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Our restaurants are failing. Why should food delivery apps thrive?

164 points by aloukissas 6y ago

perlpimp 6y ago
I thought delivery apps aren't making a profit either.
- dmix 6y ago
  Foodora was extremely popular here in Toronto, you’d see the bike delivery people all over the place and they signed up tons of restaurants but they just shut down citing the margins simply not making sense for the business. It didn’t help that a month before shutting down a group of workers unionized in Ontario, and further threw a wrench in a terribly low margin business and now none of them have a job and the entire city is stuck using Uber Note: Foodora only shut down their Canadian business, not their European one. Foodora had acquired Hurrier which was our other homegrown food delivery service here in Toronto, which is obviously no longer an option either. They too were struggling with margins, which I know from speaking to people who worked there.
  - dathinab 6y ago
    > It didn’t help that a month before shutting down a group of workers unionized in Ontario, and further threw a wrench in a terribly low margin business and now none of them have a job and the entire city is stuck using Uber I don't think unionizing is ever a problem. I you do moralistic acceptable business practices. If your business is only profitable by paying below acceptable salary, push side costs onto employees or cutting corner wrt. employee safety then it IHMO it is better for your business to close. Additionally if a whole industry is affected by this then IMHO it needs a major reform in how it works or it should just cease to exist. Sure food delivery can not cease to exist, it's needed but if their is no way to operate it profitable without taking advantage of delivery personal and/or restaurants then it needs a major change. Either people need to accept that delivered food is more costly or the state needs to subvention it (during epidemics and similar where it's an somewhat essential service for some people, like when your stove just broke yesterday).
    - dmix 6y ago
      Wake me up when that fantasy world becomes reality. In the mean time I’d rather not have to give Uber money.
- cordite 6y ago
  They aren't making a profit because they're spending more than they're making. They make enough to pay the driver, the operations around that, and the tech running the site. But their shareholders see this as an opportunity to expand the markets. They aren't taking this for granted, they're aggressively spending on marketing, on signing up restaurants for their platform (except DoorDash, they list most restaurants without partnership), on ads for Google, Facebook, and other major platforms. This is why they aren't making a profit. But it's eating so much into their costs that they're doing some sneaky practices: they're doing the same that Etsy does, taking more out of the net sales on advertising that the restaurant did not consent to knowing they will be charged for it as much as they were.
softwaredoug 6y ago
Our city has some local restaurant driven “drop points” for getting lots of restaurant prepared meals at a margin better for restaurants. Please see if your city has something similar as an alternative to grubhub, etc
- dehrmann 6y ago
  I had an idea, and I think Travis Kalanick started building something like it, where restaurants rent kitchen space alongside other virtual restaurants. The site would have good road access and be centralized, so pickups are faster, and the space would be used more efficiently that high-rent retail space. I got the idea seeing a local restaurant with most of it's orders being picked by a food delivery service, yet they were paying for a good, downtown location where parking is hard.
- wdb 6y ago
  Sounds interesting, good examples of this? Curious, if it's available in London (UK)
  - BukhariH 6y ago
    In London these dark/cloud kitchens are becoming more & more common. You might have already been ordering from them & not realised - they used to be marked as “Editions” on Deliveroo: https://foodscene.deliveroo.co.uk/promotions/deliveroo-editions.html https://foodscene.deliveroo.co.uk/promotions/deliveroo-editi...
- coolswan 6y ago
  That's great; what city is this?
naveen99 6y ago
It’s easier to prune the leaves than to cut out middle branches.
softwaredoug 6y ago
As restaurants open a bit, tables will be scarce due to distancing. Restaurants should charge a premium for their limited space. If I could have a nice meal out right now, I’d probably spend 2x what I would pre covid! Anything just to do something nice away from home.
haltingproblem 6y ago
They thrive because people are lazy - both restaurant and their customers. Restaurants can make a concerted effort to ask regular clients to order from their own websites/apps but rarely do even when they can make an extra 10-15% after giving the customers 10% off. Customers are lazy because inspite of all the talk of supporting local, they are too hooked on click-click-click and ordered. The delivery apps have hundreds of millions in investment in technology and marketing, a lot of it shady. The apps can offer addictive flows that restaurants cannot compete with. The solution out of this is an app co-op model - payment processing (3%) + 2-3% overhead. There are similar offerings in the ride-share world and this should work on the delivery apps as well. I would rather support an app that provides a healthy living to a small company in Tulsa or Talinn that subsidize rents in SF and fatten VC portfolios for an online menu with checkout supported by hundreds of millions in marketing dollars.
- ericzawo 6y ago
  Restaurants are a lot of things. But lazy is not one of them. Have you ever worked at a restaurant?
  - dvtrn 6y ago
    I’ve been an AGM and worked the industry six years plus four years adjacent in catering before finishing college and moving into SWE. Yes an awful lot of them are lazy. I mention him only to mention the scary accuracy of it, but the late Anthony Bourdain has a chapter dedicated to crappy restauranteurs in nearly every book he’s written on the topic of food service as a career (of course his distaste for crappy restaurant owners is poignantly dotted through the entirety of “Kitchen Confidential” to be fair), and I often wonder to this day to hear his voice on the state of affairs in food service during a pandemic, and the micro economy that’s sprung up in food delivery.
  - enitihas 6y ago
    Restaurants might not be lazy in their core business functions, but that doesn't make them non lazy on other matters.
scarface74 6y ago
So capping delivery fees on unprofitable delivery platforms now means they lose more money or they cut the pay of the drivers. The only answer is shockingly enough for both the delivery services and the restaurants to charge enough to be profitable and then people will have to choose to get out or pay the market rate. Capitalism is the answer. On the other hand, since I am a bleeding heart capitalist, I have no problem with the government giving people money who can’t or shouldn’t go out to make it easier for them to get delivery.
- deleted 6y ago
  [deleted]
lwb 6y ago
I thought the whole point of capitalism is that you don’t have to answer “should” moralisms about any particular business. Consumers will decide and competition among vendors will drive down prices. Why do so many outsiders feel so confident that they know better than Grubhub/Uber Eats/DoorDash what their prices should be?
saadalem 6y ago
Food delivery is a complex, three-sided marketplace problem area. Balancing the needs of all stakeholders, especially during a time of consistent innovation is challenging.
- remote_phone 6y ago
  Found the UberEats employee. I’ve only ever heard UberEats employees call it a 3P/2P marketplace (I have good friends that work at Uber as well).
  - zaroth 6y ago
    I don’t see UberEats mentioned in OPs profile. Best not to accuse people of shilling.
  - itake 6y ago
    I don't work fro UberEats (or any delivery company), but I do work for a company in the local rest space. Uber Eats margins are just as thin as the restaurants. a round trip delivery might take 40 mins. Everyone's margins are super thin.
  - JMTQp8lwXL 6y ago
    Is three-sided in reference to the delivery couriers as a group, or the aggregator food delivery app? Clearly, the remaining two parties would be the restaurant and the hungry customer.
  - saadalem 6y ago
    I'm not even working on a company xD
  - truculent 6y ago
    I’ve heard deliveroo employees in the U.K. say the same
deleted 6y ago
[deleted]
joeblow21 6y ago
This is the Green New Deal. Essential vs Non Essential businesses.
ganstyles 6y ago
As part of trying to provide benefits one would normally get in the office, we provide unlimited Doordash for lunch/dinner. I would prefer to order from places directly, but the choice is either free for me but I order through DD, or pay out of my pocket and order directly. This isn't common I don't think, and we won't have DD anymore after we all go back to the office, but it's a data point. The accounting is significantly easier apparently when the company just gets a monthly Doordash bill rather than having to deal with individual receipts on concur or something.
- MattGaiser 6y ago
  DoorDash probably offers the company a discount on everything as well for the volume.
kevindong 6y ago
> While neither Uber nor Grubhub turns a profit delivering food, they are nonetheless venture-backed and raking in mountains of cash The author acknowledges that the delivery services are losing money. And yet, the author is essentially saying that the apps should lose even more money because someone else is willing to fund the apps.
- casefields 6y ago
  It's a very weird position. Even if I were taking in a trillion in cash, if my expenses are a trillion+1, no would call me a success for long.
  - sokoloff 6y ago
    That would entirely depend on your payment terms.
- dathinab 6y ago
  It's not that simple. First we need to know why they don't turn in a profit. Potential reasons include: - Because they pay to the people delivering (I don't think so). - Because keeping the app running is to expensive, i.e. server costs (I don't think so to). - Because they payed a lot upfront to create the app and are still paying it of (Maybe, still unlikely, this would have been their own mistake and go away after some time). - Because they are spending to much on "external" cost, like advertisements (likely). - Because they know they don't have to yet make profit so they take maximal advantage of venture capital by reinvesting much profits in R&D and similar (somewhat likely) - Because they are selling a service for to little to the end customer, i.e. making losses to "kill of" competition by taking advantage of venture capital (I think that's the main point). The thing is paying people to deliver stuff is expensive just the wage which needs to be payed can noticeable increase the price and doing much advertisement isn't cheap either. So normally I would expect <price in restaurant> + <not small additional delivery cost> Or alternatively <price in restaurant> + <a small bit more> + <constraints like only delivery if destination close to restaurant (max 15min time) and min order amount (20+$) etc.> But what we see is prices nut much higher then restaurant, not limited to close proximity, no or low min amount. So someone has to pay for it, and by using a combination of intransparency and their (perceived) marked power they force a not small amount of the cost they have to operate somewhat profitable onto the restaurants... Which is the actual problem I think.
aianus 6y ago
If 30% of dine-in prices go to rent / seating / storefront marketing, why shouldn’t 30% of the takeout price (which is the same) go to subsidize the delivery infrastructure? Why are restaurant owners ok with paying so much for rent on a useless (during COVID) storefront in a high traffic area, but when Uber Eats gives them more marketing and orders than the storefront does, Uber Eats is the bad guy. Be mad at the landlord or COVID, not Uber.
libertine 6y ago
You're missing one thing - a restaurant is more then the delivery of food to a plate. Just because they can have food made for food delivery services, doesn't mean it will be the best choice for regular customers. Where restaurants compete with food delivery is by being in a physical location that people seek to have an experience. Or a quick stop on a car ride. Or a fast snack near work. For some restaurants food delivery simply won't work.
- ikeyany 6y ago
  There is still an opportunity for innovation. A restaurant that specializes in "experiences" is not doomed to optimize in food alone. For example, when a customer places an order, a restaurant could offer personalized wine pairing, or affix interesting recipes from the chef, or send you a coupon for the neighboring business.
aloukissas 6y ago
Many restaurants are asking for a flat-fee alternative, similar to the Shopify model for e-commerce. Whoever brings this to market will win the restaurant owners. And then does the consumer loyalty lie with the app or the restaurant? I.e., would I rather order from restaurants on my favorite app or from my favorite restaurant, regardless of the app? Probably the latter, but who knows!
- MattGaiser 6y ago
  I am very much the former. I generally open the app before I decide what to eat and then choose there. A comment I made about that here: https://news.ycombinator.com/item?id=23195743 https://news.ycombinator.com/item?id=23195743 I am definitely in the minority on that, but not in a tiny minority.
- selectodude 6y ago
  I use ChowNow, which apparently is a fixed fee. I’m not sure if they’re lying or not but there’s a pretty large number of restaurants in my area that send you to their app for online ordering.
jqcoffey 6y ago
The question I keep asking myself is, if Domino’s can be their own delivery system and now most restaurants are 100% delivery why can’t they do the same thing? I was, a long time ago, a delivery driver for Little Caesar’s and it seemed to work out for everyone without any technology to speak of. EDIT: I am aware of the three party optimization problem for food delivery services. In housing seems to simplify that problem immensely given there is no /fourth/ party trying to optimize it from the outside and take a cut in the process.
- MattGaiser 6y ago
  1. Location. Dominos has been within 10 minutes of everywhere I have ever lived or vacationed. My last order of Chinese food came from the other side of the city. 2. Tips. Most people do not tip the app drivers. I suspect more people tip the pizza driver as he sees that you stiffed him. Customers are no longer paying for the delivery.
  - jqcoffey 6y ago
    > Location. Dominos has been within 10 minutes of everywhere I have ever lived or vacationed. My last order of Chinese food came from the other side of the city. Sure, but that doesn’t preclude that Chinese restaurant from having their own delivery function. Each Domino’s restaurant needs to be self sufficient as well. Googling “Chinese food near me” seems to provide the look up. > Customers are no longer paying for the delivery. Have you seen the charges from an Uber eats delivery? We stopped using food delivery services entirely and just pick up now to save the ~$20 overhead on dinner.
LatteLazy 6y ago
Well right now you either live or die together...
remote_phone 6y ago
People appear to be forgetting how horrible food delivery was pre-UberEats/DoorDash et al. It was horrible and the food was always cold. Once they started doing food delivery it was a game changer. My food arrived hot enough that I had to wait sometimes but almost always pleasantly warm. To me, it’s worth paying the fees, especially since I don’t have to spend time going out, waiting, driving back. When I go for In’n’out these days, it’s almost an hour spent in total. I would rather pay fees and a tip to get someone to bring it to me. And quite honestly, without food delivery most of these restaurants would be dead anyway so they really should be thankful. There’s no way they could coerce enough customers to drive down, find parking and wait while they expose themselves to COVID just for a meal.
- kingkawn 6y ago
  I never had a problem with delivery before the VCs started trying to make bank off it
- derrekl 6y ago
  I worked at a pizza place in the early to mid 90s in the suburbs of Chicago. The place ran its own delivery service. The service was fantastic, pizzas delivered piping hot most of the times. It wasn’t very hard for the restaurant to set up and operate the service. 15 year old me understood it pretty well. That said I think where these delivery services have come in is at places that historically didn’t have their own delivery. Now these places suddenly have “delivery as a service” to add on with Seemingly no additional work, a fee, and additional revenue. These places could easily start their own delivery service if they want, but they must still think it’s easier to pay the delivery as a service fees.
  - blfr 6y ago
    Yes, pizza places had it figured out. Everyone else, not so much. And on Uber Eats or many of their competitors you can order pancakes with coffee, burgers, traditional food, Georgian, whatever. In Poland, Pyszne.pl is usually better and offers a wider selection than Uber Eats. The delivery is often provided by the restaurant itself, just like you suggest. In fact, I made two orders from Uber Eats today and both are delivered by the restaurant. But even then the intermediary keeps them honest with reviews and access to the platform. It's not pure rent seeking. Before that, these platforms do a lot of promotion, marketing, and allow for easy discovery. They have greatly expanded the market. Just like Uber did for taxis.
orev 6y ago
Apps are doing well because they are solving a real problem — translating restaurants’ abysmal web sites, PDF menus, and awful online ordering experiences to apps that “just work”. If restaurants put any effort at all into fixing those things, there would not be such a strong demand for apps. Obviously this is different for different restaurants, and the skill set needed to run a restaurant is vastly different from running an e-commerce site, but just like they need to figure out how to do taxes and read lease agreements, online presence is a necessary thing in 2020.
- basch 6y ago
  Theres a nice friction removal for the customer. One account, only typing your credit card number in once, a consistent place to make a complaint or get a refund. Visa, Amazon, Apple, Google, or Paypal sort of provide that function, but being able to shop many restaurants with a single identity has its benefits. Something that wouldnt be fixed just by restaurants with nice websites.
  - slfnflctd 6y ago
    One nice theory I've seen floated - which I believe has happened in some places - is for several local restaurants to split the cost of building & running a combined web store and/or app. If word gets around enough that this is a faster or cheaper overall experience, people will migrate. The only catch there is if the stores want to also continue taking GH/DD/UE orders, in which case the menus and branding might have to be different. In the long run, I honestly think kitchen-only setups optimized for efficiency & food safety will grab a big share of the market. They can experiment with vertical integration, and avoid all the hassles & limitations of sit-down dining. They will be able to more, better, faster and cheaper. It might be hard to copy & paste the entire thing from one city to another, but the core functions should be quite portable.
    - ethbro 6y ago
      It would be insane for restaurants to build their own platforms. It would be crazy smart for someone to standardize an interface (e.g. REST API), let restaurants implement glue to their systems, and then allow a plurality of delivery services to consume and order through the standard interface.
JCharante 6y ago
The industry in the US is ridiculous. In a different country my friends run a newish (7 months?) cafe where they aren't on any apps. Instead you can send them a facebook message or call, and they will dispatch a shipper to you. They will then send one of their baristas who aren't busy, or if necessary they've built up a list of delivery drivers who like to hangout near their restaurant, they "sell" the food to the shipper, and then the shipper is in charge for collecting payment to compensate themselves. The restaurant loses some money because they have to pay for take out containers instead of being able to use a reusable plate, but they're not having 30% taken from them. I guess it helps that their customer base is those who probably aren't going to try to pull a fast one on the restaurant (one that caters to foreigners) but I don't think screwing over delivery people is very ingrained in the culture eitherway.
- haltingproblem 6y ago
  Grubless 30% does not include delivery. That is the just the ordering and payment processing.
  - JCharante 6y ago
    The 30% doesn't subsidize the shipping at all? How expensive is to to upload a picture of a menu, have someone keep an eye on a cell phone for text messages, and take credit card payments if you want to go cashless. Surely the benefit of having a "verified" payment method doesn't outweigh the shrink that would be caused by having people pay on delivery or run it through Square or something. Setup a shopify or literally anything. 30% might be worth it if the only way people will discover you is if they search "pizza" into an app and you have the highest rating within the first three results, but if people are seeking out your restaurant as returning customers then you shouldn't need to pay 30% for a very expensive ad.
- vinay427 6y ago
  This is definitely not limited to the US, for what it's worth. The type of informal arrangement you describe seems rather undesirable if we're trying to enforce safety and labor regulations, tax collection, etc. I'm sure there are some exceptions but where I live as well as in other western European countries in which I've looked into food delivery, there were companies that operate an app-based platform, similar to in the US.
sturza 6y ago
This is one of the reasons why marketplaces that took the place in customer interaction make most of the money and the supplier(restaurant) is poorly paid. Getting in between the customer and the supplier can put you on the top of the food chain.
ackbar03 6y ago
Does anyone think these food delivery companies are ever going to go away? I mean the restaurants don't seem to like them, the delivery people are pissed, vcs are burning money, and through all this these huge companies are still having a trouble turning a profit. This doesn't seem to be working for anybody except maybe the consumer who is just currently subsidized directly and indirectly through all the above parties. It doesn't make too much sense to me
- code_duck 6y ago
  In Portland there are efforts from local businesses to form their own delivery consortiums, such as https://www.pdxccc.com/restaurants.html https://www.pdxccc.com/restaurants.html
  - code_duck 6y ago
    Oh, and I wanted to add a company I was looking for when I made this post. https://atyourdoor.co/ https://atyourdoor.co/ does delivery for a lot of local distilleries. I think this local consortium thing is the way a lot of smaller businesses will go.
mhh__ 6y ago
> why should I'm not a huge fan of moralistic takes on business. If you're selling something dangerous then that's wrong, but it's very easy to be blinkered from a high position. If people want to buy food in a certain way I can't really blame them - arguably the same with Uber and taxis, Uber has disrupted an industry which was fairly uncompetitive and politically charged (Their prevalence indicates the customers appreciate their presence in the space)
- swiley 6y ago
  Yeah I feel like the “people shouldn’t profit from catastrophe” thing is a big part of why it’s still hard to get PPE (no one can justify extra manufacturing etc.)
  - tasty_freeze 6y ago
    You misunderstand the difference between profiting and profiteering. Nobody is claiming companies should sell toilet paper at cost, but they are saying toilet paper shouldn't get 5x more expensive.
    - Retric 6y ago
      IMO some price increase is a good idea to discourage hoarding, promote investment, and promote alternatives like a bidet. But, I think you achieve most of that with simply doubling prices, after that it’s generally more harm than good.
      - lotsofpulp 6y ago
        > But, I think you achieve most of that with simply doubling prices, after that it’s generally more harm than good. How can one make such a vast claim without knowing things such as cost of input materials, machinery, labor, etc?
        Retric 6y ago
        The profit in a competitive market is usually ~5%. Double prices while selling out and profit increases by 21x if not vastly more which is a huge incentive. To the point where doubling the profit again is unlikely result in meaningfully increased production. PS: And yea it’s more complex than that, you can generally skip out in advertising but may be paying significant overtime etc. But that’s rarely particularly important as there are so many inputs involved in ramping up production that you hit multiple different limits.
sebringj 6y ago
IMO it does show that restaurants have to downsize their footprint to not really be restaurants anymore as the costs are just too high for the slim margins. An idea would be to convert to smaller purposeful rented kitchens or even food trucks that are in zoned parking lot delivery pickup areas for app services to quickly go to and deliver to clients. I lean toward the food truck model as you have the best of both worlds where you have a gathering of food choices in-person when nearby and a way for delivery areas to be centralized and more efficient. In the end, the margins are too high from apps though but it does show a need to start changing how things are done.
dathinab 6y ago
Just a random idea: Maybe some people could setup a non-profit platform to connect delivery driver and restaurants and is focused on transparency? Operating such a platform shouldn't be to expensive. The major cost (I guess) lies in advertisement and paying people to actually do the delivery. I believe customer being able to see how much of the price goes to the platform, the delivery driver and the restaurant (maybe required by a law?) would not just open up the eye for unfair practices but also for understanding why prices are higher when delivering (as it becomes clear that 3 parties instead of one need to live from the money). Given how many complains against delivery services cropped up in the recent half year on hacker news it maybe might be time for (small&mid-sized) restaurants to organize?
- dathinab 6y ago
  PS: Just for clarification I mean the major operating costs. There is a higher upfront cost in properly bootstrapping this platform.
- MattGaiser 6y ago
  > paying people to actually do the delivery. I have both DoorDash and the Dasher app. I've seen the order I might regularly pay a $2.99 fee for (I don't as I have DashPass) be offered to drivers for $13 with a $4 tip. This was on a $30 order for two. How you pay for delivery is a major issue.
  - dathinab 6y ago
    > Operating such a platform shouldn't be to expensive. What I meant is the cost for the platform not the products and service on it. I.e. the costs to keep the app running and doing the bookkeeping on in the server. The idea is that if it's hard to profitable operate platforms for food delivery if you properly pay the delivery person and the restaurant, then maybe it would be better to not try to do so and instead operate such a platform as a non-profit (or shared responsibility of a large group of restaurants) focused on connecting independent delivery personal and restaurants. With that you would only have the service/app operational cost and if the area you cover is large enough you probably could have something like a fixed $1 or less cost per delivery (+food cost + delivery personal cost). Naturally this also would mean you don't have money for doing much R&D or advertisement. So it would be in the responsibility of the restaurants to advertise that people can order online over that platform. I.e. it would turn the whole delivery business conceptually upside down by putting the focus on the restaurants. Or you could say it's just going back to the roots. I'm not sure if that could work in the US. But I think it has a chance of working in many EU countries.
vegannet 6y ago
Uber Eats isn’t really in the business of delivering food, it’s in the business of discounting the cost of food delivery. If your favourite local restaurant raised investment to be able to reduce their prices to below cost they would have a queue of people at the door... but would they be thriving? The moment Uber Eats can’t afford to continue to subsidise the cost of their food delivery model they won’t be “thriving” any more and local players will fill the vacuum.
quotemstr 6y ago
Because that's what the market says is important --- and the market is just the average of the true preferences we individually reveal through our spending choices. The market isn't just some abstraction: it's the will of all of us combined. And who is the author of this article to override this will?
SpicyLemonZest 6y ago
The author doesn't seem to have any ideas on how to help restaurants thrive too. A cap on Grubhub fees isn't going to save most restaurants. He just wants to bring the pain on food delivery apps too, which will improve the situation by... sympathetic magic? I feel bad sniping at him, because I agree with the general principle that the economics of the restaurant industry are worse than they ought to be. But this genre of social reform take, "we must smash this business because it's doing well when others aren't", is just incredibly toxic.
TomMarius 6y ago
Because they can save my credit card for all restaurants.
JohnTHaller 6y ago
Someone put this together in NYC: https://www.eatnyc.org/ https://www.eatnyc.org/ "EatNYC.org is an updated list of restaurants that are still open for pickup and delivery in New York City*. Ordering directly ensures restaurants keep 100% of what you pay. "
crazygringo 6y ago
This article is misguided, based on a false premise. Food delivery apps are not thriving, if thriving means making big profits. GrubHub's stock price isn't much different from where it was 5 years ago. UberEats isn't expected to turn a profit for another five years as they continue to lose money on every order. There are no monopolies here taking advantage of restauranteurs. There's an entire ecosystem of food delivery apps competing with each other. The reality of the situation is that delivering meals is extremely expensive. It doesn't have meaningful economies of scale the way package delivery does. Both restaurants and customers have to pay these huge delivery fees because that's just what delivery costs. (In fact, many are still being subsidized by massive VC.) Running a restaurant is always a precarious business proposition in the first place. Adding delivery is another precarious choice -- you can massively increase revenue but only at the cost of massively decreasing profit percentage, and if you don't calculate exactly right it'll seem like a big waste-of-time wash in the end, or you'll even lose money. That's just how it works. I have tons of sympathy for restaurant owners, but just because it's hard -- not because they're being taken advantage of, because they're not. But laws that restrict the ability of food delivery apps to charge what the market will bear isn't going to solve anything. They don't have these extra profits lying around they can just moderately reduce. The inevitable result will be them dropping the restaurants that are least profitable for delivery entirely, and reducing deliverypeople so your food will take two or three times as long to deliver. That's just Econ 101 -- if your revenue is reduced to where there's no path to profit, you need to cut quality. End of story.
- blancNoir 6y ago
  from the article "While neither Uber nor Grubhub turns a profit delivering food, they are nonetheless venture-backed and raking in mountains of cash: Grubhub reported revenue of $362.98 million during the first quarter this year, a year-over-year increase of more than 12%. Uber Eats’ revenue surged 53% from the same quarter a year ago, to $819 million. Restaurants, meanwhile, are facing utter devastation. The restaurant industry lost 5.5 million jobs nationwide in April, according to the Bureau of Labor Statistics. In L.A., the overall unemployment rate now stands at 24%, an increase from 4.7% in February." edit: additional context from article
Udik 6y ago
It feels a bit like reading about the industrial revolution, when masses of destitute workers were exploited by rich factory owners. Their salary was just barely enough to keep them alive and their work perfectly fungible: for any worker that decided the deal wasn't good enough there was a queue of others in wait. Eventually the workers improved their condition through massive and coordinated strikes that entirely blocked the production and prevented anyone to replace them until their requests were met. (On the other hand the fact that delivery apps are funded by VC money and don't turn profits either sounds even more ominous: does it mean that consumer spending is fuelled by debt and still not producing profit for anyone involved?)
say_it_as_it_is 6y ago
Restaurants without their own delivery service would have no business at all if it weren't for delivery services. I see no ethical issue here. A formerly prestigious newspaper is arguing against a new business benefitting in a strained supply chain. It's a weak attempt to gain status.
thrill 6y ago
Will restaurants fail slower or faster without food delivery services?
chvid 6y ago
The truth is that in the current situation most restaurants should not be in business. And the fees charged by delivery services are artificially low due to the high level of competition and all the investor money.
- dathinab 6y ago
  > And the fees charged by delivery services are artificially low due to the high level of competition and all the investor money. And them forcing part of their costs onto the restaurants. ;=) Still stopping operating a restaurant doesn't stop all costs, so operating it on a small flame and doing a bit of not very profitable delivery jobs can still be better then not operating at all.
xnx 6y ago
I wish there was more discussion around how to get these delivery apps to compete with each other on price. Are there any meta-delivery apps where you can easily compare prices?
- MattGaiser 6y ago
  They compete for customers on price. Until I got DashPass, I routinely checked all three for lunch info.
6gvONxR4sf7o 6y ago
I don't understand why it's a commission price structure. Take uber eats. You buy some price of food, then there's an uber eats service fee on top of that, and then a delivery fee (and you're supposed to tip the driver in addition to the service fee and delivery fee?). It seems like that price structure already clearly splits the restaurant's and uber's (and the driver's) portions, but I guess uber takes a commission in addition to that? Like, why fees and commissions instead of just fees? Consumers would understand that delivery is an added cost, so you just add the cost.
- dehrmann 6y ago
  They definitely don't explain it well: https://help.uber.com/ubereats/article/how-do-fees-work-on-uber-eats?nodeId=65d229e2-a2b4-4fa0-b10f-b36c9546cf55 https://help.uber.com/ubereats/article/how-do-fees-work-on-u...
dvduval 6y ago
Google ranks apps higher than restaurants. It would not be all that difficult to roll out a more open source technology that all restaurants could use. Then Google can rank the restaurants more and the apps less. or perhaps a search engine like being might move into this space. This would be a savings for the restaurants and the consumers.
yalogin 6y ago
The delivery business is in a bubble right now, deservedly so. But it's going to come back to earth once we have a vaccine. I don't think the price model is sustainable at all. They are trying to get into the middle of an already tight equation between the service industry and the customers. To me the main issue is for restaurants the margins are thin and the price/profit equation is very different for every restaurant. So applying the same business/pricing model for all restaurants won't work. The only sustainable way is to let customers pay for the delivery. Right now the apps are forcing the restaurants to pay up in some ways by service shaming them to sign up and offer delivery. Of course profitable restaurants will become do more business and the rest will lost more money. Not a good thing for the over all ecosystem. I guess this is when the concept of kitchens set up just for delivery will take off.
AzzieElbab 6y ago
The restaurants are squeezed by landlords,and high labor costs. What does this have to do with food delivery?
bergstromm466 6y ago
"Uber has nothing to do with helping people get rides in towns. Uber is a business plan. It’s a platform monopoly getting ready to leverage that monopoly into another vertical whether it be delivery, drones or logistics. The prosperity of all the people who used to be in the cabbie industry ends up sacrificed to the growth of this company. Corporations are like these obese people, they suck money out of our economy and store it in the fat of share price. That’s not business, that’s value extraction. They take all the chips off the board." https://www.theguardian.com/technology/2016/feb/12/digital-capitalism-douglas-rushkoff https://www.theguardian.com/technology/2016/feb/12/digital-c...
excalibur 6y ago
I don't feel like their fees should be capped necessarily, but I DO feel like they should be required to charge them all to customers directly rather than bleeding small businesses dry. Let informed consumers decide how much app overhead they're willing to put up with.
tehlike 6y ago
I use chownow. It has a fixed fee (based on pricing page on their site). Made me feel good. Probably true, too, because I checked the menu of one of my favorite restaurants, doordash prices were much higher.
projektfu 6y ago
Diversity loss is a problem. A too-strong middleman will eventually cause roll up in the field to businesses with enough size to have bargaining power.
yoleg 6y ago
The problem is that these delivery apps are trying to scale a business on top of a product that already has thin margins. They're trying to squeeze in between the restaurants and consumer and both sizes is feeling the squish. IMO the relationship between delivery apps and restaurants could be a bit more mutually beneficial. How this could potentially work - 1. Restaurants modernize their web presence with the help of the app company. They make it easy for consumers to order online through their website, or some sort of aggregation app, but the restaurants maintain their brand, and process payments. 2. Restaurants put out a bid to deliver an order through the delivery app and someone in the area agrees to pick it up 3. The delivery person receives the fee and perhaps a few bucks as tips upon delivery The app company would make money through long term contracts (partnerships) with the restaurants to service their delivery needs. These types of long term partnerships could be much more valuable to both the app (tech company) and the restaurant - the app company could help the restaurant modernize and maintain their online presence which is much more valuable than pinching them with fees. Obviously this is more challenging for both sides since it requires buy-in, long-term collaboration, etc but the other option is to not adapt and continue fighting delivery apps for tight margins. I feel like Yelp would be in a perfect place to do this if they weren't too busy pinching restaurant owners for ad money.
deleted 6y ago
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okareaman 6y ago
Title should say "Our restaurants who depend on sitdown dine in experience for profitability are failing"
luord 6y ago
This doesn't even need a moralistic judgment: if the application owners don't change their practices, most restaurants are going to go under and then they'll lose revenue anyway. So this is not only abuse of the restaurants, it's economical self-injury. Possibly self-destructive entirely.
chiph 6y ago
At work we use Foodsby, and it's been difficult watching their offerings drop week over week. I think they have solved some of the major inefficiencies in the Grubhub/Doordash models [0], and I hope they make it. [0] Foodsby delivers to company offices, not individuals. They coordinate orders with the restaurants, so that they aren't delivering single meals, and the restaurants can put a cap on the number of orders so they're not overwhelmed. The restaurant does the delivery so they control that cost (no hidden charges to them)
neonate 6y ago
https://archive.md/hKM5i https://archive.md/hKM5i
jariel 6y ago
They pose it like a moral question that is wrong. Restaurants left with ugly payments to 'delivery apps' sounds bad, but most of the reason is delivery is expensive! The bulk of the cost here is not some magical money-making software, it's the time, effort, gas, wear and tear, energy of someone delivering. Most delivery app companies are losing money anyhow. A better approach might be to strongly deregulate delivery and taxi services. Let anyone do it, have some industry-standard practices (i.e. you have to register, certain vehicles for certain things, some minimum pricing laws etc.) and then let's see how that works. Restaurants can literally order a regular taxi for food delivery and such general taxis could be used for a lot of things.
xtiansimon 6y ago
I’m shocked people will pay the surcharges for delivery. Not everything travels well. But people do, and don’t seem to care.
cmurf 6y ago
The internet needs to be destroyed.

164 points by aloukissas 6y ago

perlpimp 6y ago

I thought delivery apps aren't making a profit either.

dmix 6y ago
Foodora was extremely popular here in Toronto, you’d see the bike delivery people all over the place and they signed up tons of restaurants but they just shut down citing the margins simply not making sense for the business. It didn’t help that a month before shutting down a group of workers unionized in Ontario, and further threw a wrench in a terribly low margin business and now none of them have a job and the entire city is stuck using Uber Note: Foodora only shut down their Canadian business, not their European one. Foodora had acquired Hurrier which was our other homegrown food delivery service here in Toronto, which is obviously no longer an option either. They too were struggling with margins, which I know from speaking to people who worked there.
- dathinab 6y ago
  > It didn’t help that a month before shutting down a group of workers unionized in Ontario, and further threw a wrench in a terribly low margin business and now none of them have a job and the entire city is stuck using Uber I don't think unionizing is ever a problem. I you do moralistic acceptable business practices. If your business is only profitable by paying below acceptable salary, push side costs onto employees or cutting corner wrt. employee safety then it IHMO it is better for your business to close. Additionally if a whole industry is affected by this then IMHO it needs a major reform in how it works or it should just cease to exist. Sure food delivery can not cease to exist, it's needed but if their is no way to operate it profitable without taking advantage of delivery personal and/or restaurants then it needs a major change. Either people need to accept that delivered food is more costly or the state needs to subvention it (during epidemics and similar where it's an somewhat essential service for some people, like when your stove just broke yesterday).
  - dmix 6y ago
    Wake me up when that fantasy world becomes reality. In the mean time I’d rather not have to give Uber money.
cordite 6y ago
They aren't making a profit because they're spending more than they're making. They make enough to pay the driver, the operations around that, and the tech running the site. But their shareholders see this as an opportunity to expand the markets. They aren't taking this for granted, they're aggressively spending on marketing, on signing up restaurants for their platform (except DoorDash, they list most restaurants without partnership), on ads for Google, Facebook, and other major platforms. This is why they aren't making a profit. But it's eating so much into their costs that they're doing some sneaky practices: they're doing the same that Etsy does, taking more out of the net sales on advertising that the restaurant did not consent to knowing they will be charged for it as much as they were.

softwaredoug 6y ago

Our city has some local restaurant driven “drop points” for getting lots of restaurant prepared meals at a margin better for restaurants. Please see if your city has something similar as an alternative to grubhub, etc

dehrmann 6y ago
I had an idea, and I think Travis Kalanick started building something like it, where restaurants rent kitchen space alongside other virtual restaurants. The site would have good road access and be centralized, so pickups are faster, and the space would be used more efficiently that high-rent retail space. I got the idea seeing a local restaurant with most of it's orders being picked by a food delivery service, yet they were paying for a good, downtown location where parking is hard.
wdb 6y ago
Sounds interesting, good examples of this? Curious, if it's available in London (UK)
- BukhariH 6y ago
  In London these dark/cloud kitchens are becoming more & more common. You might have already been ordering from them & not realised - they used to be marked as “Editions” on Deliveroo: https://foodscene.deliveroo.co.uk/promotions/deliveroo-editions.html https://foodscene.deliveroo.co.uk/promotions/deliveroo-editi...
coolswan 6y ago
That's great; what city is this?

naveen99 6y ago

It’s easier to prune the leaves than to cut out middle branches.

softwaredoug 6y ago

As restaurants open a bit, tables will be scarce due to distancing. Restaurants should charge a premium for their limited space. If I could have a nice meal out right now, I’d probably spend 2x what I would pre covid! Anything just to do something nice away from home.

haltingproblem 6y ago

They thrive because people are lazy - both restaurant and their customers. Restaurants can make a concerted effort to ask regular clients to order from their own websites/apps but rarely do even when they can make an extra 10-15% after giving the customers 10% off. Customers are lazy because inspite of all the talk of supporting local, they are too hooked on click-click-click and ordered. The delivery apps have hundreds of millions in investment in technology and marketing, a lot of it shady. The apps can offer addictive flows that restaurants cannot compete with. The solution out of this is an app co-op model - payment processing (3%) + 2-3% overhead. There are similar offerings in the ride-share world and this should work on the delivery apps as well. I would rather support an app that provides a healthy living to a small company in Tulsa or Talinn that subsidize rents in SF and fatten VC portfolios for an online menu with checkout supported by hundreds of millions in marketing dollars.

ericzawo 6y ago
Restaurants are a lot of things. But lazy is not one of them. Have you ever worked at a restaurant?
- dvtrn 6y ago
  I’ve been an AGM and worked the industry six years plus four years adjacent in catering before finishing college and moving into SWE. Yes an awful lot of them are lazy. I mention him only to mention the scary accuracy of it, but the late Anthony Bourdain has a chapter dedicated to crappy restauranteurs in nearly every book he’s written on the topic of food service as a career (of course his distaste for crappy restaurant owners is poignantly dotted through the entirety of “Kitchen Confidential” to be fair), and I often wonder to this day to hear his voice on the state of affairs in food service during a pandemic, and the micro economy that’s sprung up in food delivery.
- enitihas 6y ago
  Restaurants might not be lazy in their core business functions, but that doesn't make them non lazy on other matters.

scarface74 6y ago

So capping delivery fees on unprofitable delivery platforms now means they lose more money or they cut the pay of the drivers. The only answer is shockingly enough for both the delivery services and the restaurants to charge enough to be profitable and then people will have to choose to get out or pay the market rate. Capitalism is the answer. On the other hand, since I am a bleeding heart capitalist, I have no problem with the government giving people money who can’t or shouldn’t go out to make it easier for them to get delivery.

deleted 6y ago
[deleted]

lwb 6y ago

I thought the whole point of capitalism is that you don’t have to answer “should” moralisms about any particular business. Consumers will decide and competition among vendors will drive down prices. Why do so many outsiders feel so confident that they know better than Grubhub/Uber Eats/DoorDash what their prices should be?

saadalem 6y ago

Food delivery is a complex, three-sided marketplace problem area. Balancing the needs of all stakeholders, especially during a time of consistent innovation is challenging.

remote_phone 6y ago
Found the UberEats employee. I’ve only ever heard UberEats employees call it a 3P/2P marketplace (I have good friends that work at Uber as well).
- zaroth 6y ago
  I don’t see UberEats mentioned in OPs profile. Best not to accuse people of shilling.
- itake 6y ago
  I don't work fro UberEats (or any delivery company), but I do work for a company in the local rest space. Uber Eats margins are just as thin as the restaurants. a round trip delivery might take 40 mins. Everyone's margins are super thin.
- JMTQp8lwXL 6y ago
  Is three-sided in reference to the delivery couriers as a group, or the aggregator food delivery app? Clearly, the remaining two parties would be the restaurant and the hungry customer.
- saadalem 6y ago
  I'm not even working on a company xD
- truculent 6y ago
  I’ve heard deliveroo employees in the U.K. say the same

deleted 6y ago

[deleted]

joeblow21 6y ago

This is the Green New Deal. Essential vs Non Essential businesses.

ganstyles 6y ago

As part of trying to provide benefits one would normally get in the office, we provide unlimited Doordash for lunch/dinner. I would prefer to order from places directly, but the choice is either free for me but I order through DD, or pay out of my pocket and order directly. This isn't common I don't think, and we won't have DD anymore after we all go back to the office, but it's a data point. The accounting is significantly easier apparently when the company just gets a monthly Doordash bill rather than having to deal with individual receipts on concur or something.

MattGaiser 6y ago
DoorDash probably offers the company a discount on everything as well for the volume.

kevindong 6y ago

> While neither Uber nor Grubhub turns a profit delivering food, they are nonetheless venture-backed and raking in mountains of cash The author acknowledges that the delivery services are losing money. And yet, the author is essentially saying that the apps should lose even more money because someone else is willing to fund the apps.

casefields 6y ago
It's a very weird position. Even if I were taking in a trillion in cash, if my expenses are a trillion+1, no would call me a success for long.
- sokoloff 6y ago
  That would entirely depend on your payment terms.
dathinab 6y ago
It's not that simple. First we need to know why they don't turn in a profit. Potential reasons include: - Because they pay to the people delivering (I don't think so). - Because keeping the app running is to expensive, i.e. server costs (I don't think so to). - Because they payed a lot upfront to create the app and are still paying it of (Maybe, still unlikely, this would have been their own mistake and go away after some time). - Because they are spending to much on "external" cost, like advertisements (likely). - Because they know they don't have to yet make profit so they take maximal advantage of venture capital by reinvesting much profits in R&D and similar (somewhat likely) - Because they are selling a service for to little to the end customer, i.e. making losses to "kill of" competition by taking advantage of venture capital (I think that's the main point). The thing is paying people to deliver stuff is expensive just the wage which needs to be payed can noticeable increase the price and doing much advertisement isn't cheap either. So normally I would expect <price in restaurant> + <not small additional delivery cost> Or alternatively <price in restaurant> + <a small bit more> + <constraints like only delivery if destination close to restaurant (max 15min time) and min order amount (20+$) etc.> But what we see is prices nut much higher then restaurant, not limited to close proximity, no or low min amount. So someone has to pay for it, and by using a combination of intransparency and their (perceived) marked power they force a not small amount of the cost they have to operate somewhat profitable onto the restaurants... Which is the actual problem I think.

aianus 6y ago

If 30% of dine-in prices go to rent / seating / storefront marketing, why shouldn’t 30% of the takeout price (which is the same) go to subsidize the delivery infrastructure? Why are restaurant owners ok with paying so much for rent on a useless (during COVID) storefront in a high traffic area, but when Uber Eats gives them more marketing and orders than the storefront does, Uber Eats is the bad guy. Be mad at the landlord or COVID, not Uber.

libertine 6y ago

You're missing one thing - a restaurant is more then the delivery of food to a plate. Just because they can have food made for food delivery services, doesn't mean it will be the best choice for regular customers. Where restaurants compete with food delivery is by being in a physical location that people seek to have an experience. Or a quick stop on a car ride. Or a fast snack near work. For some restaurants food delivery simply won't work.

ikeyany 6y ago
There is still an opportunity for innovation. A restaurant that specializes in "experiences" is not doomed to optimize in food alone. For example, when a customer places an order, a restaurant could offer personalized wine pairing, or affix interesting recipes from the chef, or send you a coupon for the neighboring business.

aloukissas 6y ago

Many restaurants are asking for a flat-fee alternative, similar to the Shopify model for e-commerce. Whoever brings this to market will win the restaurant owners. And then does the consumer loyalty lie with the app or the restaurant? I.e., would I rather order from restaurants on my favorite app or from my favorite restaurant, regardless of the app? Probably the latter, but who knows!

MattGaiser 6y ago
I am very much the former. I generally open the app before I decide what to eat and then choose there. A comment I made about that here: https://news.ycombinator.com/item?id=23195743 https://news.ycombinator.com/item?id=23195743 I am definitely in the minority on that, but not in a tiny minority.
selectodude 6y ago
I use ChowNow, which apparently is a fixed fee. I’m not sure if they’re lying or not but there’s a pretty large number of restaurants in my area that send you to their app for online ordering.

jqcoffey 6y ago

The question I keep asking myself is, if Domino’s can be their own delivery system and now most restaurants are 100% delivery why can’t they do the same thing? I was, a long time ago, a delivery driver for Little Caesar’s and it seemed to work out for everyone without any technology to speak of. EDIT: I am aware of the three party optimization problem for food delivery services. In housing seems to simplify that problem immensely given there is no /fourth/ party trying to optimize it from the outside and take a cut in the process.

MattGaiser 6y ago
1. Location. Dominos has been within 10 minutes of everywhere I have ever lived or vacationed. My last order of Chinese food came from the other side of the city. 2. Tips. Most people do not tip the app drivers. I suspect more people tip the pizza driver as he sees that you stiffed him. Customers are no longer paying for the delivery.
- jqcoffey 6y ago
  > Location. Dominos has been within 10 minutes of everywhere I have ever lived or vacationed. My last order of Chinese food came from the other side of the city. Sure, but that doesn’t preclude that Chinese restaurant from having their own delivery function. Each Domino’s restaurant needs to be self sufficient as well. Googling “Chinese food near me” seems to provide the look up. > Customers are no longer paying for the delivery. Have you seen the charges from an Uber eats delivery? We stopped using food delivery services entirely and just pick up now to save the ~$20 overhead on dinner.

LatteLazy 6y ago

Well right now you either live or die together...

remote_phone 6y ago

People appear to be forgetting how horrible food delivery was pre-UberEats/DoorDash et al. It was horrible and the food was always cold. Once they started doing food delivery it was a game changer. My food arrived hot enough that I had to wait sometimes but almost always pleasantly warm. To me, it’s worth paying the fees, especially since I don’t have to spend time going out, waiting, driving back. When I go for In’n’out these days, it’s almost an hour spent in total. I would rather pay fees and a tip to get someone to bring it to me. And quite honestly, without food delivery most of these restaurants would be dead anyway so they really should be thankful. There’s no way they could coerce enough customers to drive down, find parking and wait while they expose themselves to COVID just for a meal.

kingkawn 6y ago
I never had a problem with delivery before the VCs started trying to make bank off it
derrekl 6y ago
I worked at a pizza place in the early to mid 90s in the suburbs of Chicago. The place ran its own delivery service. The service was fantastic, pizzas delivered piping hot most of the times. It wasn’t very hard for the restaurant to set up and operate the service. 15 year old me understood it pretty well. That said I think where these delivery services have come in is at places that historically didn’t have their own delivery. Now these places suddenly have “delivery as a service” to add on with Seemingly no additional work, a fee, and additional revenue. These places could easily start their own delivery service if they want, but they must still think it’s easier to pay the delivery as a service fees.
- blfr 6y ago
  Yes, pizza places had it figured out. Everyone else, not so much. And on Uber Eats or many of their competitors you can order pancakes with coffee, burgers, traditional food, Georgian, whatever. In Poland, Pyszne.pl is usually better and offers a wider selection than Uber Eats. The delivery is often provided by the restaurant itself, just like you suggest. In fact, I made two orders from Uber Eats today and both are delivered by the restaurant. But even then the intermediary keeps them honest with reviews and access to the platform. It's not pure rent seeking. Before that, these platforms do a lot of promotion, marketing, and allow for easy discovery. They have greatly expanded the market. Just like Uber did for taxis.

orev 6y ago

Apps are doing well because they are solving a real problem — translating restaurants’ abysmal web sites, PDF menus, and awful online ordering experiences to apps that “just work”. If restaurants put any effort at all into fixing those things, there would not be such a strong demand for apps. Obviously this is different for different restaurants, and the skill set needed to run a restaurant is vastly different from running an e-commerce site, but just like they need to figure out how to do taxes and read lease agreements, online presence is a necessary thing in 2020.

basch 6y ago
Theres a nice friction removal for the customer. One account, only typing your credit card number in once, a consistent place to make a complaint or get a refund. Visa, Amazon, Apple, Google, or Paypal sort of provide that function, but being able to shop many restaurants with a single identity has its benefits. Something that wouldnt be fixed just by restaurants with nice websites.
- slfnflctd 6y ago
  One nice theory I've seen floated - which I believe has happened in some places - is for several local restaurants to split the cost of building & running a combined web store and/or app. If word gets around enough that this is a faster or cheaper overall experience, people will migrate. The only catch there is if the stores want to also continue taking GH/DD/UE orders, in which case the menus and branding might have to be different. In the long run, I honestly think kitchen-only setups optimized for efficiency & food safety will grab a big share of the market. They can experiment with vertical integration, and avoid all the hassles & limitations of sit-down dining. They will be able to more, better, faster and cheaper. It might be hard to copy & paste the entire thing from one city to another, but the core functions should be quite portable.
  - ethbro 6y ago
    It would be insane for restaurants to build their own platforms. It would be crazy smart for someone to standardize an interface (e.g. REST API), let restaurants implement glue to their systems, and then allow a plurality of delivery services to consume and order through the standard interface.

JCharante 6y ago

The industry in the US is ridiculous. In a different country my friends run a newish (7 months?) cafe where they aren't on any apps. Instead you can send them a facebook message or call, and they will dispatch a shipper to you. They will then send one of their baristas who aren't busy, or if necessary they've built up a list of delivery drivers who like to hangout near their restaurant, they "sell" the food to the shipper, and then the shipper is in charge for collecting payment to compensate themselves. The restaurant loses some money because they have to pay for take out containers instead of being able to use a reusable plate, but they're not having 30% taken from them. I guess it helps that their customer base is those who probably aren't going to try to pull a fast one on the restaurant (one that caters to foreigners) but I don't think screwing over delivery people is very ingrained in the culture eitherway.

haltingproblem 6y ago
Grubless 30% does not include delivery. That is the just the ordering and payment processing.
- JCharante 6y ago
  The 30% doesn't subsidize the shipping at all? How expensive is to to upload a picture of a menu, have someone keep an eye on a cell phone for text messages, and take credit card payments if you want to go cashless. Surely the benefit of having a "verified" payment method doesn't outweigh the shrink that would be caused by having people pay on delivery or run it through Square or something. Setup a shopify or literally anything. 30% might be worth it if the only way people will discover you is if they search "pizza" into an app and you have the highest rating within the first three results, but if people are seeking out your restaurant as returning customers then you shouldn't need to pay 30% for a very expensive ad.
vinay427 6y ago
This is definitely not limited to the US, for what it's worth. The type of informal arrangement you describe seems rather undesirable if we're trying to enforce safety and labor regulations, tax collection, etc. I'm sure there are some exceptions but where I live as well as in other western European countries in which I've looked into food delivery, there were companies that operate an app-based platform, similar to in the US.

sturza 6y ago

This is one of the reasons why marketplaces that took the place in customer interaction make most of the money and the supplier(restaurant) is poorly paid. Getting in between the customer and the supplier can put you on the top of the food chain.

ackbar03 6y ago

Does anyone think these food delivery companies are ever going to go away? I mean the restaurants don't seem to like them, the delivery people are pissed, vcs are burning money, and through all this these huge companies are still having a trouble turning a profit. This doesn't seem to be working for anybody except maybe the consumer who is just currently subsidized directly and indirectly through all the above parties. It doesn't make too much sense to me

code_duck 6y ago
In Portland there are efforts from local businesses to form their own delivery consortiums, such as https://www.pdxccc.com/restaurants.html https://www.pdxccc.com/restaurants.html
- code_duck 6y ago
  Oh, and I wanted to add a company I was looking for when I made this post. https://atyourdoor.co/ https://atyourdoor.co/ does delivery for a lot of local distilleries. I think this local consortium thing is the way a lot of smaller businesses will go.

mhh__ 6y ago

> why should I'm not a huge fan of moralistic takes on business. If you're selling something dangerous then that's wrong, but it's very easy to be blinkered from a high position. If people want to buy food in a certain way I can't really blame them - arguably the same with Uber and taxis, Uber has disrupted an industry which was fairly uncompetitive and politically charged (Their prevalence indicates the customers appreciate their presence in the space)

swiley 6y ago
Yeah I feel like the “people shouldn’t profit from catastrophe” thing is a big part of why it’s still hard to get PPE (no one can justify extra manufacturing etc.)
- tasty_freeze 6y ago
  You misunderstand the difference between profiting and profiteering. Nobody is claiming companies should sell toilet paper at cost, but they are saying toilet paper shouldn't get 5x more expensive.
  - Retric 6y ago
    IMO some price increase is a good idea to discourage hoarding, promote investment, and promote alternatives like a bidet. But, I think you achieve most of that with simply doubling prices, after that it’s generally more harm than good.
    - lotsofpulp 6y ago
      > But, I think you achieve most of that with simply doubling prices, after that it’s generally more harm than good. How can one make such a vast claim without knowing things such as cost of input materials, machinery, labor, etc?
      - Retric 6y ago
        The profit in a competitive market is usually ~5%. Double prices while selling out and profit increases by 21x if not vastly more which is a huge incentive. To the point where doubling the profit again is unlikely result in meaningfully increased production. PS: And yea it’s more complex than that, you can generally skip out in advertising but may be paying significant overtime etc. But that’s rarely particularly important as there are so many inputs involved in ramping up production that you hit multiple different limits.

sebringj 6y ago

IMO it does show that restaurants have to downsize their footprint to not really be restaurants anymore as the costs are just too high for the slim margins. An idea would be to convert to smaller purposeful rented kitchens or even food trucks that are in zoned parking lot delivery pickup areas for app services to quickly go to and deliver to clients. I lean toward the food truck model as you have the best of both worlds where you have a gathering of food choices in-person when nearby and a way for delivery areas to be centralized and more efficient. In the end, the margins are too high from apps though but it does show a need to start changing how things are done.

dathinab 6y ago

Just a random idea: Maybe some people could setup a non-profit platform to connect delivery driver and restaurants and is focused on transparency? Operating such a platform shouldn't be to expensive. The major cost (I guess) lies in advertisement and paying people to actually do the delivery. I believe customer being able to see how much of the price goes to the platform, the delivery driver and the restaurant (maybe required by a law?) would not just open up the eye for unfair practices but also for understanding why prices are higher when delivering (as it becomes clear that 3 parties instead of one need to live from the money). Given how many complains against delivery services cropped up in the recent half year on hacker news it maybe might be time for (small&mid-sized) restaurants to organize?

dathinab 6y ago
PS: Just for clarification I mean the major operating costs. There is a higher upfront cost in properly bootstrapping this platform.
MattGaiser 6y ago
> paying people to actually do the delivery. I have both DoorDash and the Dasher app. I've seen the order I might regularly pay a $2.99 fee for (I don't as I have DashPass) be offered to drivers for $13 with a $4 tip. This was on a $30 order for two. How you pay for delivery is a major issue.
- dathinab 6y ago
  > Operating such a platform shouldn't be to expensive. What I meant is the cost for the platform not the products and service on it. I.e. the costs to keep the app running and doing the bookkeeping on in the server. The idea is that if it's hard to profitable operate platforms for food delivery if you properly pay the delivery person and the restaurant, then maybe it would be better to not try to do so and instead operate such a platform as a non-profit (or shared responsibility of a large group of restaurants) focused on connecting independent delivery personal and restaurants. With that you would only have the service/app operational cost and if the area you cover is large enough you probably could have something like a fixed $1 or less cost per delivery (+food cost + delivery personal cost). Naturally this also would mean you don't have money for doing much R&D or advertisement. So it would be in the responsibility of the restaurants to advertise that people can order online over that platform. I.e. it would turn the whole delivery business conceptually upside down by putting the focus on the restaurants. Or you could say it's just going back to the roots. I'm not sure if that could work in the US. But I think it has a chance of working in many EU countries.

vegannet 6y ago

Uber Eats isn’t really in the business of delivering food, it’s in the business of discounting the cost of food delivery. If your favourite local restaurant raised investment to be able to reduce their prices to below cost they would have a queue of people at the door... but would they be thriving? The moment Uber Eats can’t afford to continue to subsidise the cost of their food delivery model they won’t be “thriving” any more and local players will fill the vacuum.

quotemstr 6y ago

Because that's what the market says is important --- and the market is just the average of the true preferences we individually reveal through our spending choices. The market isn't just some abstraction: it's the will of all of us combined. And who is the author of this article to override this will?

SpicyLemonZest 6y ago

The author doesn't seem to have any ideas on how to help restaurants thrive too. A cap on Grubhub fees isn't going to save most restaurants. He just wants to bring the pain on food delivery apps too, which will improve the situation by... sympathetic magic? I feel bad sniping at him, because I agree with the general principle that the economics of the restaurant industry are worse than they ought to be. But this genre of social reform take, "we must smash this business because it's doing well when others aren't", is just incredibly toxic.

TomMarius 6y ago

Because they can save my credit card for all restaurants.

JohnTHaller 6y ago

Someone put this together in NYC: https://www.eatnyc.org/ https://www.eatnyc.org/ "EatNYC.org is an updated list of restaurants that are still open for pickup and delivery in New York City*. Ordering directly ensures restaurants keep 100% of what you pay. "

crazygringo 6y ago

This article is misguided, based on a false premise. Food delivery apps are not thriving, if thriving means making big profits. GrubHub's stock price isn't much different from where it was 5 years ago. UberEats isn't expected to turn a profit for another five years as they continue to lose money on every order. There are no monopolies here taking advantage of restauranteurs. There's an entire ecosystem of food delivery apps competing with each other. The reality of the situation is that delivering meals is extremely expensive. It doesn't have meaningful economies of scale the way package delivery does. Both restaurants and customers have to pay these huge delivery fees because that's just what delivery costs. (In fact, many are still being subsidized by massive VC.) Running a restaurant is always a precarious business proposition in the first place. Adding delivery is another precarious choice -- you can massively increase revenue but only at the cost of massively decreasing profit percentage, and if you don't calculate exactly right it'll seem like a big waste-of-time wash in the end, or you'll even lose money. That's just how it works. I have tons of sympathy for restaurant owners, but just because it's hard -- not because they're being taken advantage of, because they're not. But laws that restrict the ability of food delivery apps to charge what the market will bear isn't going to solve anything. They don't have these extra profits lying around they can just moderately reduce. The inevitable result will be them dropping the restaurants that are least profitable for delivery entirely, and reducing deliverypeople so your food will take two or three times as long to deliver. That's just Econ 101 -- if your revenue is reduced to where there's no path to profit, you need to cut quality. End of story.

blancNoir 6y ago
from the article "While neither Uber nor Grubhub turns a profit delivering food, they are nonetheless venture-backed and raking in mountains of cash: Grubhub reported revenue of $362.98 million during the first quarter this year, a year-over-year increase of more than 12%. Uber Eats’ revenue surged 53% from the same quarter a year ago, to $819 million. Restaurants, meanwhile, are facing utter devastation. The restaurant industry lost 5.5 million jobs nationwide in April, according to the Bureau of Labor Statistics. In L.A., the overall unemployment rate now stands at 24%, an increase from 4.7% in February." edit: additional context from article

Udik 6y ago

It feels a bit like reading about the industrial revolution, when masses of destitute workers were exploited by rich factory owners. Their salary was just barely enough to keep them alive and their work perfectly fungible: for any worker that decided the deal wasn't good enough there was a queue of others in wait. Eventually the workers improved their condition through massive and coordinated strikes that entirely blocked the production and prevented anyone to replace them until their requests were met. (On the other hand the fact that delivery apps are funded by VC money and don't turn profits either sounds even more ominous: does it mean that consumer spending is fuelled by debt and still not producing profit for anyone involved?)

say_it_as_it_is 6y ago

Restaurants without their own delivery service would have no business at all if it weren't for delivery services. I see no ethical issue here. A formerly prestigious newspaper is arguing against a new business benefitting in a strained supply chain. It's a weak attempt to gain status.

thrill 6y ago

Will restaurants fail slower or faster without food delivery services?

chvid 6y ago

The truth is that in the current situation most restaurants should not be in business. And the fees charged by delivery services are artificially low due to the high level of competition and all the investor money.

dathinab 6y ago
> And the fees charged by delivery services are artificially low due to the high level of competition and all the investor money. And them forcing part of their costs onto the restaurants. ;=) Still stopping operating a restaurant doesn't stop all costs, so operating it on a small flame and doing a bit of not very profitable delivery jobs can still be better then not operating at all.

xnx 6y ago

I wish there was more discussion around how to get these delivery apps to compete with each other on price. Are there any meta-delivery apps where you can easily compare prices?

MattGaiser 6y ago
They compete for customers on price. Until I got DashPass, I routinely checked all three for lunch info.

6gvONxR4sf7o 6y ago

I don't understand why it's a commission price structure. Take uber eats. You buy some price of food, then there's an uber eats service fee on top of that, and then a delivery fee (and you're supposed to tip the driver in addition to the service fee and delivery fee?). It seems like that price structure already clearly splits the restaurant's and uber's (and the driver's) portions, but I guess uber takes a commission in addition to that? Like, why fees and commissions instead of just fees? Consumers would understand that delivery is an added cost, so you just add the cost.

dehrmann 6y ago
They definitely don't explain it well: https://help.uber.com/ubereats/article/how-do-fees-work-on-uber-eats?nodeId=65d229e2-a2b4-4fa0-b10f-b36c9546cf55 https://help.uber.com/ubereats/article/how-do-fees-work-on-u...

dvduval 6y ago

Google ranks apps higher than restaurants. It would not be all that difficult to roll out a more open source technology that all restaurants could use. Then Google can rank the restaurants more and the apps less. or perhaps a search engine like being might move into this space. This would be a savings for the restaurants and the consumers.

yalogin 6y ago

The delivery business is in a bubble right now, deservedly so. But it's going to come back to earth once we have a vaccine. I don't think the price model is sustainable at all. They are trying to get into the middle of an already tight equation between the service industry and the customers. To me the main issue is for restaurants the margins are thin and the price/profit equation is very different for every restaurant. So applying the same business/pricing model for all restaurants won't work. The only sustainable way is to let customers pay for the delivery. Right now the apps are forcing the restaurants to pay up in some ways by service shaming them to sign up and offer delivery. Of course profitable restaurants will become do more business and the rest will lost more money. Not a good thing for the over all ecosystem. I guess this is when the concept of kitchens set up just for delivery will take off.

AzzieElbab 6y ago

The restaurants are squeezed by landlords,and high labor costs. What does this have to do with food delivery?

bergstromm466 6y ago

"Uber has nothing to do with helping people get rides in towns. Uber is a business plan. It’s a platform monopoly getting ready to leverage that monopoly into another vertical whether it be delivery, drones or logistics. The prosperity of all the people who used to be in the cabbie industry ends up sacrificed to the growth of this company. Corporations are like these obese people, they suck money out of our economy and store it in the fat of share price. That’s not business, that’s value extraction. They take all the chips off the board." https://www.theguardian.com/technology/2016/feb/12/digital-capitalism-douglas-rushkoff https://www.theguardian.com/technology/2016/feb/12/digital-c...

excalibur 6y ago

I don't feel like their fees should be capped necessarily, but I DO feel like they should be required to charge them all to customers directly rather than bleeding small businesses dry. Let informed consumers decide how much app overhead they're willing to put up with.

tehlike 6y ago

I use chownow. It has a fixed fee (based on pricing page on their site). Made me feel good. Probably true, too, because I checked the menu of one of my favorite restaurants, doordash prices were much higher.

projektfu 6y ago

Diversity loss is a problem. A too-strong middleman will eventually cause roll up in the field to businesses with enough size to have bargaining power.

yoleg 6y ago

The problem is that these delivery apps are trying to scale a business on top of a product that already has thin margins. They're trying to squeeze in between the restaurants and consumer and both sizes is feeling the squish. IMO the relationship between delivery apps and restaurants could be a bit more mutually beneficial. How this could potentially work - 1. Restaurants modernize their web presence with the help of the app company. They make it easy for consumers to order online through their website, or some sort of aggregation app, but the restaurants maintain their brand, and process payments. 2. Restaurants put out a bid to deliver an order through the delivery app and someone in the area agrees to pick it up 3. The delivery person receives the fee and perhaps a few bucks as tips upon delivery The app company would make money through long term contracts (partnerships) with the restaurants to service their delivery needs. These types of long term partnerships could be much more valuable to both the app (tech company) and the restaurant - the app company could help the restaurant modernize and maintain their online presence which is much more valuable than pinching them with fees. Obviously this is more challenging for both sides since it requires buy-in, long-term collaboration, etc but the other option is to not adapt and continue fighting delivery apps for tight margins. I feel like Yelp would be in a perfect place to do this if they weren't too busy pinching restaurant owners for ad money.

deleted 6y ago

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okareaman 6y ago

Title should say "Our restaurants who depend on sitdown dine in experience for profitability are failing"

luord 6y ago

This doesn't even need a moralistic judgment: if the application owners don't change their practices, most restaurants are going to go under and then they'll lose revenue anyway. So this is not only abuse of the restaurants, it's economical self-injury. Possibly self-destructive entirely.

chiph 6y ago

At work we use Foodsby, and it's been difficult watching their offerings drop week over week. I think they have solved some of the major inefficiencies in the Grubhub/Doordash models [0], and I hope they make it. [0] Foodsby delivers to company offices, not individuals. They coordinate orders with the restaurants, so that they aren't delivering single meals, and the restaurants can put a cap on the number of orders so they're not overwhelmed. The restaurant does the delivery so they control that cost (no hidden charges to them)

neonate 6y ago

https://archive.md/hKM5i https://archive.md/hKM5i

jariel 6y ago

They pose it like a moral question that is wrong. Restaurants left with ugly payments to 'delivery apps' sounds bad, but most of the reason is delivery is expensive! The bulk of the cost here is not some magical money-making software, it's the time, effort, gas, wear and tear, energy of someone delivering. Most delivery app companies are losing money anyhow. A better approach might be to strongly deregulate delivery and taxi services. Let anyone do it, have some industry-standard practices (i.e. you have to register, certain vehicles for certain things, some minimum pricing laws etc.) and then let's see how that works. Restaurants can literally order a regular taxi for food delivery and such general taxis could be used for a lot of things.

xtiansimon 6y ago

I’m shocked people will pay the surcharges for delivery. Not everything travels well. But people do, and don’t seem to care.

cmurf 6y ago

The internet needs to be destroyed.