivery. When they outsource this service, they pay a third party for doing it, but save on the costs of doing it themselves. When you consider how expensive the third party is to the restaurant, you also have to consider how much they would be spending if they do it in-house.
    - 6y ago

Retric 6y ago

Delivery apps have a vastly higher overhead because the drivers are not based out of a single high volume restaurant. With traditional deliveries operating over a tiny radius back to base. Drivers can do multiple deliveries at the same time. Pick up a new stack of orders and quickly be out the door again, this means they need fewer people during rush and thus much lower overhead. Some people are willing to pay 10+$ an order to have a much wider selection of restaurants from a huge area. But, that doesn’t scale to the kind of volume these companies expect.

c22 6y ago
For what it's worth, these ride-share delivery drivers also grab multiple orders at a time if they can. It's one of the reasons delivery takes so long. I've observed drivers putting in additional orders that just came in (and waiting for them) while they are picking up. I also think they'll swing by (and often wait at) two or three places to get orders before heading out to deliver.
- FartyMcFarter 6y ago
  There's a limit to this though. If the food gets cold or otherwise bad due to waiting too long, people will ask for money back or orders will go down.
  - munk-a 6y ago
    Compare this to a restaurant running their own service that can chose not to prepare meals while waiting for more orders to roll in - so the delivery might not be as quick as it potentially could be, but the food is fresher.
    - rightbyte 6y ago
      The main edge the restaurants with their own delivery has. UberEats just black boxes the restaurant excepting it to treat the delivery guy as a ordinary customer. That process has to be so wasteful compares to bulk preparation and delivery.

mpol 6y ago

If Uber cannot afford this, maybe it is not a viable business. If either the restaurant has more cost than income, or Uber has more cost than income, it seems not to be working really.

malcolmgreaves 6y ago

Maybe food delivery services isn't solvable using the Silicon Valley method -- use insane amounts of rich people's money to subsidize product hyper-growth to only later monopolize said market to re-coop earlier losses. If these businesses would grow more sustainably (i.e. slower), they wouldn't need such large sums of money to operate. They wouldn't over hire at sales / marketing / engineering / design / operations/ literally every role. In turn, they would be forced to set rates that can cover their actual costs while being a good business deal for restaurants, as they'd have to be around long enough for the delivery company to have any real growth. There should be economies of scale wrt. a centralized delivery platform that services all kinds of restaurants. The fact that, say, Dominos has been offering delivery for _decades_ means that it's absolutely possible to have a sustainable national food delivery business on $8 medium pizza deals and $4 delivery charges. The tech delivery companies are just plain greedy: I surmise it's their quest for "f u" money that kills their business model right off the bat.

thebean11 6y ago
Are you sure Dominos actually profits on the delivery itself, or do they just offer it at/below cost to sell more pizzas?
- bthater 6y ago
  Delivery is profitable for dominos. But the real money, well that is in garlic bread.
  - nerfhammer 6y ago
    all restaurant business is just a ploy to get people to buy soda
    - godzillabrennus 6y ago
      Alcohol and coffee are also helpful.
    - 6y ago

fock 6y ago

I guess, you can operate a very good and featureful food delivery SaaS for a lot less if you skip GoogleAds, ridiculous mid 6 figure salaries (for a similar job in every place except SV) and building an exploratory machine learning arm to compete with the adtech companies you're anyway spending money on in this scenario. If you then host your servers in some coloc (because you'll have what: a 4 times surge capacity on holidays compared to a regular friday?) you can even reduce your computing bill (given that without needless data collection for your analytics and ML efforts your computing power needs will shrink fast...). Around here most restaurants still use this kind of service (often hosted by some lowly webdev).

harryVic 6y ago
That sounds like a great idea. Why don't you do it?
- gamblor956 6y ago
  You missed his sarcasm. It's what most restaurants are already doing: putting up a webpage and having customers call them. Any restaurant worth its salt is already tracking what its customers order (on an aggregate basis) because that's how they now what supplies to reorder and when.
- fock 6y ago
  because it's not interesting too me currently. Also, the market is saturated and competing on such a market (especially if it's invaded by cash-burning startups) isn't fun for sure.
- freeone3000 6y ago
  He says most restaurants are. There's no money in one-off webdev consulting for low-margin businesses, which is why you won't hear it as a pitch - it's solved with a single webpage with a phone number, or maybe a Google Sheets frontend. There's so much human in the backend there's not a ton of point automating the frontend.
  - 6y ago

JeremyNT 6y ago

My local restaurant has a couple of employees who own old beater cars. I call the restaurant, then they send out one of these employees with the food. The restaurant charges nothing extra beyond the tip, which I select on arrival. This is how delivery used to work. The lie and promise of the startups trying to "disrupt" this is that it's somehow going to be better to proxy these interactions through a faceless megacorp rather than a small local business. Well, is that really happening? If I use Uber Eats I get more expensive, worse service than calling my local place directly. So maybe these delivery businesses shouldn't survive, at least not as currently envisioned, because they offer something that doesn't actually have that much value to most people.

eddieplan9 6y ago
You know back in the days you can also go to farmer Joe and buy a chicken and pay no middle man. Jumping from that fact to the conclusion that food supply chain has not much value is, naive, to say the least.
- VLM 6y ago
  His argument seems to be that unlike supermarkets and wholesalers which provide positive value from which some profit can be siphoned off, delivery megacorps provide negative value so there's not much profit to siphon. Your argument seems to be that food middlemen should exist in some form, although you provide no reason; However, the existence and fetishization (for better or worse) of "local farmers markets" seems to point in the opposite direction. My local pizza place delivers; there doesn't seem much room to create value to pay some engineer's salary and some VC profits a thousand miles away. Or rephrased, VCs and engineers are expensive, and their offerings can be undercut by every local restaurant in the country that has a phone and a teenager with a car, which is not exactly the strongest network effect or vendor lockin I've ever seen in a marketplace. The delivery market seems to be of the form "We all need an offering in the market to stay competitive with everyone else losing money on every delivery". The best possible exit for a delivery startup seems to be improving something in the already adequate infrastructure then pray Dominos Pizza acquires them. The uphill battle is the main complaints people have about fast food is the cost is high, few choices, and the food is unhealthy. Nobody seems bothered by logistics problems like pizza taking a half hour to arrive or routes not being optimized to minimize gasoline consumption. Its true that customers are bad product designers, thinking of the anecdote of Ford's customers wanting a better horse, not a model T. However a business model of door to door horse feed delivery, logistics optimized by telegraphs in California, was also not a winner.

dragontamer 6y ago

Foodsby has a cool model. 1. Set a time. Say 11:00 or 12:00. The food will be delivered at this time, no other time. 2. Set a location, a little table in the lobby of various buildings where the Foodsby driver drops off the food. 3. One driver goes to the various restaurants, and goes to the various dropoff points. One trip at one time can serve hundreds of customers. ------- Every foodsby trip is synchronized to the time. As such, all orders and deliveries are batched together, saving time and effort on all parties involved.

ragebol 6y ago

> Delivery is expensive. It's time-consuming, and customers are rarely willing to pay the true cost of it. I think that's the main problem. Delivery isn't free and so far has been subsidized by Uber's investors or draining the restaurants. Which didn't have a choice because they where being undercut. We'll end up with either paying a reasonable price for delivery or picking it up yourself. Or maybe robots, but those aren't free either.

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gamblor956 6y ago

Pizza parlors and Chinese restaurants have successfully been delivering food for decades with their own delivery staff. It's only the Silicon Valley delivery services that are unable to profit from delivery, because they insist on paying executives and engineers 6+ figures when all of the value is in the delivery drivers, not the wasteful overhead.

i_am_proteus 6y ago
This. I have a family member who runs a restaurant and employs his own delivery drivers, and has been profitable for decades. He lists food on GruHub as well, but charges all of the markup through to the customer. He includes a flyer with the delivery that says in large text "We have our own drivers! Call us with your order and save 20% compared to GrubHub!"
- syshum 6y ago
  >>Call us with your order and save 20% compared to GrubHub! He should probably invest in his own online ordering system, they are not complex is should not cost that much. personally I hate calling in orders, this holds true even if I am just picking it up, I prefer to use an Online order system.
  - ghaff 6y ago
    I'm not sure what the big deal is in calling if I'm just calling in to order a pizza or a sub. That aside, at least part of the value of the aggregators is a lot of people apparently want to just go to one place and order from a variety of restaurants. Personally, I don't really get it--I just have menus from the very limited number of decent takeout options around where I live--but setting up your own site doesn't help with that.
    - Leherenn 6y ago
      A lot of people simply dislike calling, no matter the reason.
    - 6y ago

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Mikeb85 6y ago

> If people think it doesn't cost that much money to operate, then all restaurants shouldn't have a problem having their own delivery service. Many already do and more are pivoting to delivering themselves. The delivery services are terrible and not worth their fees.

calvinbhai 6y ago

The cost for Uber is to process the cc transaction, cost of transportation (the close to minimum wage "net pay" to the driver). I agree Uber has other costs, and I'm not saying it should act like a charity and not recover those costs. So whatever is uber's costs + profit needed, add it as a fee for using the app. Eg: If I order a 2 large pizzas at my neighborhood pizza shop, and on their printed menu it is $40 (assume including taxes), I'd like to see the same price displayed to me. Uber can charge me processing fee and delivery fee of say $20 or $30 on top of this (to recover Uber's costs + profit). Sadly, this is not what actually happens. Ordering the same item through delivery app, I see that each menu item is costing $1 to $5 more already (happens with Instacart too). On top of this I pay a processing fee and a delivery fee. In addition to this, the pizza shop guy pays 40%. Obfuscating price at every step and then proclaiming to be a saviour of my neighborhood restaurants, is exactly what ticks me off. Again, I'm not saying delivery apps should be charitable. I just want some transparency. The reason I go to a local pizza shop, (in addition to satiate hunger and enjoy tasty food) is to support the local economy. Uber can charge the same total amount to me while providing the same service, provided they clearly show how much goes to Uber and how much goes to restaurant and delivery person.

mulmen 6y ago

Sounds like Uber has a bad business model then. Restaurants already offered delivery, it’s not like Uber invented that or even exclusively enables it. Somehow they invented a model where nobody is making any money and convinced investors to enable it.

puranjay 6y ago

> Uber has to also pay for engineers, sales/marketing to get customers/restaurants onto the platform I really wonder how much of this is a self-created problem. Would Uber really need that many engineers if it wasn't processing data at a massive scale to find the ideal surge price for every trip and maximize revenue? Maybe Uber would make less money without surge pricing (and the large scale data crunching it involves), but then maybe Uber also wouldn't need to pay for so many engineers. Similarly, would Uber really need to pay for marketing if it attracted growth organically instead of trying to dominate the world within half a decade? We live in rather strange time for business. It used to be that if you wanted to build a $100B company, you spent decades in the trenches, reinvesting profits and attracting growth organically. Even a true "unicorn" (not that I care much for that term) like Microsoft was worth "only" $35B in 1995, 20 years after it was founded. We've all somehow assumed that this order of things is natural when it is far from how the rest of the business world functions

usrusr 6y ago
> I really wonder how much of this is a self-created problem It's part of the overfunding game: you can't just take the money and go "yay, 300 years of runtime because we stay lean". Investment is meant to be spent. Burning it all purely on buying market would also be a little too transparent, investors want to believe that they are getting more than that and they need others to believe that as well should they ever desire for greater fools. But once you add an army of well paid talent to the mix it gets much easier to claim that there's more to your growth than buying market. Even if all they do is cosplay unassailable technological lead.

RoyTyrell 6y ago

f you can't provide a product or service to customers at a price they want to pay, too bad but that's capitalism. Not every business is viable even if the 'goals' are.

Nextgrid 6y ago

5% fees on top of the true cost of delivery is enough for what is essentially an automated process. Maybe it's not enough for "growth" and "engagement" and maintaining an engineering blog about their overengineered stack (I call those "engineering playgrounds") but guess what? None of those things benefit users.

megaframe 6y ago

Sometime back Uber added this $0 delivery for a set of rotating restaurants. In my mind what I figured they were doing was clumping orders together to drive down costs... in practice I don't know what they're doing, but I like that idea. Maybe when this price war ends normal delivery will be something much higher and they offer some kind of flash or pre-order pricing deals on clumped orders. Like $5 delivery for pre-ordering a pizza for that evening from this one restaurant so only one driver needs to go out there. Uber-Pool for your food if you will. Or you place your order at a higher price and if some more people hop onto the order from the same restaurant they cut your delivery price a bit.