Hacker News Reader

Comment by ByteJockey | Hacker News Reader

You're assuming that domino's makes a profit on food delivery rather than breaking even on it.

But domino's also makes the food, so if they break even on the deliver, that's fine, they made money on the food. Scaling the delivery part of the business also scales the food part.

If you aren't making the food, you have to make money on the delivery alone because scaling your delivery service scales someone else's food business. You're essentially competing with your suppliers (restaurants with their own delivery), and they don't need to make money on the product. That's a hard position to be in.

View on HN

Yeah, but the delivery companies take 20-30% of the gross food order.

So while they aren’t technically vertically integrated, they have the pricing of vertical integration (assuming typical restaurant margins).

> assuming typical restaurant margins

I think Domino's margins blow typical restaurant margins out of the water. I don't have hard numbers, but worked a variety of delivery jobs from 2010-2014. Domino's was the only place with the attitude that their food was worth pennies to produce.

Most places didn't offer discounts to their employees, not even for food that was mistakenly made and had to be trashed. Domino's was the only one that would just allow employees to make themselves a pizza for lunch or to take home for dinner (but no feta cheese, we had limited quantities of that).

Call and complain about any Domino's order, even over the dumbest thing, and they're supposed to give you a credit for a new order. It was drilled into my head as an employee. If someone complains, give them something free, and they're pretty much guaranteed to order from Domino's again in the future more times than they would if you had never made a mistake.

Also an individual driver could do far more deliveries than an app-based delivery worker can. The routing software they used at the time was really good, and would group 2 nearby orders for one trip by a delivery driver. There was never any waiting unless there were no orders at all. From what I hear with my friends who work UberEats/GrubHub, a lot of time is wasted at the restaurant waiting for the food to finish. McDonalds (at least in my area) is a big offender, marking orders as ready for pickup when they haven't even started making them yet. Having all food coming from a single storefront, and being able to take multiple deliveries at once is a big deal.

As for why places like Pizza Hut and Burger King can't do it as well, I guess it comes down to the tech and management. When Burger King tried offering first-party delivery services it was a massive shit show. I worked there for a bit, as they were the only store paying drivers 100% of the delivery fee. It ended up being a terrible deal because I would average 1-2 deliveries per hour during the lunch and dinner "rush", while a great day at Domino's could have me doing 10 per hour. Pizza Hut wasn't as terrible as when BK attempted it, but I feel like it only worked because they have a limited menu and not because they're actually competent.

I delivered for Pizza Hut a dozen+ years ago. The store I was at only did delivery and take out. We didn't have routing software, but it was really easy to divvy up and group orders looking at a map. I'm sure it would be more difficult if your software wasn't great, volumes weren't high enough, or just not having the vertical integration.

Also, with vertical integration drivers can help cut, box, and confirm orders so staff can focus on other things--or not depending on how busy they are.

I worked Sunday afternoons just me and a manager. I would share responsibilities of cooking, prep, and delivering, they would cover the phone lines, prep, and cook as needed. It would normally be quiet, but we might randomly get a large youth group or party order while also prepping for Sunday evening football rush. The fungibility of labor seemed better than the burstability of delivery, at least in that case.

A cheap pizza from Aldi is £1. A regular pizza with some toppings and maybe meat is £2-3 in most supermarkets. Could be £4 in higher end supermarkets.

You see where this is going. Pizzas are worth nothing, supermarkets are making money on these (it's not allowed to sell an item at a loss in Europe). Domino produces for £1-2 and sell for £10-20.

The accepted number in the restaurant industry is that food cost must be less than 30% of the listed price. Pizzas are pushing this to an extreme by selling for double digits while they're so cheap.

> (it's not allowed to sell an item at a loss in Europe).

Do you have a source for this?

It's not a European legislation, but a law in some countries (including France).

This is dumping, and considered anti-competition.

You can't really compare a cheap frozen pizza to a chain pizza. They are bigger, for one.

I've read before that a Hot-n-Ready from Little Caeser's is sold for $5.55 but costs $3.50 in just ingredients. They don't make any money on those.

The breadsticks that they sell for $3.99, the cup of marinara for $1.99, the $13 veggie pizza and the $15 supreme pizza is where the money is made. Do you think there's an extra $10 in toppings on those supreme pizzas? Don't forget the bottles of soda..

http://www.unhappyfranchisee.com/little-caesars-what-franchi...

That was the price for fresh, not frozen, and they're not small. Smaller than the large £20 pizza from the chain, sure, but not necessarily smaller than the £10-15 one.

The link is talking about a $11 pizza, that was briefly on sale for $5 (and still making a profit). It's not a $5 pizza.

Are you familiar with a hot n ready? That is a large one topping pepperoni, they are always $5-6 depending on location. It’s been this way since 1997

You are forgetting rent, ovens (energy), staff, and delivery vehicles. Those push the margins down quite a bit.

This is an extremely accurate description of Dominos operations. Very few,if any,can replicate it,unless they also sell products that cost a small fraction of the end price. At least in the UK, their tech is years ahead of any other pizza join, including their biggest competitors.

Routing optimization only really works at massive scale, otherwise waiting times are just getting too long. Chain's like Dominos or Pizza Hut have the advantage of a single source, all managed by the same company, using the same tools, systems an processes. Companies like Uber Eat or Deliveroo are using multiple small sources (restaurants) to deliver multiple small destinations with small order numbers. Can work, once everythig is automated as ch as possible (near impossible without an operating system for small restaurants) and at huge scale (locally, within normal delivery driver's ops radius). All despite competition. Without taking expenses like marketing and so on into account. Not sure how these companies are going to make money.

I imagine the end goal is the same as with Uber's main business. Automation

Bubble

Uh, considering they've been doing well prior to tech, and AI being a thing, I think that's non-factual

The end goal of what? Uber Eats or Domino's?

Both probably. I read an interesting article about restaurants renting in industrial areas with no dining room only doing take out. People will always want to eat somewhere nice / fun but certain franchises I could see making the switch

They'll need to survive for 10 years losing billions annually if that is their goal. And it will take them years to scale up automated rides/food delivery even after it becomes available.

Reply on news.ycombinator.com