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Sometimes middlemen serve a useful purpose. For example, I like grocery stores because they deal with farmers and food distribution and save me from driving ou

Sometimes middlemen serve a useful purpose. For example, I like grocery stores because they deal with farmers and food distribution and save me from driving out to source my own produce from growers. Sometimes they... might not. It's all relative the cut they demand. So here, are food delivery companies worth ~30% of cost? Yes, all sort of anecdotes are possible to drum up in this situation. Long term, across the entire food industry, can a ~30% cost be absorbed? Somebody is paying that, you or the restaurant, because it sure as heck isn't the delivery company. Will the service provided by delivery (and advertising/marketing) increase volume to offset ~30%? I don't think so, which means that because of their oh-so-useful help, means prices go up. This is needed because either customers pay more, restaurants make less, or somehow the delivery/advertising/marketing company drives more volume so they can turn around and immediately take that as their cut. If the customers don't like higher prices, they'll stop spending. If the restaurants don't make profit after this new expense, they'll shut down.

sokoloff 6y ago
> Somebody is paying that [30%], you or the restaurant The customer is. They are the only one bringing money into the system over the long-run. The customer is paying for the ingredients, the property tax, the delivery, the lights, everything. The restaurant just handles the money.
- kingaillas 6y ago
  Right, so when a middleman comes along that apparently requires a 30% cut, either the customer pays it (prices go up). Or the restaurant absorbs the cost (possibly partially). However I am under the impression that restaurants are NOT operating at a 30% profit margin, and cannot absorb this middleman cut entirely on their own. It remains to be seen if sales volume goes up enough to offset this. Otherwise the middleman cut will be paid by the customer and thus prices go up. FWIW, I don't think the middleman adds enough value to demand a 30% cut. So I personally opt out of that and order directly from a restaurant and also pick up in person. >The restaurant just handles the money. I thought they were providing the labor for the actual service/product the customer wants. Without that, there is no product for the middleman to attach to and deliver.
  - sokoloff 6y ago
    The last line was a callback to the original quote: https://www.brainyquote.com/quotes/henry_ford_122318 https://www.brainyquote.com/quotes/henry_ford_122318
- kingaillas 6y ago
  I can't edit and add to my comment... so new post. Basically what I think we're dancing around, is that perhaps the current business of model of restaurants is busted and has to change, post covid. The old model is rent a large space for indoor dining, cook/serve the food, sell high margin alcoholic drinks ;), plan for a steady stream of events/holidays (valentine's day, mother's/father's day, etc), try to locate near other office workers for a steady lunch customer base, and so on. Maybe that doesn't work as well post-covid due to work-from-home a large shift to ordering out. I mean rent alone has got to be eating restaurants alive, when they don't need as much space now. As far as middlemen and delivery, restaurants themselves are middlemen if you look at meat/produce being the actual materials and me, the hungry customer, wanting the spend cash for a product - but now eating at home. Perhaps the new restaurant future is the rent smaller work spaces, or team up with other restaurants and have a booth with shared/common space, and serve mostly with delivery in mind. There's a place like this in my local large city, with a dozen or so vendors that rotate a little bit, sharing a large common area. It was packed every time I went, in the before times... not sure how it is doing now (website says they are mostly doing delivery so I suppose it is still up and running). In which case a restaurant factors in the delivery fee/cut as an expense. Basically juggle it so part of the fee comes from not having to pay as much rent, and perhaps this delivery need is part of the new business model. Folks can still come by in person to get out of the house and save a bit, but factor in the majority of customers will order delivery. I don't actually work in this industry so I don't know what actual numbers look like, but I do listen to the Planet Money podcast and a recent episode was about a restaurant that had to close due to high rents! It ended with the former owners wanting to open a new restaurant, but only if they owned the building.
deleted 6y ago
[deleted]

sokoloff 6y ago

> Somebody is paying that [30%], you or the restaurant The customer is. They are the only one bringing money into the system over the long-run. The customer is paying for the ingredients, the property tax, the delivery, the lights, everything. The restaurant just handles the money.

kingaillas 6y ago
Right, so when a middleman comes along that apparently requires a 30% cut, either the customer pays it (prices go up). Or the restaurant absorbs the cost (possibly partially). However I am under the impression that restaurants are NOT operating at a 30% profit margin, and cannot absorb this middleman cut entirely on their own. It remains to be seen if sales volume goes up enough to offset this. Otherwise the middleman cut will be paid by the customer and thus prices go up. FWIW, I don't think the middleman adds enough value to demand a 30% cut. So I personally opt out of that and order directly from a restaurant and also pick up in person. >The restaurant just handles the money. I thought they were providing the labor for the actual service/product the customer wants. Without that, there is no product for the middleman to attach to and deliver.
- sokoloff 6y ago
  The last line was a callback to the original quote: https://www.brainyquote.com/quotes/henry_ford_122318 https://www.brainyquote.com/quotes/henry_ford_122318
kingaillas 6y ago
I can't edit and add to my comment... so new post. Basically what I think we're dancing around, is that perhaps the current business of model of restaurants is busted and has to change, post covid. The old model is rent a large space for indoor dining, cook/serve the food, sell high margin alcoholic drinks ;), plan for a steady stream of events/holidays (valentine's day, mother's/father's day, etc), try to locate near other office workers for a steady lunch customer base, and so on. Maybe that doesn't work as well post-covid due to work-from-home a large shift to ordering out. I mean rent alone has got to be eating restaurants alive, when they don't need as much space now. As far as middlemen and delivery, restaurants themselves are middlemen if you look at meat/produce being the actual materials and me, the hungry customer, wanting the spend cash for a product - but now eating at home. Perhaps the new restaurant future is the rent smaller work spaces, or team up with other restaurants and have a booth with shared/common space, and serve mostly with delivery in mind. There's a place like this in my local large city, with a dozen or so vendors that rotate a little bit, sharing a large common area. It was packed every time I went, in the before times... not sure how it is doing now (website says they are mostly doing delivery so I suppose it is still up and running). In which case a restaurant factors in the delivery fee/cut as an expense. Basically juggle it so part of the fee comes from not having to pay as much rent, and perhaps this delivery need is part of the new business model. Folks can still come by in person to get out of the house and save a bit, but factor in the majority of customers will order delivery. I don't actually work in this industry so I don't know what actual numbers look like, but I do listen to the Planet Money podcast and a recent episode was about a restaurant that had to close due to high rents! It ended with the former owners wanting to open a new restaurant, but only if they owned the building.

deleted 6y ago

[deleted]