
Restaurants rebel against delivery apps as cities crack down on fees - elorant
https://www.nbcnews.com/tech/tech-news/restaurants-rebel-against-delivery-apps-cities-crack-down-fees-n1211456
======
lordnacho
I actually looked into opening a restaurant in the London suburbs. A friend of
mine runs a chain of sushi delivery shops in central London, so I had some
advice from an insider.

It seems to not work at all with a 30% cut going to Deliveroo and those types.
I went to look at some locations to find out the rent, and I had a look at the
ingredient and staffing costs. Then I threw it all on a spreadsheet to make a
guess about the breakeven, and I checked it with my buddy.

The thing about Domino's and the sushi delivery is that they run their own
delivery network. They don't have the costs that Uber Eats or Deliveroo have
with marketing and tech. The delivery management is fairly complicated,
perhaps not in a tech way (except for Dominos, who have a big tech arm) but in
terms of marshalling a bunch of drivers to efficiently drop off food during
the evening rush, it's a fair bit of work in itself. My buddy talked more
about that than making sushi.

~~~
raverbashing
Deliveroo and Just Eat in Europe seems to have an explicit delivery fee shown
at checkout (and distance based according to each restaurant).

Not sure if they take an extra fee on top of the "pre-delivery price" or how
does it work.

~~~
save_ferris
I wonder if European policy drives that because we don’t have that kind of
transparency in the US

~~~
KoftaBob
What do you mean? I've used Doordash, UberEats, GrubHub, and others like it,
and they've all explicitly listed a "service/delivery fee" at checkout.

~~~
jaredklewis
But doordash, Uber eats etc...receive MORE than just the service delivery fee
that they charge you. These platforms separately charge the restaurant itself
a fee (rumored to usually be between 10% - 30% of the order total) for every
order.

This is the lack of transparency discussed in this thread. People would like
to know at the end of the day, how much of the order money goes to the
restaurant.

~~~
KoftaBob
Agreed. In an ideal world, whatever costs associated with delivery should be
completely borne by the customer, not the restaurant.

If the restaurant isn't the one providing the actual delivery, the service
provided provides most of the benefit to the customer, and it should be us
customers that pay for the convenience.

This reminds me of the debate around NYC banning landlords from forcing
tenants to pay brokers fees. The landlords are the ones benefitting the most
from brokers' services, and should bear the brunt of the cost.

I'm curious to see if any cities/states take a similar approach with food
delivery and prohibit delivery companies from charging the restaurants
themselves fees.

~~~
tomp
Technically UberEats etc aren’t charging the restaurants for delivery, but for
marketing - “you’ll get more orders by being on our platform” - at least
that’s how they’re selling it, and I suspect it’s true at least for some
restaurants

------
mxd3
I delivered for Pita & Sticks in 2015 when it was a new restaurant. The owner
refused to pay me my last paycheck after I quit and found another delivery
job.

Point is.. delivery drivers were treated like shit before GrubHub and Uber.
Before it was restaurant owners. Not all, but many.

Now that the deliveries are all centralized to a few companies, it’s an
opportunity to get delivery workers better wages and benefits.

~~~
softwaredoug
How much income do they make on grubhub outside the tip the customer pays?

~~~
wenc
Here's one data point

[https://news.ycombinator.com/item?id=23217005](https://news.ycombinator.com/item?id=23217005)

Other data points can be found here (take with a pinch of salt, but gets you
the right ball park) are here:

[https://www.reddit.com/r/couriersofreddit/](https://www.reddit.com/r/couriersofreddit/)

------
tomComb
There thing that really bugs me is that the net fees to the restaurant are
usually hidden from the user, so when users who care (which I admit was
probably few, until this recent wave of indignation) couldn't take this into
account.

I hope that the result of this new wave of concern is forcing the delivery
apps to display the total fees they are charging the restaurant.

~~~
sokoloff
Are you similarly annoyed that you can’t learn the rent, ingredient prices, or
wages costs?

I think that businesses have all kinds of expenses and that they’re in
business to abstract that away and offer me dish X for $Y at place P and time
T. I’m not inclined to care about their bank fees, advertising costs, health
care costs, or SEO strategy.

~~~
mehrdadn
Delivery cost is different in that you normally avoid it as a customer if you
go in person. So it's not actually abstracted away from you. You can't avoid
their rent, wages, etc.

~~~
the8472
If you're ordering from a chain then taking delivery could allow them to
arbitrate on the rent part. And you wouldn't be taking up any of their table
space either.

------
cpuguy83
The thing with GrubHub, UberEats, etc... is they are (usually exclusive)
marketing services masquerading as delivery services.

What's infuriating is knowing they are charging 30% in addition to the 10%
they charge me, the consumer... and still you have to pay the driver. There's
one restaurant about a half mile from me... Uber Eats was going to charge me a
$10+ fee for the pleasure of using them (not including tip).

I could literally take an Uber there AND back and it would have been less
expensive... screw it I'll walk and reheat my food.

It is a completely backwards model.

Open Table seems to be in the same realm... I can't remember if the figure is
correct so I'm loathe to mention it... but our favorite restaurant told us
Open Table charges $5/head (to the restaurant).

~~~
cosmotic
Usually exclusive? Every restaurant entrance in Chicago has UberEats,
DoorDash, Postmates, Delivery.com, Grubhub, Seamless, AND Eat24 stickers. Walk
inside and theres a table with ~8 iPads, one for each delivery service.

~~~
cpuguy83
Most of the places I order from are on only one of these apps.

------
Robotbeat
This is a case where restaurants should start a delivery app co-op.

Any time where you have a whole business segment subject to what boils down to
rent-seeking tolls, there’s an opportunity for cooperatives.

~~~
TulliusCicero
The idea that this is just GrubHub or DoorDash or whoever being greedy doesn't
seem to jive with these companies losing money too.

It seems more likely that the economics of general delivery service just don't
work out very well for most restaurant types. It ends up costing the
restaurant too much, such that the prices to compensate themselves and the
drivers fairly are higher than consumers will tolerate paying.

A nice, friendly co-op would probably work okay for restaurant types that were
already known for delivery (e.g. pizza), probably not for others.

~~~
thatguy0900
Wouldn't it hurt them that they're trying to service every resteraunt in every
area simultaneously, with massive marketing budgets? Seems like it would be
much cheaper to just service your local area

~~~
dehrmann
Economies of scale usually mean it's the opposite.

------
BurningFrog
It's fascinating to see people having such strong moral intuitions that
restaurant people deserve to get paid for their work, while food delivery
people do not.

~~~
thescriptkiddie
GrubHub charges a 15-30% fee, of which only 10% goes to the delivery person.
On average the app owners are making twice as much as the person who does all
of the actual work.

~~~
BurningFrog
By "food delivery people" I mean the entire company, not just the person in
the car.

So it's the app developers and management that don't deserve to get paid?

Despite the large fees, these companies are all losing tons of money. So it's
not like anyone is getting rich by overcharging restaurants.

It looks to me like maybe food delivery simply isn't a sustainable business
with 2020 technology. Or it needs a whole different business model.

~~~
c22
Seems like it. 10-15 years ago I had a bunch of paper menus in a folder taped
to my fridge that I would have to look at to order food. Perhaps I didn't have
access to every restaurant in the area, but the selection was broad enough.
The only extra fee I paid was whatever tip I chose to give the driver which I
always assumed got added on top of a reasonable wage. That system seemed to be
sustainable--at least it operated fine for many decades.

It's too bad the old system was cannabilized by the apps. I'm sure some
smaller operations that couldn't afford to run their own delivery before have
seen an uptick in sales, but as a consumer the choice paralysis, screwed-up
orders from over-worked kitchens, and insane fees/price bloat has turned
getting food delivery into an unpleasant experience I now try to avoid.

~~~
saurik
> The only extra fee I paid was whatever tip I chose to give the driver which
> I always assumed got added on top of a reasonable wage.

I would give low odds on this assumption being true :(.

------
softwaredoug
Good! To summarize what I’ve learned lately:

Grubhub takes

\- 20-30% commission

\- all promotions are on a restaurants back

\- Has a very liberal, no questions asked return policy

This post summarizes how expensive grubhub can be.

[https://www.eater.com/2020/5/1/21243966/giuseppe-
badalamenti...](https://www.eater.com/2020/5/1/21243966/giuseppe-badalamenti-
chicago-pizza-boss-shares-grubhub-earning-statement-on-facebook)

------
xhruso00
In Malaysia restaurants charge 30% more on delivery apps (Grab, Foodpanda).
But they have also published phone number to order directly from them in case
of pick-up. So those who can't pickup have to pay the extra fee.

~~~
Consultant32452
That's how it is for me here in the states. The Uber eats prices appear to
have the markup baked in compared to calling and ordering for pickup. I am
having a very hard time understanding why anyone is upset.

~~~
pc86
Any time someone _else_ makes money people on HN start a tirade about how evil
capitalism is and how they should know exactly who is getting every penny they
spend on every product or service.

------
officemonkey
I stopped using Grubhub because the majority of my purchases were to the same
neighborhood Pizza joint. I just phone it in and literally cut out the middle-
man. It takes two extra minutes.

~~~
kull
For some apps they give you incentives like points that you gain with each
purchase to get your free meal later.

~~~
sokoloff
Suggests to me that perhaps the local pizza joint should get into that same
game.

~~~
TeMPOraL
If they can also offer the ability to pre-pay for delivery on-line, or at the
very least equip drivers with card terminals, they could also capture some
extra customers who use a third party primarily for this kind of convenience.

------
zhoujianfu
I guess I don’t understand the uproar here... is anybody forcing people to use
these apps? Anybody forcing the restaurants to pay fees to them? Is there some
monopoly force at play here?

My city (Santa Monica) recently passed a 15% cap on fees delivery apps can
charge, and immediately grubhub dropped Din Tai Fung from us, I assume because
they’re too far away for 15% to work.

They don’t do their own delivery so to get it yesterday I had to place a to-go
order and drive and pick it up myself, about an hour total round-trip with no
opportunities for efficiently stacking orders. I guess I probably “saved” $40,
but I would have preferred to pay it!

~~~
foogazi
Here are the instructions for how to fix this ( from the article):

>Shortly after he put the message on the internet, Singh ended his contract
with Grubhub.

That’s it. End the contract, don’t pay the high fees

------
jacquesm
The new middle men: same as the old. Any kind of commission based service will
always use its position as a wedge to either gain marketshare or increase its
profits by hammering on that wedge as much as they can. As long as it moves,
keep on hammering. I've yet to find an ethical one. Here in NL 'Thuisbezorgd'
pulled the exact same stunts. I hate them with a passion and always search to
find out if the restaurant I'm ordering from has a direct process as well,
they are usually super happy about that.

------
ape4
The delivery fee should be based on distance - not how much you spend on food.

~~~
dylan604
Distance doesn't work the same for all cities. 10 miles in NYC is forever away
far. 10 miles in Dallas is up the street. Delivery fees should take distance
into consideration, but also how long it takes to do the delivery using actual
congestion data.

~~~
ape4
OK, time estimate is fine. But it should be same for any kind of food.

------
holoduke
There must be a business model where every restaurant pays 10 dollars per
month to be part of a food delivery program. Each delivery will be paid
without additional costs other than the regular delivery rates (paid by the
customer) It will be less lucrative than those 30% fee cut companies. But
enough to make a good business. Maybe I should start it :)

~~~
sokoloff
I’d recommend something more like $0.25/order and a $10/mo minimum. You are
going to have per-order costs and the restaurant is almost surely happy to
realize that and pay them.

------
mhb
I haven't kept up with this, but why doesn't the restaurant charge the
delivery service whatever they normally charge and have the customer pay the
delivery charge?

~~~
mindslight
The article conveniently omits discussing this, but I can only assume it's
because these restaurants have signed contracts with the delivery services.
There's no other way this makes sense, like the taking of commission on
fraudulent phone orders (the delivery service setting up a number purporting
to the business and then charging a commission).

So it sounds like the restaurants themselves signed up for a terrible deal,
and are now trying to change it via the court of public opinion. There can
certainly be power imbalances that push parties into detrimental arrangements,
but leaving this fundamental fact out makes the article extremely
disingenuous.

The real question is are these restaurants locked into some kind of term
commitment, or could they sever their relationship with the delivery services
tomorrow and set up their own? The delivery services' move would presumably be
to blackball the restaurant from the platform (in contrast with how they
handle non-contracted restaurants that they're courting), but if enough
restaurants got together they could certainly start a competing service.

~~~
matz1
There is no such prohibition. They can set their own price or even different
menu.

------
DoreenMichele
If you are ordering online and getting delivery because of the pandemic --
because you think it is a best practice for germ control -- I think you are
probably better off ordering takeout and picking it up yourself.

Delivery drivers have been known to sample the food they are delivering and
things like that. I am not thrilled with the idea of some underpaid delivery
driver having time alone with my food.

Restaurants have to comply with food safety and hygiene laws and their staff
get appropriate training. I doubt delivery drivers get similar training
(correct me if I'm wrong).

Staff in restaurants are not only trained in food safety, they are typically
not alone. This is one of the best ways to ensure that people are behaving.
Delivery drivers are going to be alone with your food and therein lies the
problem.

[https://www.wasserstrom.com/blog/2018/10/12/food-delivery-
ri...](https://www.wasserstrom.com/blog/2018/10/12/food-delivery-risks/)

~~~
bdcravens
It's not universal, but I've seen many restaurants do a pretty good job of
sealing the bag, in order to combat this problem.

~~~
DoreenMichele
I have a permanently compromised immune system. I default to preferring
takeout over delivery where possible. I occasionally get delivery where that's
just not practical for some reason, but it's the exception.

There's a pandemic on. If people are interested in my opinion about _best
practices_ for playing defensively in a germy world, there it is. And if they
aren't, (shrug).

~~~
bdcravens
You'll recall that I also have CF. For whatever reason, I don't fear delivery
(though I'm more and more sensitive to how exploitative it is for businesses)

~~~
DoreenMichele
No, I did not recall that.

I do what I do to be drug free. This is probably not your scenario. The degree
of hostility I got on CF lists is why I left them all.

~~~
bdcravens
I believe we had a couple of conversations in the past under your previous
username.

I will agree that CF lists tend to be toxic.

~~~
DoreenMichele
My memory isn't what it used to be and HN gets about 5 million visitors per
month.

I assumed you had no idea what my story is. That tends to be my default
assumption.

------
sarahcho
This is a real problem that has existed for a long time, but has really only
came to public attention because of the lockdowns. I wrote about it here:
[https://blog.routesimply.com/why-your-restaurant-should-
brin...](https://blog.routesimply.com/why-your-restaurant-should-bring-
deliveries-in-house/)

My partner owns a pretty successful craft brewery in the bay area, and he's
recently decided to get rid of doordash, grubhub and ubereats. What worked for
him is using a network of ex-Uber drivers (there are tons of whatsapp and
telegram groups where these guys hang out) together with an app
(www.routesimply.com) that I built for him.

He takes orders directly on the phone, instagram and fb messengers and tacks
on a delivery fee that the customer pays for and gives 100% to the driver.

------
Dumblydorr
I drive to all of the eateries I want to support. Some of them don't do
delivery, others do, but it's a chance to leave the apartment and it's all
money going straight to the eatery, not an exploitative delivery app.

------
20years
Are there any food service establishments out there that solely focus on
delivery? No walk-ins, no dining in but only delivery? Their staff would
pretty much consist of cooks and delivery employees and the facility would be
big enough for a kitchen and prep area.

I would think a setup like that with good food would do well in this new
reality we are in.

I imagine it would challenging for a restaurant to focus on a good dine-in
experience alongside a good delivery service, especially considering the low
margins.

~~~
theNJR
Yes, Cloud kitchens. Guess who has the most high profile one?

~~~
kombucha111
Travis?

~~~
theNJR
Yep

------
deft
So not only the unprofitable gig-economy apps are going under, they're
actually dragging everyone else down with them. How long until the VC and
other funding runs out?

~~~
TeMPOraL
This was written in 2013:

[https://www.ribbonfarm.com/2013/04/03/the-locust-
economy/](https://www.ribbonfarm.com/2013/04/03/the-locust-economy/)

Year after year, I'm appreciating the analogy to locusts more and more.

------
paulie_a
Resteraunts should just put "GrubHub fee" on the bill

------
naveen99
Maybe delivery costs would be lower if people could subscribe way out into the
future... then, set it up like a paper route.

~~~
bertil
Deliveroo offers a subscription service but you still order on demand — the
subscription just lowers your fee.

Competitors have suggested options with regular deliveries to pool them. Few
offer hot food, many it’s fresh but cold (Frichti in France), sometimes it’s
frozen (AllPlants in the UK) and you might include food-prep kits (Blue Apron
in the US).

Based on the growth and successes that I’ve seen, I’m not sure that warm food
on a route is far cheaper to operate; dish to re-heated seems to work, but not
as well as food prep.

------
aabbcc1241
If the delivery platform is not evil, it can charge as low as PayPal do. But
if they charge less, they can only do less advertising, which makes the
network effect weaker.

Is there a way to let people discover suitable service without paying a lot
for advertising? Like the real word-of-mouth, not the "KOL" one.

------
fxtentacle
As a foreigner, it seems to me that the problem in the US is that too many
people live alone.

My favorite pizza shop in northern Germany has a minimum order of $22 and
charges $4 in delivery fees.

For one person alone, that wouldn't work. So you order together as a family.
Or together with your flatmates in university.

~~~
binxbolling
In Germany, 41.8% of households have just one person.

In the USA, 28.4% of households have just one person.

~~~
fxtentacle
I'd wager they count in different ways. Or I'm living in a total bubble. None
of my friends is living alone. All of them are either sharing a house with
others or living together with their girlfriend/wife.

Edit: it might be that your statistic is dominated by houses being owned by
old people

------
billfruit
Restaurants aren't free from unfair practices, often they charge the same
price for takeway as for dine in, whereas takeway should be cheaper not
including delivery charges.

Costs including for facilities/rent/upkeep for dining areas shouldn't be added
to remote orders. In some jurisdictions(esp in 3rd world), even are supposed
to be different for takeaway and dining as orders made in air-conditioned
dining areas are often taxed at a higher rate.

~~~
HelloMcFly
What an odd reaction to this article.

Do you believe there is some sort of moral or ethical obligation that
restaurants must operate at the same margin for every transaction? Should
liquor prices be reduced to meet the margin of the steak entree?

Those "air-conditioned dining areas" help create the overall economics
available to supply you takeout; few restaurants could sustainably survive on
takeout alone. Takeout orders also either cannot buy higher-margin items
(alcohol) or typically do not (dessert) so it's not like the are a strictly
equal value proposition.

Takeout and dine-in are not two separate business, they both operate together.

------
systematical
Amazon, Expedia, Grubhub and others are just middlemen sucking blood from
small businesses and consumers.

------
tehlike
I started using chownow, who has upfront cost for takeouts. Haven't done
delivery yet.

------
rdlecler1
My friend runs a restaurant. He changed his prices for the delivery services.

~~~
mcv
That sounds like the easiest way to handle this.

------
dehrmann
> owner John Stamos

I had to check; it's not the "Full House" John Stamos.

------
Hamuko
How long until Grubhub starts mandating the drivers to check for such notes?

~~~
gruez
The restaurants can “seal” the bags. Getting the drivers to break those seals
to search for marketing materials won’t look good for grubhub

~~~
catalogia
If the seals are removed entirely, not merely broken, then there's a good
chance the customer wouldn't know they'd been screwed with.

------
softwaredoug
Are restaurants allowed to have Grubhub specific pricing?

~~~
ckrailo
Yes and many do

------
calmlynarczyk
I could write a lot about the benefits these apps provide, but I think we can
all agree their ease of use and flattening of the marketplace into a
centralized data source is a very powerful combination. This means restaurants
essentially have to be on them to compete. Before, more decentralized factors
like geography and word-of-mouth helped restaurants gain and hold marketshare.

This isn’t a new phenomenon, but it’s a definite shakeup of an industry that
didn’t have to deal with this issue as much before. It’s similar to how credit
card networks like Visa and Mastercard inserted themselves into the payments
space. The ease of use these services offered customers simply outweigh the
option for sellers to not use them. Sellers already didn’t like how these
companies skimmed a few percent off of every purchase. Now you have delivery
apps which are taking far more significant chunks of revenue out of each
transaction.

However, how many customers know how much of what they’re paying is going to
transaction costs? Some stores and gas stations offer slightly lower prices if
you pay with cash instead of card. Customers are given this awareness so they
understand that they are paying more for a feature.

Takeout apps not only add to the transaction cost, but also control the
interface between the customer and restaurant. A restaurant wouldn’t even have
the option to tell the customer how much of the price of their food goes
toward middleman fees because it’s not in the takeout services’ interests to
surface that info in their app. Instead, they can hide away the details of
price differences between restaurants and then play sellers off against each
other for their own benefit. Even credit card networks don’t have that much
control over the entire transaction process, but these new end-to-end
marketplaces control both factors in order to pawn off blame on the sellers.

If this continues, I foresee these takeout services exerting so much control
over small-business restaurants that the restaurants either fold or all be
homogenized under whatever the takeout services will. Given the propensity for
vertical integration these days, the takeout services will probably just stand
up their own food services in place of the restaurants, similar to what Uber
ultimately wants to do with its drivers. Small business won’t be able to
compete and even more local restaurants will disappear. Some will continue to
exist as a niche as demand for variety/personable service and low
prices/convenience fluctuate back and forth between stabilizing somewhere in
the middle. This will probably be at the expense of customers and society as a
whole, given that restaurants are one of the last bastions of small business
in the ever globalizing economy.

In order to combat the shock that restaurants face while takeout apps hold a
huge level of control over the marketplace, public institutions and personal
will are needed to keep these apps from becoming too powerful. I see it as a
more proactive form of anti-trust enforcement. Otherwise, you’re looking at a
future where local restaurants probably won’t exist.

------
SpicyLemonZest
While I'm not sure I'm on board with it, I have to admit that it's impressive
how much restaurants have managed to moralize their pricing disputes with
delivery apps. I didn't expect this genre of article would survive a ban on
in-restaurant dining.

------
icedchocolate
The fees some of these apps charge is criminal. You’re an advertising and
coordination company, do you really deserve a huge percentage per order?
Gross.

~~~
sokoloff
Yeah, it’s terrible that we force these restaurants to be on these platforms
and don’t give them any free market choice in the matter to opt out. /s

~~~
ganstyles
I think your being facetious, but in case not I'll emphasize that you it is
indeed terrible. The way these predatory companies go after restaurants until
they're added to the roster or create fake restaurant websites and phone
numbers is ridiculous.

~~~
SpicyLemonZest
I simply reject the label of "predatory" here. Restaurant owners are
sophisticated businesspeople who negotiate supply contracts and such as a
matter of course; it's not predatory for delivery apps to offer them a deal,
even if they'd prefer a better one.

The fake phone numbers and websites, yeah, I'll grant you those are dishonest.
Anyone calling a restaurant's listed phone number is expecting to reach that
restaurant.

~~~
hleach
For every sophisticated business person there are four that need basic math
and accounting explained to them.

It's all too common to see them base their entire business around a single
percentage above total raw ingredient cost.

While I agree predatory is a strong word, you are missing the point. There is
an ecosystem of small businesses that are being cannibalized by delivery app
companies. These are the places I enjoy eating, places that are unique and
amazing but not necessarily the top rungs of the business ladder.

This is happening because these delivery apps that are run by sophisticated
business people haven't even worked out their business model yet.

Asking for transparency isn't asking for too much.

~~~
SpicyLemonZest
Most of the time I order delivery, I'm not trying to support my favorite
places or really any places at all. I just want some noodles, and I'm entirely
insensitive to where they come from. The restaurant industry has no intrinsic
moral right to make money from my order; it's strange to propose that I should
go out of my way to spend more money and waste more time just for the sake of
some random owner's bottom line.

When I'm trying to support my favorite restaurants, the ones I do care about
for their own sake, I of course go pick the food up myself. I think most
people do the same.

~~~
jacquesm
If you feel the restaurant industry has no intrinsic moral right to make money
on your order then you are 100% mistaken. If they don't make money on your
order _you don 't get food_, so it is in your own interest that they do make
money on your order. A race to the bottom will get you either crappy food or
no food at all.

What surprises me is that on a website with lots of top earners people would
still begrudge others to make an honest living. And running a restaurant is a
lot more work than writing software.

------
technick
I'm all for banning grubhub, ubereats, postmates, and doordash. If people want
to order take out, let them get off their lazy ass, come down and pick up
their own order.

~~~
DoreenMichele
Some people order delivery because they don't have transportation. Others
order delivery because they are handicapped and, for example, in snowy, icy
weather, their wheelchair plus snow and ice and so forth mean going somewhere
is not very feasible at times.

I mostly get takeout and pick it up myself. I think these delivery services
are generally a bad idea, but some people getting delivery aren't simply "lazy
ass" people.

------
ravenstine
My question is how long this can go on for before these delivery apps have to
lower their fees. The fees are pretty obscene, and it's clear that apps like
GrubHub pass that cost to the restaurant rather than the customer because they
know that the customer won't want to pay that much and that restaurants at
least want some amount of attention and visibility in these apps, especially
since more customers are wanting to use these apps rather than ordering
through some crappy website or by calling in.

But I'm not convinced that apps actually _should_ require the amount of
overhead they might try and claim is responsible for these high fees. Customer
and driver support for delivery apps is pretty minimal and almost always
outsourced. Nowadays, most driver support is handled via text, which means you
can have fewer support staff and they can just multitask. When I drove for
GrubHub, when I visited the regional office, it was usually staffed by one or
two people who were only there maybe a few hours out of the day(which is why,
at least a few years ago, you couldn't just randomly show up). It's possible
that they have way more employees at their HQ... but I have to wonder just how
much of their costs are essential and not fluff generated by excessive growth
from VC funding. Why bother building a lean organization if the money will
just keep coming in whether or not the business model brings in enough money?
All it has to do is bring in _enough_ money to make lenders confident in the
future of the business.

In any case, there seems to be room for a delivery app, or a _system_ of
delivery apps, to compete with top-heavy companies like GrubHub and DoorDash.
Why not run a leaner delivery app business, charge restaurants a flat fee,
don't bother with a big marketing department because partnered restaurants
will do most of the marketing by visibility, have restaurants pay the base
delivery fee, allow drivers to keep all their tips to encourage more drivers,
and pass the $3-4 deliver fee to the customer? Say you charged partnered
restaurants $199 a month, and you acquired the market share of GrubHub, which
is ~115,000 restaurants; that would be $22,885,000 per months of revenue. Is
that really not enough to run a successful delivery app? Or is this a matter
of everyone wanting to run a bajillion dollar unicorn?

~~~
cameronbrown
Ignoring marketing won't help, since the restaurants aren't inventivised to
promote your app. There's huge opportunity cost switching away from the
incumbent apps, too much risk for most businesses.

~~~
ghaff
And you have to get the restaurants to sign up, which requires
marketing/sales.

It does seem like the sort of thing where someone could develop the
app/framework and either focus on some specific lucrative markets (denser
areas of higher income cities) and/or have some sort of franchise model.

Very few people do a significant amount of take out delivery when they're
traveling. So long as you have a profitable business in a city, there's no
particular _network_ advantage (other than any economies of scale) to serving
other cities.

------
troughway
I'm sure HN has no shortage of ex-Uber engineers given how many people from
their tech divisions they have let go of recently.

I am curious to hear what they think about this, in light of them being let go
en masse, which in itself shines even more light on things that are outside of
this discussion.

Was the company ever sustainably profitable? If so, which divisions/apps? When
did they start becoming unprofitable?

Gouging restaurants who are already working with razor thin margins is really
strange to me.

I am guessing they thought that as long as VCs kept pouring money in like
gasoline, they could turn a blind eye to the fact that they have destabilized
a fragile ecosystem that _a lot_ of people depend on (remember: knowing how to
cook is an anomaly these days).

I'm guessing they didn't learn anything from Groupon.

~~~
bertil
Not Uber but Deliveroo — and it was long enough that I can talk freely. Mind
you: that was a while ago.

The vast majority of people underestimate the cost of delivery, more
specifically two things: the duration of delivery or rather how many
deliveries per hour of work at peak time, and the utilisation rate.

It’s hard, in the best circumstances (good weather, constant demand,
professional restaurant, dense habitat) to have a driver handle two deliveries
per hour. If you take a £2 free from the customer and a £5 commission over a
£17 order, you can pay a rider £14 per hour. At that rate, you typically would
get the left wing press to call you exploitative every other day. That’s
excluding everything else: marketing, customer service, tech. You can’t
improve anything without capital that has to come from investors.

All that ignore the key problem availability: if you have 100 riders on
schedule, about 60 would show up. They are not employees after all, and you
can’t fire half of your contractors every day when you are growing like weed.
Probably fewer than 30 will show up if it rains, but 80 might if the weather
looks nice and there’s nothing on TV. If you have reasons to believe that
you’ll get 360 deliveries during the three hour dinner shift, you should be
good but… if you get 350 orders and 70 riders show up (nothing unusual
exceptional) they’ll all get one fewer order than expected and they will
complain they are are not making enough money. More likely, half will do six,
a third will do five and a dozen not enough to justify them showing up. That’s
excluding any exceptional case: hail, Premier League finals, etc. 20 riders
for 4,000 orders wasn’t out of the question with bad enough weather. Your
marketing team is quite likely to tell you that means 3950 unhappy customers
because most riders will switch off the app after the second of third customer
insults them because the website isn’t responsive.

There are many ideas about how to increase the number of delivery per hour of
work:

* telling people to pedal faster isn’t a good idea;

* asking more than 30% from restaurants will get chef’s knife thrown your way (not a metaphor);

* paying people any less than £14/h gets you call a slave trader by the international press;

* asking customers for more than £2 is a crime against humanity and will tank your retention faster than spilling broth and bringing cold pizza;

* setting an ordering minimum to something as high as a meal for two people, i.e. £20, is an effective way to become a trending topic on twitter for all the wrong reasons; reasons that my grandmother would wash out of your mouth with soap;

* handling over two deliveries from the same restaurant to a single rider can work at times, but it’s hard to find the rare good cases and you get very angry customers ver fast; handling two deliveries from _different_ restaurants is… ::shivers:: Let’s not talk about it.

So, you are right: razor thin margins at best in most cases.

What works is looking at the above and seeing in as a stats game:

1\. 360 orders ± 30, 60 riders ± 20 isn’t a great combination. 3,600±100 and
500±50 are better: your margin can be improved with just the large number
theorem. That means, in any places without the population density of central
Paris, to feed a significant portion of the population. It sounds absurd but
having 20 riders out in a hail storm means you will have none within an hour,
even if the sun goes back (thank you non-sensical May weather); having 200
means they see their peers riding and wait it out.

2\. Another thing where scale really helps is opportunities: if you have more
than 3,000 deliveries in three hours per square mile, that’s 50 deliveries in
the last three minutes. One is bound to be nearby, less than two minutes away.
So rather than pay riders to do delivery, then shlep for the next one to a
restaurant half a mile away and only then to start carrying food again, you
get to pay them to deliver food, then turn the corner and do it again. That
way, you can hope riders to handle more than two deliveries per hour. That
considerably helps your business models.

3\. What can help a little bit more is that with ten times more order, the
rare cases when one rider can pick up two orders and not make it awkward
increases as O(n^2) so they go from rare to worth the time to implement an
assignment logic for those.

That should give you a hint why you’ve heard the words “billion raised in a
new round of financing” used around that business model: there is path to
profitability but it has to go through extreme growth.

I’ll let you do the math on rider pay, restaurant, fees, possible subscription
models, population density, etc. but if you do, remember that a service like
that requires, at maturity, thousands of engineers hoping Silicon-Valley level
pay.

~~~
rdtwo
* handling over two deliveries from the same restaurant to a single rider can work at times, but it’s hard to find the rare good cases and you get very angry customers ver fast; handling two deliveries from different restaurants is… ::shivers:: Let’s not talk about it.

I think this is the area of most opportunity. You can’t really do this with a
guy on a bike but in the us there is no reason you couldn’t establish delivery
windows for certain neighbors and pickup windows to restaurants then have a
guy with a meals on wheels like truck come, pick up items from adjacent
restaurants and deliver them to customer.

It messes up the delivery driver as disposable and replaceable mentality as
timing is critical but if you want to have efficiency sometimes you need to
pay a bit more.

~~~
bertil
At the right scale, it is, but the pairing opportunities become significant
when a given service represents a significant portion of how people eat. (To
give you an idea: at that point, the lobbying against the platform isn’t
coming from restaurants but supermarkets.)

It also requires to change the expectations and internal organisation of
restaurants:

* you have to tell them that the delivery person will pick both — otherwise they freak out when they don’t run out with the first one;

* you have to ask them to have two orders come out of the kitchen at roughly the same time: fast-order cooks can do that if they know they have to, but if they don‘t, those are quite frequently far apart. And there’s little information coming out of the kitchen telling you that this will be the case when assigning the order.

Handling that kind of organisational change is ambitious when a restaurant is
struggling because they have a staffer whose full time job is to copy orders
from the delivery tablet into their point-of-sale because the two softwares
are not integrated.

