
Our restaurants are failing. Why should food delivery apps thrive? - aloukissas
https://www.latimes.com/food/story/2020-05-16/food-delivery-app-commissions-ubereats-grubhub-doordash
======
orev
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.

~~~
ramraj07
Apps are doing well because this is another one of those protective moat ideas
where once they have established themselves they have no need to innovate
further. Sites like grubhub have no physical reason to gouge 20-30% commission
on top of charging both sides delivery fees (further on top of guilting
customers into tipping more). In the end it's an app serving a few web pages
and APIs (these filthy companies don't even deal with the credit card mess).

But because they have an insurmountable most (not earned via any sheer
technical breakthrough, just through cunningness and being ruthless) they
don't need to care if they have too many engineers,whether these engineers are
any good, or if their nodejs ec2 instances serve 100 queries a minute. So they
just keep it like that.

Companies like IBM needed decades to get into such a rot, modern VC funding
and cloud computing have just accelerated this phenomenon.

~~~
nerfhammer
But aren't there like 2 dozen competing apps trying to do this? Shouldn't that
drive prices down? Or is actually legitimately expensive to provide this
service?

We've been told that evil VCs subsidize service to run at below cost to drive
competitors out of business. Uber is often accused of this. Why aren't we
seeing that phenomenon here? And Uber is literally one of the competitors.

~~~
Jommi
I would not be surprised if the US market had some level of collusion going
on. It just doesn't make sense to me that they aren't currently competing on
price.

There are some other possible reasons tho, like food actually not being as
"commodity"-like as we think it is (like rides are)

~~~
nerfhammer
That would surprise me. It's unlikely a dozen apps would be able to coordinate
like that. The thing about cartels is the first defector can cut prices and
capture marketshare, which is what we're supposed to believe evil VC funded
cutthroat startups are inclined to do. Raising prices to increase profit but
reduce revenue growth is the exact opposite of that.

The other hypothesis is that delivery is simply expensive. The driver has to
drive to the pickup place, find parking, stand in line potentially for awhile,
drive to the delivery, park again, walk to the delivery location to drop off
the item. Most of those things an ordinary uber fare would not have to deal
with.

~~~
heavyset_go
This is naive. Cartels are a market failure, and your argument against cartels
existing is that market forces in an ideal world would prevent them.

Reminder that Adobe, Apple, Google, Intel, Intuit, Pixar, Lucasfilm and eBay
all colluded to keep engineer compensation below market value[1].

[1] [https://en.wikipedia.org/wiki/High-
Tech_Employee_Antitrust_L...](https://en.wikipedia.org/wiki/High-
Tech_Employee_Antitrust_Litigation)

~~~
Jommi
Well that's also just a naive view. Industrial Economics takes a deeper look
at this for example.

------
crazygringo
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
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

~~~
crazygringo
Right, but "raking in mountains of cash" is skipping the "in the face of even
larger mountains of costs". That's why this article feels deceitful -- using
words like "raking in" and "surging" as if revenue before costs means anything
at all.

If you lose money on every order, you're not thriving in any sense. You're
_hoping_ to thrive some day in the future. The fact that they're venture-
backed is irrelevant. Restaurants are backed by investors and bank loans too.

~~~
matthewdgreen
Most growth-oriented tech companies are “unprofitable” in the sense they
invest their revenues into growth rather than dividends. This does not mean
their core products necessarily make less money than it costs to operate them,
without those massive growth investments. The real question people are asking
here is: what necessary costs do the food delivery apps actually incur in
operating their business that causes them to have such high commissions and
fees and still lose money per transaction?

~~~
crazygringo
> _This does not mean their core products necessarily make less money than it
> costs to operate them_

Generally, yes it does. The up-front costs for building and marketing a
platform so that it ultimately becomes profitable are enormous. In today's
climate, the idea that a company could just "choose" to be profitable now and
in the long-term rather than grow is disingenuous: over the following few
years, other companies will eat their lunch and they'll fold.

But with delivery apps, answering your question is not hard. First, paying
delivery people is _expensive_. Crazy expensive. That's obviously the main
variable cost. Then there are huge fixed costs with creating and maintaining a
multi-platform app, customer service to deal with late/missing/wrong orders,
sales and support for restaurants, marketing, and all the normal business
stuff.

That's your answer. Food delivery apps aren't spending half their revenue on
frivolous side projects like space rockets or cities of the future, or
questionably/fraudulently siphoning revenue to a founder. They're just trying
to operate as normal businesses, and there's zero evidence to the contrary.

~~~
Jommi
I think you're slightly misrepresenting what the parent comment is saying. You
both are right.

Food delivery can be profitable, and they could switch to being profitable if
they wanted to. That's what the parent company is saying - they chose not to
as they want to operate on the hypothesis that investing in growth as early as
possible will put them on an expontential trend in a network effect -based
business. Which is true.

However, what you say is right as well. If they switched to a completely
profit skimming model, their competitor would keep them in check very fast.

However. what data that I've seen in ridehailing shows, is that if you invest
in growth and achieve the 1 or 2 position in volume, you can grow and reap
profits simultaneously - at least for some time. It's a massive juggling
effort.

------
kevindong
> 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.

~~~
dathinab
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.

~~~
ramraj07
They seem to be charging enough to pay delivery drivers on top of their
outrageous commission so I don't think that's the real expense. Not like they
pay for their insurance or even social security!

~~~
Jommi
Why would they pay for social security of a contractor?

------
haltingproblem
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
Restaurants are a lot of things. But lazy is not one of them. Have you ever
worked at a restaurant?

~~~
haltingproblem
You are right, lazy is the wrong word, irrational perhaps?

I have worked in commercial kitchens and have plenty of friends who run
restaurants and have spend time in their operations. They regularly complain
about the 30%+ they fork over to grubless. 30% is an insane fraction in a
business that barely makes an accounting profit!

In established restaurants, a significant fraction of the orders come from
repeat customers. Moving these repeat customers to a 5% friction channel from
a 30% channel can be a game changer.

Now when I walk past restaurants, I see banners imploring folks to order from
their website. I guess, one silver lining from this pandemic.

~~~
KirinDave
The challenge is how they would do that. It requires expertise which itself
costs money and time to gain, and it's an ongoing maintenance cost for a small
restaurant that may have extremely seasonal revenue.

It's not actually clear to me that every restaurant acting individually can
actually recover that delivery service fee. There's no economy of scale for
them to exploit.

------
mhh__
> 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)

~~~
xenocyon
> prevalence indicates the customers appreciate their presence

Focusing solely on consumers ignores negative externalities. There are many
situations in which cost benefits from such externalities (slavery, pollution,
human rights abuses, animal mistreatment) can lead to a favorable marketplace
position vs competitors who do not exploit such externalities.

What is more, many of these exploits (slavery, pollution, human rights abuses,
animal mistreatment) were or are legal at the time such exploitation occurred.
Therefore using legality as sole criterion of propriety is insufficient. A
moralistic/ethical take on business is, far from a negative thing, highly
necessary.

~~~
kgantchev
I don't think the poster used legality as the moral compass, rather, consumer
choice was the moral compass.

If consumers lack the moral conciousness on their day to day transactions,
then how can we expect them to make the right moral choices when they vote?

~~~
xenocyon
I addressed consumer choice in my first paragraph. Let me expand on that:

There have in fact been successful consumer-led movements, but the most
successful of these concern cases where the consumers also happened to be the
same people being exploited (colonial India's rejection of dumped British
textiles, the Montgomery bus boycott, the Boston tea party, etc).

Cases where consumers have acted en masse on behalf of _another_ exploited
class are a lot fewer and weaker. To some extent, one may point to the current
growth of organic animal products as an example of this, but even in this
case, this has been boosted by consumers seeing these choices (in some cases
rightly, in some wrongly) as also healthier for human end consumers besides
the question of animal cruelty.

History's guide suggests that while morally-minded consumers can and should
vote with their wallets, such personal virtuous choices are largely useless
without a larger movement to effect change.

~~~
kgantchev
If consumers are not morally-minded enough to act on the behalf of another
exploited class, then how can you expect them to vote on behalf of the
exploited class?

And if history suggests that people's virtuous choices are largely useless,
then how is their voting going to be any better?

------
aianus
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.

------
jqcoffey
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
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
> 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.

------
saadalem
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.

------
SpicyLemonZest
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.

------
softwaredoug
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

~~~
wdb
Sounds interesting, good examples of this? Curious, if it's available in
London (UK)

~~~
BukhariH
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-
editi...](https://foodscene.deliveroo.co.uk/promotions/deliveroo-
editions.html)

------
yoleg
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.

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

~~~
dmix
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
> 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
Wake me up when that fantasy world becomes reality. In the mean time I’d
rather not have to give Uber money.

------
aloukissas
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!

~~~
selectodude
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.

------
6gvONxR4sf7o
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
They definitely don't explain it well:
[https://help.uber.com/ubereats/article/how-do-fees-work-
on-u...](https://help.uber.com/ubereats/article/how-do-fees-work-on-uber-
eats?nodeId=65d229e2-a2b4-4fa0-b10f-b36c9546cf55)

------
vegannet
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.

------
libertine
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
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.

------
luord
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.

------
say_it_as_it_is
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.

------
dathinab
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?

~~~
MattGaiser
> 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
> 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.

------
Udik
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?)

------
jariel
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.

------
sebringj
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.

------
softwaredoug
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.

------
ganstyles
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
DoorDash probably offers the company a discount on everything as well for the
volume.

------
tehlike
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.

------
chiph
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)

------
chvid
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
> 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.

------
ackbar03
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
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
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.

------
dvduval
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.

------
quotemstr
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?

------
JohnTHaller
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. "

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

------
excalibur
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.

------
sturza
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.

------
remote_phone
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.

~~~
derrekl
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
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.

------
xnx
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
They compete for customers on price. Until I got DashPass, I routinely checked
all three for lunch info.

------
naveen99
It’s easier to prune the leaves than to cut out middle branches.

------
projektfu
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.

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

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

------
neonate
[https://archive.md/hKM5i](https://archive.md/hKM5i)

------
yalogin
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.

------
thrill
Will restaurants fail slower or faster without food delivery services?

------
TomMarius
Because they can save my credit card for all restaurants.

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

------
cmurf
The internet needs to be destroyed.

------
scarface74
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.

------
lwb
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?

------
JCharante
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.

~~~
vinay427
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.

~~~
dathinab
I have seen similar business model in Germany.

Basically small shops doing 40-80% of their revenue by delivery but limit
delivery to places reachable shortly with a scooter and min amounts of 20€ or
so.

This shops then have their own delivery person working part time for them and
when they have many orders or orders at times where the delivery person
doesn't work they order an external delivery person (and then often make very
little profit with that delivery).

The only difference is that you pay the company and they pay the delivery
personal.

Orders are mostly done per phone. And payment mostly done in cash. Through
often the delivery personal has a mobile card reader, too.

Through we also have US stile apps, with similar problems (but better labor
laws, so at least wrt. employee abuse they tend to be slightly less terrible).

(Ref: Germany, Berlin)

