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When I pay for food in a restaurant, what I'm paying goes into: - the cost of food itself - chef and kitchen staff salaries - waiter salary/tip - profit mar

When I pay for food in a restaurant, what I'm paying goes into: - the cost of food itself - chef and kitchen staff salaries - waiter salary/tip - profit margin - rent I'm assuming that the waiter salary/tip will cover delivery costs... so, the cost for the consumer will mostly remain the same. The cost saving will come from the fact that if the restaurant operates just the kitchen, they don't need excellent location. A part of this saving can be claimed by the company that makes the app. The rent difference between where you can have a restaurant vs where you can have just a kitchen in the same general area is huge in most places... so I think the business opportunity is real. Now, the companies are competing to grab market share, and most restaurants still have the same restaurant kitchen, so we haven't seen those changes, but I think it's just a matter of time.

bluGill 6y ago
Having been in the business you way overestimate how much rent actually is. Payment for the kitchen equipment inside is more in many cases. Saving even 1000 a month is not that much. You will spend more than that on your delivery vehicles! (though you can outsource that to the drivers in some cases)
- 01100011 6y ago
  Without having to worry about a store front, you could consolidate kitchen equipment between businesses. Say you use your ovens in the morning to bake bread, and at night to cook meat. Sure, there are limits to this, but there have to be some benefits from centralization. Another option for cost savings is on the fly demand pricing of meals. Through some process of ingredient availability, customer analytics, registered interest(voting or something), etc, the centralized kitchen could decide to make a particular dish at a greater volume/lower cost which could then be passed on to consumers. i.e. Tuesday is 'spaghetti night' and you can feed your family for 50% less than other options. I believe this may be how many cafeterias operate. Cafeterias are a good analogy because you have an environment already saving on wait staff and gratuities. This might seem odd to a typical HN reader who spends $300+ on sushi dinners in SF, but this sort of thing could appeal to many people with less income and without the time to prepare meals themselves. It probably won't work until we can automate the delivery process, but I think at some point the economics will work out in certain markets.
  - pwdisswordfish0 6y ago
    > Say you use your ovens in the morning to bake bread, and at night to cook meat. There's nothing inherent to the delivery app business that makes this possible. This has always been possible, but it doesn't really happen on any significant scale.
  - mattcwilson 6y ago
    Ghost kitchens are a real thing, but it’s still an open question how much value there is in building a brand relationship woth a customer from a dine-in experience. Cutting out the front-of-house, the ambiance, and the wait staff kinda also cuts out a lot of the personality and connection. Scrolling through a bunch of generic “chicken fettucini alfredo” options on an infinite grid is kinda soulless, and doesn’t give me a sense of what I’m getting for the extra money between the $14 and the $26 versions.
  - crooked-v 6y ago
    > Without having to worry about a store front, you could consolidate kitchen equipment between businesses. This is happening right now: see 'ghost kitchens' on delivery apps, with three or four different 'restaurants' that are actually operating out of the same location.
  - mattkrause 6y ago
    The deck ovens used to bake bread would be challenging to use for other types of food. You could perhaps bake some bread in a combi oven, but it’s going to be much slower.
asciident 6y ago
Personally I don't enjoy the dine-in experience that much. It takes an additional hour of time for long meals, mostly just sitting browsing through my phone, or 15-20 minutes for short meals, again browsing through my phone. I don't like the tipping system, feeling pressured to order drinks, or the whole credit card payment ritual. I hope you're right and that we see delivery-focused restaurants in low cost areas with sustainable packaging, so we can enjoy higher-end food at home besides pizza and chinese.
- chrisseaton 6y ago
  > or the whole credit card payment ritual Huh?
  - falcolas 6y ago
    Probably: Wait for the check. Get the check, attach a credit card to it. Wait for the wait staff to return and get it. Wait for the wait staff to run the card. Wait for the wait staff to return with your card. Do some math for a tip, sign the receipt. It’s also mildly concerning to leave your bare credit card (with pretty much everything they need to commit fraud with it) with a complete stranger.
    - chrisseaton 6y ago
      Do you not have contactless, or chip-and-pin? The waiter or waitress turns up with the bill, I glance at it, I tap my card, or if it's a larger sum insert it and type in my PIN. Worst case scenario it's 30s. I'm pretty sure that your agreement with your card company includes that you must not let anyone else touch the card, let alone take it away.
      - steveklabnik 6y ago
        It's still very new here, and most places just don't do it the way that you all do elsewhere in the world. I think I got my first one last year? And I bank with one of the biggest banks. Even then, we have just the chip, no PIN. (There is a PIN for like, ATM transactions, but if I go to Europe, I still have to sign, even if they do the contactless thing. Folks (reasonably) almost never expect it, and have to go find a pen...)
jessaustin 6y ago
I'm assuming that the waiter salary/tip will cover delivery costs... "Will" is doing double duty in that sentence. Maybe with some futuristic delivery tech (Rainbows End-style pneumatic cannons?) that would be possible. Today, delivery costs are covered by VCs and by paying drivers less than minimum wage. (58% of California voters approve!)
- Stratoscope 6y ago
  > some futuristic delivery tech (Rainbows End-style pneumatic cannons?) You are closer to the truth than you may realize. It's a little-known fact that there once was an underground tunnel that delivered piping hot burritos from the SF Bay Area to hungry customers in New Jersey. Behold the Alameda-Weehawken Burrito Tunnel: https://idlewords.com/2007/04/the_alameda_weehawken_burrito_tunnel.htm https://idlewords.com/2007/04/the_alameda_weehawken_burrito_...
roenxi 6y ago
To some degree yes, but the market that you are talking about is going to be dominated by repeat diners. It isn't people going out to show off for example - it is people who want want food. The competition mentality in hospitality businesses is cut-throat and deeply ingrained. If they saw a profit margin, they would attempt to push the delivery service out of the market. If I'm a regular at Toby's Popular Take Away, it seems unlikely that Toby would sit quietly while Uber made money. He would try to muscle in on the distribution too. It is unlikely that the market share they are fighting for is defensible. A lot of people aren't fighting for it at the moment because there is no profit to be found. The app part might get commoditised or done in a community manner or by some random dude as a side project, it wouldn't be too hard to get local businesses on side with an idea like that. It doesn't need to be a big company.
falcolas 6y ago
> I'm assuming that the waiter salary/tip will cover delivery costs... Unlikely. At least, not a non-exploitative delivery cost. Beyond the employee cost and mileage, there’s the fact that (in the US) delivery drivers are also tipped. They’re also probably more expensive for a company to insure.
- cma 6y ago
  If consumers don't drive to get their food, over time their insurance should come down. It should come down more since a restaurant delivery driver can make multiple stops on one optimized route vs a customer just going to the restaurant and back, but once you factor in how much more dangerous scooter delivery is vs car maybe this doesn't hold up.
leetcrew 6y ago
> Now, the companies are competing to grab market share, and most restaurants still have the same restaurant kitchen, so we haven't seen those changes, but I think it's just a matter of time. I wouldn't be so sure of that. delivery is inherently less profitable for the restaurant. a single employee can serve many more dine-in and especially take-out customers in an hour than they can as a delivery driver. at the same time, you are throwing maintenance and insurance for a vehicle into the equation. you can push a lot of this cost onto the driver, but not all of it. I also doubt that the location savings are that substantial. you don't need to lease the prime real estate that everyone walks by, but you still need to be within a 15-20 minute drive of your customer base. any property within 20 minutes of a dense area tends to be expensive to rent. there are already a few take-out/delivery only places in my area. the only ones that seem to be doing well have pretty bad food for the price.
- furyofantares 6y ago
  > at the same time, you are throwing maintenance and insurance for a vehicle into the equation. We're comparing to the customer driving to the restaurant, right? So this was always a cost the customer was paying and it's just moved into the transaction
  - mattcwilson 6y ago
    If by “cost” you mean car mileage, sure. But in a store pickup situation, there is no additional driver to pay, special packaging for transportation of the food, liability for safe transport of the food, transportation logistics operating costs, etc.
  - leetcrew 6y ago
    right, but the fundamental problem is that customers aren't willing to pay the full cost of delivery. delivery places don't just compete with other delivery places on price; they also have to compete with takeout prices. people don't mentally add the cost of gas, vehicle depreciation, and their own time onto takeout prices. plus a pretty common "workflow" is for people to pickup food on their way home from work, which has a negligible cost for them even if they rigorously price it out.
jvm_ 6y ago
'Ghost kitchen': How a plain storefront hides more than a dozen delivery restaurants Business model is gaining popularity as food delivery apps gain a foothold in Canada https://www.cbc.ca/news/canada/calgary/ghost-kitchen-calgary-1.4989791 https://www.cbc.ca/news/canada/calgary/ghost-kitchen-calgary...
romanoderoma 6y ago
Why order out to some (probably unsafe) dark kitchen when I have a kitchen in my house? In this covid times when I don't want to cook I simply go downstairs and order a take out from one of the tens of restaurants around, where I can get the same quality of a dine in at half the price while also supporting local businesses that are suffering. Food delivery is overrated in my opinion and also unfair to workers. The only reason I found to order from a delivery company is to skip the waiting line at McDonald's those rare times I feel like having junk food on a Sunday night while watching a movie and don't move from the couch. But if I want a good pasta I simply order to the guy at the restaurant below my home from the window, don't even need to phone them, and they give me the food in a regular dish, not some lousy plastic wrap that I just return when I have time.
perlgeek 6y ago
I don't know if it's everywhere, but here in Germany the profit margins on the food tend to pretty low, and the restaurants try to make up for that by selling drinks pretty expensively. So for takeout, I just order food, and often just drink tap water. I also assume I'm not the only one doing that, so for the restaurants, a significant part of their profit dries up. They'll have to adjust to that somehow, most likely by increasing food prices, or by cutting into the extra profit from rent differences that you have laid out. If they do exist, I'm not yet convinced.
- Nbox9 6y ago
  In the US ordering (free) water is common for casual restaurants. There is a lot of profit to be made from selling alcoholic drinks, but that’s not in everyone’s business plan.
duongnt 6y ago
You also need to spend time and money getting to and from the restaurant. If you use Uber both ways it’s already more than double the cost of getting the food to you.

bluGill 6y ago

Having been in the business you way overestimate how much rent actually is. Payment for the kitchen equipment inside is more in many cases. Saving even 1000 a month is not that much. You will spend more than that on your delivery vehicles! (though you can outsource that to the drivers in some cases)

01100011 6y ago
Without having to worry about a store front, you could consolidate kitchen equipment between businesses. Say you use your ovens in the morning to bake bread, and at night to cook meat. Sure, there are limits to this, but there have to be some benefits from centralization. Another option for cost savings is on the fly demand pricing of meals. Through some process of ingredient availability, customer analytics, registered interest(voting or something), etc, the centralized kitchen could decide to make a particular dish at a greater volume/lower cost which could then be passed on to consumers. i.e. Tuesday is 'spaghetti night' and you can feed your family for 50% less than other options. I believe this may be how many cafeterias operate. Cafeterias are a good analogy because you have an environment already saving on wait staff and gratuities. This might seem odd to a typical HN reader who spends $300+ on sushi dinners in SF, but this sort of thing could appeal to many people with less income and without the time to prepare meals themselves. It probably won't work until we can automate the delivery process, but I think at some point the economics will work out in certain markets.
- pwdisswordfish0 6y ago
  > Say you use your ovens in the morning to bake bread, and at night to cook meat. There's nothing inherent to the delivery app business that makes this possible. This has always been possible, but it doesn't really happen on any significant scale.
- mattcwilson 6y ago
  Ghost kitchens are a real thing, but it’s still an open question how much value there is in building a brand relationship woth a customer from a dine-in experience. Cutting out the front-of-house, the ambiance, and the wait staff kinda also cuts out a lot of the personality and connection. Scrolling through a bunch of generic “chicken fettucini alfredo” options on an infinite grid is kinda soulless, and doesn’t give me a sense of what I’m getting for the extra money between the $14 and the $26 versions.
- crooked-v 6y ago
  > Without having to worry about a store front, you could consolidate kitchen equipment between businesses. This is happening right now: see 'ghost kitchens' on delivery apps, with three or four different 'restaurants' that are actually operating out of the same location.
- mattkrause 6y ago
  The deck ovens used to bake bread would be challenging to use for other types of food. You could perhaps bake some bread in a combi oven, but it’s going to be much slower.

asciident 6y ago

Personally I don't enjoy the dine-in experience that much. It takes an additional hour of time for long meals, mostly just sitting browsing through my phone, or 15-20 minutes for short meals, again browsing through my phone. I don't like the tipping system, feeling pressured to order drinks, or the whole credit card payment ritual. I hope you're right and that we see delivery-focused restaurants in low cost areas with sustainable packaging, so we can enjoy higher-end food at home besides pizza and chinese.

chrisseaton 6y ago
> or the whole credit card payment ritual Huh?
- falcolas 6y ago
  Probably: Wait for the check. Get the check, attach a credit card to it. Wait for the wait staff to return and get it. Wait for the wait staff to run the card. Wait for the wait staff to return with your card. Do some math for a tip, sign the receipt. It’s also mildly concerning to leave your bare credit card (with pretty much everything they need to commit fraud with it) with a complete stranger.
  - chrisseaton 6y ago
    Do you not have contactless, or chip-and-pin? The waiter or waitress turns up with the bill, I glance at it, I tap my card, or if it's a larger sum insert it and type in my PIN. Worst case scenario it's 30s. I'm pretty sure that your agreement with your card company includes that you must not let anyone else touch the card, let alone take it away.
    - steveklabnik 6y ago
      It's still very new here, and most places just don't do it the way that you all do elsewhere in the world. I think I got my first one last year? And I bank with one of the biggest banks. Even then, we have just the chip, no PIN. (There is a PIN for like, ATM transactions, but if I go to Europe, I still have to sign, even if they do the contactless thing. Folks (reasonably) almost never expect it, and have to go find a pen...)

jessaustin 6y ago

I'm assuming that the waiter salary/tip will cover delivery costs... "Will" is doing double duty in that sentence. Maybe with some futuristic delivery tech (Rainbows End-style pneumatic cannons?) that would be possible. Today, delivery costs are covered by VCs and by paying drivers less than minimum wage. (58% of California voters approve!)

Stratoscope 6y ago
> some futuristic delivery tech (Rainbows End-style pneumatic cannons?) You are closer to the truth than you may realize. It's a little-known fact that there once was an underground tunnel that delivered piping hot burritos from the SF Bay Area to hungry customers in New Jersey. Behold the Alameda-Weehawken Burrito Tunnel: https://idlewords.com/2007/04/the_alameda_weehawken_burrito_tunnel.htm https://idlewords.com/2007/04/the_alameda_weehawken_burrito_...

roenxi 6y ago

To some degree yes, but the market that you are talking about is going to be dominated by repeat diners. It isn't people going out to show off for example - it is people who want want food. The competition mentality in hospitality businesses is cut-throat and deeply ingrained. If they saw a profit margin, they would attempt to push the delivery service out of the market. If I'm a regular at Toby's Popular Take Away, it seems unlikely that Toby would sit quietly while Uber made money. He would try to muscle in on the distribution too. It is unlikely that the market share they are fighting for is defensible. A lot of people aren't fighting for it at the moment because there is no profit to be found. The app part might get commoditised or done in a community manner or by some random dude as a side project, it wouldn't be too hard to get local businesses on side with an idea like that. It doesn't need to be a big company.

falcolas 6y ago

> I'm assuming that the waiter salary/tip will cover delivery costs... Unlikely. At least, not a non-exploitative delivery cost. Beyond the employee cost and mileage, there’s the fact that (in the US) delivery drivers are also tipped. They’re also probably more expensive for a company to insure.

cma 6y ago
If consumers don't drive to get their food, over time their insurance should come down. It should come down more since a restaurant delivery driver can make multiple stops on one optimized route vs a customer just going to the restaurant and back, but once you factor in how much more dangerous scooter delivery is vs car maybe this doesn't hold up.

leetcrew 6y ago

> Now, the companies are competing to grab market share, and most restaurants still have the same restaurant kitchen, so we haven't seen those changes, but I think it's just a matter of time. I wouldn't be so sure of that. delivery is inherently less profitable for the restaurant. a single employee can serve many more dine-in and especially take-out customers in an hour than they can as a delivery driver. at the same time, you are throwing maintenance and insurance for a vehicle into the equation. you can push a lot of this cost onto the driver, but not all of it. I also doubt that the location savings are that substantial. you don't need to lease the prime real estate that everyone walks by, but you still need to be within a 15-20 minute drive of your customer base. any property within 20 minutes of a dense area tends to be expensive to rent. there are already a few take-out/delivery only places in my area. the only ones that seem to be doing well have pretty bad food for the price.

furyofantares 6y ago
> at the same time, you are throwing maintenance and insurance for a vehicle into the equation. We're comparing to the customer driving to the restaurant, right? So this was always a cost the customer was paying and it's just moved into the transaction
- mattcwilson 6y ago
  If by “cost” you mean car mileage, sure. But in a store pickup situation, there is no additional driver to pay, special packaging for transportation of the food, liability for safe transport of the food, transportation logistics operating costs, etc.
- leetcrew 6y ago
  right, but the fundamental problem is that customers aren't willing to pay the full cost of delivery. delivery places don't just compete with other delivery places on price; they also have to compete with takeout prices. people don't mentally add the cost of gas, vehicle depreciation, and their own time onto takeout prices. plus a pretty common "workflow" is for people to pickup food on their way home from work, which has a negligible cost for them even if they rigorously price it out.

jvm_ 6y ago

'Ghost kitchen': How a plain storefront hides more than a dozen delivery restaurants Business model is gaining popularity as food delivery apps gain a foothold in Canada https://www.cbc.ca/news/canada/calgary/ghost-kitchen-calgary-1.4989791 https://www.cbc.ca/news/canada/calgary/ghost-kitchen-calgary...

romanoderoma 6y ago

Why order out to some (probably unsafe) dark kitchen when I have a kitchen in my house? In this covid times when I don't want to cook I simply go downstairs and order a take out from one of the tens of restaurants around, where I can get the same quality of a dine in at half the price while also supporting local businesses that are suffering. Food delivery is overrated in my opinion and also unfair to workers. The only reason I found to order from a delivery company is to skip the waiting line at McDonald's those rare times I feel like having junk food on a Sunday night while watching a movie and don't move from the couch. But if I want a good pasta I simply order to the guy at the restaurant below my home from the window, don't even need to phone them, and they give me the food in a regular dish, not some lousy plastic wrap that I just return when I have time.

perlgeek 6y ago

I don't know if it's everywhere, but here in Germany the profit margins on the food tend to pretty low, and the restaurants try to make up for that by selling drinks pretty expensively. So for takeout, I just order food, and often just drink tap water. I also assume I'm not the only one doing that, so for the restaurants, a significant part of their profit dries up. They'll have to adjust to that somehow, most likely by increasing food prices, or by cutting into the extra profit from rent differences that you have laid out. If they do exist, I'm not yet convinced.

Nbox9 6y ago
In the US ordering (free) water is common for casual restaurants. There is a lot of profit to be made from selling alcoholic drinks, but that’s not in everyone’s business plan.

duongnt 6y ago

You also need to spend time and money getting to and from the restaurant. If you use Uber both ways it’s already more than double the cost of getting the food to you.