This is tangential, but I worked for a food delivery startup (a conscientious one) for a couple of years and food delivery is a terribly extractive business that kills restaurants. Either order from the restaurant directly or just go there yourself, Doordash et. al. will kill your favorite restaurant with your help. The numbers don't add up in the kitchen's favor.
Second this, it also allows you to build a real relationship with the other folks in your community
Could you explain further? The restaurant gets the order at the same price, Uber adds delivery fees and a 25% markup on the cost of food. Why would these numbers not work out in the kitchen's favor? Maybe I'm missing something. Genuinely curious.
I have seen Doordash statements where commission + fees added up to 60% of the price. I asked the person who mostly worked with restaurant owners why they do it. He said:
1. A lot of restaurants are passion businesses and they don't realize how much money they are losing.
2. Morale in the kitchen is important, orders coming in keeps morale up.
From myself I would also add that they get a FOMO, cause it's hard to sit and watch others get business, however unprofitable. The most stable and profitable businesses in towns where we operated only worked with us, cause we offered cooperative ownership and small commission. It made no financial sense for them to work with anybody else.
While you pay a markup on the application, UberEats and others keeps 25/30% of the price based on the marked up price. If you make the calculation they usually have to cut into the kitchen margin while the price for the customer stays more expensive.
Can't the restaurant just say no?
Not always
- https://www.eater.com/2020/1/29/21113416/grubhub-seamless-ki...
- https://www.knoxnews.com/story/entertainment/dining/2018/10/...
- https://lawstreetmedia.com/featured/restaurant-sues-doordash...
- https://www.golocalprov.com/news/legal-but-unethical-ri-rest...
- https://www.wctv.tv/2023/12/19/phony-restaurant-listing-door...
These stories are horrible, but that doesn't prove restaurants lose money on Doordash. One of my clients bootstraps online ordering for restaurants. About 80% of those restaurants request to be on Doordash, and have been on there for many years. I assume they're not all dumbasses losing money on every order.
Doesn't excuse Doordash taking advantage of anyone.
Not every restaurant can handle the deferred payout either. Their business is based on receiving payment at the time of service. The restaurant model operates on razor thin margins, and they don’t buy their food on net 30 terms, but they have to absorb costs as if they do.
There are other issues, but this setup looks a lot like paying the mafia due to the imbalance of power.
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Unless something has changed over the last couple years, restaurants opt in to being available on those apps. Uber Eats and the others are generally integrated into the restaurant's point of sales system.
Nah. Those delivery services were opt-out until California passed a law in 2021 prohibiting that kind of behavior.
Ok, but if they're doing it without the restaurant's buy in, then they're presumably just acting as a middleman and ordering from the restaurant themselves, at which point I'm not sure how they're stiffing the restaurant 20-30%. If I were running a restaurant and Doordash kept calling me trying to submit an order for cheaper than the food costs I would simply decline to take their business...?
That would explain why they sell less or cheaper food, which appear too high on the app due to the markup they have to add to the price to handle the fees. This would be an alternate explanation to why things seem inflated. Even with inflated ingredients prices, it actually still doesn’t add up how the volume dropped so much such that each unit would need to cost that much more (I’m arguing it can’t just be the ingredient prices being high). The fees adding to the perceptual inflation make sense.
It’s more expensive volume or less cheaper volume they can make due to higher ingredient prices PLUS the fees they have to add to cover the delivery service cut. That’s how you get a $20 burger for delivery.
This all gets worse when the prices become sticky at the retail place itself (app prices enter the real world). These delivery service are a serious agitator, true disrupter.
That's my understanding. Uber takes 25%, but by default that's offset by increasing the on-app price 25% relative to the in-store price, and the owner has to explicitly opt out of that behavior. So at the end of the day, they should be getting the same amount as in store orders unless they opted out of the markup, right?
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When I worked at a restaurant b2b company that helped pay invoices I learned how razor thin margins most operate on. We even ended up giving out effectively a payday loan to one when they asked for assistance but jeeze those businesses struggle sometimes.
It can work, pizza delivery has been able to be profitable for example. But they are set up from the concept to be delivery businesses, and they have that accounted for in their pricing. Doordash trying to extract profit and pay a driver and put that all on the restaurant? No that's not going to work. As a restaurant I'd refuse Doordash orders at any less than full menu price, and paid on pickup not maybe three months later. If the customer wants the convenience of delivery to their door they need to pay for it.
Of course it can work, the delivery companies need to restaurants to stay alive. But they will be barely alive.
Are middlemen ever a good idea? What about middlemen that become the gatekeepers of your business.
Middlemen are often a good idea, yes. Can you imagine if for every single item you wanted to buy you had to go to the original manufacturer? And now suddenly every manufacturer needs to also become a seller and distributor?
Without middlemen every restaurant would have to be farm to table, which is a significant burden from many angles and would probably result in more shutting down than delivery services could.
Cutting out the middleman is great... but only when you run the numbers and it makes sense, not as a universal truth.
Middlemen are good when they add value. Like offering delivery when restaurants don’t normally deliver.
But they can deliver without being a middleman. E.g. they can work as contractors for the restaurant.
But now, instead, they are the ones taking the customer's orders, and hence they become the portal for the business (and thus, middlemen). Which is a bad situation for the restaurant owners.
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For the handful we checked near us, ordering via the restaurant site (for delivery) is cheaper the via uber, even with Uber one
Honestly, food delivery from restaurants is one of these things that is a big economic mismatch. The restaurant is spending tons of money on their nice dining room and part of the price of the food is supposed to be the experience of eating there. Yet, when you are ordering delivery, you are getting a subpar dining experience, plus you have to cover the additional cost of transporting the food. This means that someone is getting squeezed --- the restaurant is not getting paid enough, the delivery person is getting paid peanuts, or the buyer is having to pay a ludicrous price for the food.
That really depends on the place and the person. I don't get much value from eating inside a Chipotle or a pizza parlor.
The dining experience depends on your feelings and home, and you have to pay for transportation for the entire party to the restaurant.
