Portland approves 10% cap on fees that food delivery apps can charge restaurants
oregonlive.com
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For those who want to help, I built a chrome extension similar to Honey that shows a local restaurant's direct ordering website as you're about to order from that restaurant thru a third party service. If direct ordering isn't available, it will also show you if that same order is cheaper elsewhere. If you have a favorite local restaurant that accepts direct orders, please help us add them to our system by filling in this form: https://platerapp.app.link/JACVBOFUY7
For those interested in checking out the extension, it can be downloaded here: https://platerapp.app.link/tDSD3mUTY7 (it doesn't collect browsing history or sell personal info or anything of the sort)
I could see how the restaurant delivery would be worse if that particular restaurant is bad at delivering. Also, the app model does seem like it should be cheaper at scale by using the deliverer’s labor more efficiently.
This is a weird set of complaints.
1. Usually, there would be some lag time between when you order the food, and when the restaurant finishes making it. This would overlap with the time required for the driver to go to the restaurant and pick up the food; the app model isn't actually introducing a delay there.
2. Restaurants that do delivery themselves also use the same driver to deliver multiple orders at once. You're definitely better off with a dedicated driver, but the restaurant is much worse off. Again, this would not appear to be related to the app model. We order pizza and pick it up ourselves, because if the pizza place delivers it, it arrives stale and we pay extra for delivery.
That's not how it works. I order a lot and the driver is always there to pick it up as soon as it's ready. The driver obviously gets notified about the delivery as soon as the restaurant confirms the order.
One Friday night here in Sydney, it was raining like crazy - so we ordered in some food from one of the online groups. 2 hours later and multiple talks with support and they were still telling us stories about how it's nearly there.
We eventually called the restaurant directly and the food had been sitting ready for 90 minutes on the counter. The service just had all their gig-economy-staff decide this isn't the gig for them in bad weather, so no one was available to pick it up and deliver it. They said we could pick it up ourselves but we didn't really feel like old food at that point so we cancelled and drove out somewhere else. Being lied to was the most annoying part.
I got kinda burned when I tried to order direct from a restaurant. The last time we ate there they included a little "order online" card with a link to their website. So the next time, in the spirit of supporting businesses directly, I went to their site and ordered. They did use a third-party handler (ChowNow I think?), but I figured it was a kind of order management third-party. In fact, after placing the order, I got an additional email from that third-party handler congratulating me on ordering directly from restaurants, and that they explicitly don't charge restaurants a fee. Neat, right? Well, Lo and behold, behind the scenes they just used DoorDash to handle delivery...
That sucked because A) it was more hassle for me to sign up for Yet Another Account, and B) I have DashPass (free delivery and discounted service charge) but didn't get to use it, so it ended up costing me more even with the coupon the restaurant threw in.
Hell, there are even pizza places around me that use DoorDash for delivery. Pizza places, for goodness sake!
It's a weird world I suppose.
Restaurants that have partnered with DoorDash for delivery logistics only will pay usually around $7 per order (this varies depending on geography and overall partner terms).
However, the key difference is that this delivery fee is almost always passed on to the customer. So from a restaurant's perspective, they are getting a great deal: Delivery logistics for customers who want delivery, but if they're using a low/no commission direct ordering service, they keep (most of) the full order margin.
Did you mean 7 percent of the order perhaps?
If it's a "mom and pop joint" with 1 or maybe at most a handful of locations located in the area, skip the app and just call it in. Nothing to download or sign up for, no chance for an unseen middle-man. These non-chain restaurants are literally the "service industry", I've found I always get a higher level of service when talking to a human on the phone, at a couple of our regular places the servers that pickup ask how I'm doing, have an idea of how we like things, politely inquire about the kids, etc... A couple of them offer online ordering, but I always just pickup the phone and hand over my credit card when they bring the food out, IMO it's a better experience for all parties involved.
Edit: Caveat, I'm old enough that to-go/delivery over the phone was the only option at one point, not app first; and even before the pandemic found DoorDash and their ilk to be parasites that I wouldn't use.
If the pandemic has taught me anything, it’s that restaurants as a concept are just kind of terrible and unnecessary, at least for the bulk of the world’s unremarkable places.
If a perfect vaccine was distributed to every person on the planet right now I wouldn’t be back to visit 95% of restaurants out there.
During “lockdown” I learned to make all kinds of food and way more interesting, higher quality cocktails than 95% of bars and restaurants have, for a fraction of the price.
I learned that my restaurant visits were there to satisfy an emotional desire, and they didn’t even do a great job of that.
I learned that the desire for a “quick meal” is a farce, that homemade food isn’t really a time sink for someone deep into the habit.
My future restaurant visits will be way more sparse and deliberate. I’m going to be holding restaurants to the standard of making something that I literally can’t make at home without going to culinary school and apprenticing under a master chef.
It isn’t a noble act to support your local business if the business isn’t meeting your needs, and at this point I’m not sure how my local dive is going to be able to adapt to my modified needs.
This is you self promoting your app.
Restaurants will pay more to market themselves, hire delivery drivers, and manage the logistics.
Local restaurants are hurting because of COVID. They are blaming the delivery services, whose proprietary tech, marketing spend, logistics services are the only reason 90% could maintain any revenue stream.
Okay, but it seems like a reasonable time to promote a relevant app that is apparently free with no ads. It's not like your post is completely free of agenda.
> Restaurants will pay more to market themselves, hire delivery drivers, and manage the logistics.
This is simply not true. Adding middle men does not make this more efficient, and I'm really not sure why you think it does.
One basic reason it's not true, is that business owners won't necessarily pay for these things at all, they may just do them themselves. Sometimes it's easier to produce effort than it is to produce cash to buy effort.
The winners are people living in central areas of the city with lots of restaurants. The losers are the poorer outskirts.
I fully support the idea behind this rule. But this implementation has been proven to not work.
- Not everyone is physically able
I’m also tipping delivery drivers a lot better these days.
I work for a takewaway / food delivery company and it's facinating listening to what our customers are saying. I heard one parent say that their kids have sometimes ordered ice cream on a delivery platform rather than look to see if there's any in the freezer first. It's quickly becoming the norm to the point where peoples literal first thought is "can I order it?" rather than "can I go and get it?".
When you're earning $50+ an hour, which many in cities are easily clearing, it starts to make a lot of sense to pay someone else to do your waiting for you.
Their lives are all about optimization of time resources / time management, and everyone should bow to their needs - if it results in them shaving off some minutes here and there.
After all, they're making $300k/year working on important products, so it's only natural that every corner that could be cut, should be cut - even if it means driving people out of business.
When confronted with the logic, they regurgitate the same "But you see, my time is worth $xx, 24/7/365 - so 30 mins saved on task x is a net profit for me" (even though, in fact, they would not be working during those 30 minutes)
Every time we eat out, pay a lawn service to cut our grass, have someone else wash our car.
Yes. It is dumb though to justify it based on how much you get paid hourly. They don’t understand the real concept of opportunity cost.
imo my time is actually worth many multiples of what my employer pays me for it.
But your time is only “worth” monetarily what the market will pay for it.
You're right. If their leisure time were merely worth as much as their regular wages then they ought to be working those 30 minutes instead. Since in fact they made the opposite choice, they clearly value their leisure time more than what they would have earned by spending that time working.
You make it seem like they have a gun to the heads of the landscaper they hired to do a job, in which the landscaper now has money to do whatever want to do it with it.
To your other claim about not “working” during those 30 minutes. You are working every single minute of the day. It might not be for a paycheck, it is probably for your mental sanity by chilling out with a drink waiting for some food to arrive.
That was purely an economic decision that they value doing X over doing Y. That’s done with every transaction done throughout life.
- better delivery options
- an aversion to walking, or no walk-able options
- higher risk tolerance for lukewarm food
People differ in more than physical appearance.
It’s not the “opportunity cost” you should be measuring. It’s the “opportunity cost of the next best alternative.”
If I am an hourly worker making $50 and going to get food would be an hour that I wouldn’t be working, then yes it is worth $50 to not spend it going to get food.
But if I am choosing between watching Netflix and going to get food. The next best alternative pays $0. From a purely financial view it makes sense to get food.
I find this become more true the more someone is compensated and the more they have to work.
There are three concepts that HN commenters don’t understand
- “Monopoly” and anti-trust
- the legal concept of censorship.
- opportunity costs.
So, say, an hourly contractor who orders delivery so they can get back to work sooner still makes sense to you, right?
If he makes $50 an hour and he can get an extra hour in working, if it is cheaper for him to order food then yes it makes economic sense.
On the other hand if he were at home watching Netflix and he spent the money set aside for his utility bill to eat out and his lights got cut off , the opportunity cost wasn’t the $50, it was that he could have had lights.
Thanks for taking the time to elaborate. You have a good one.
Opportunity cost is exactly that: the next best alternative.
> But if I am choosing between watching Netflix and going to get food. The next best alternative pays $0.
If you could be spending that time earning $50, and you choose to watch Netflix instead—all else being equal—then obviously watching Netflix is worth more to you than the $50. Going to get food thus implies foregoing at least $50 worth of leisure time. The fact that no one is paying you to watch Netflix is irrelevant; monetary compensation is not the sole (or even most signficant) measure of economic value.
That’s the entire point.
This is an economic decision just One that not easily seen by dollars. I value a movie more than running errands.
It is at least $50 per hour if you could have been using that time to work. Anything else that you choose to do instead of working is prima facie worth more to you than the $50 you could have been earning. The opportunity cost—the next best alternative—is either working and earning $50 or else something you value even more than $50.
You are attempting to claim the opposite: that if someone can make $50 per hour working, but chooses to do something else, then that time is somehow worth less than $50 per hour. This makes no sense at all. This would presume that the person knowingly and deliberately chooses the option which is less valuable from their own point of view.
The only reason that I would work around 40 hours a week instead of slacking off is because ethically, that’s what I agreed to do.
Most people aren’t in a position where they could put in every waking hour into pursuits that generate money.
What percentage of people that post on HN are working hourly billable jobs?
How many people who put in extra time actually get recognized by their company for doing so at their equivalent hourly rate?
Put in just your 9-5 then bail or put extra time and effort in to your career. Many high earners in cities are doing the latter. You take the time you'd be using not only be getting your food but cleaning, mowing, looking after your car; all of the work that isn't your job, and use it to earn more instead. The higher you earn, the more this makes sense to do.
Hours are interchangeable. Sure if you order food at 7:30, get it delivered at 8, and you spend 7:30-8 watching Netflix then yeah the next best alternative for that half an hour was $0. That's not where the trade off happened though. It's when you left work at 6 instead of 5. It's when you answer that phone call or email you otherwise wouldn't have later that night. It's going out for drinks the next day with that weird guy you shared an office with until he left a few weeks ago to work at a company you really want to move to.
I am saying that the intellectually honest reason is that “I have the money to spend on doing things I don’t want to do myself”. Not, “Because I make $50/hour, for 8 hours a day, my time is worth $50 and every hour I get back in my life is worth $50/hour”.
If you are being paid hourly, you should be billing for thinking while walking down the street or taking a shower. That is some of your most productive time.
Also as another commenter mentioned, cold food. Furthermore, avoiding all of the extra zero-use plastic waste they throw in the bag by default.
I am working and/or enjoying highly limited relaxation time. I am willing to pay a premium to have the food arrive, and have the time surrounding "getting food in hand" be minimized, so as to minimize work interruption or maximize current recreational activity.
It's essentially the opportunity cost argument, applied to utility measure rather than literal dollars.
For me, the prospect of lukewarm food kills the delivery experience for me, even if delivery were "free" (not itemized to me).
If for example the pizza is $10 at the restaurant, make that $12.50 with delivery and $10 without. That way the consumer can decide themselves if they want to pay the added amount for delivery, or if they'd rather walk/drive. Right now they charge you $10 and give the restaurant only $7.50 meaning they can't make a profit on that pizza.
Restaurants that can absorb the 25-30% hit, for whatever reason, now have an advantage over those that couldn't. The question becomes is this a market failure that needs corrected, or the natural evolution of the food service industry? The case for the former is that you have a vibrant market of pretty high quality restaurants run by their owners as passion projects and have margins that keep the lights on. Squeezing this market because it's now "deliver or die" means that they'll either have to go out of business or reduce their costs which hurts the customer with second order effects -- they will have to reduce their rents by going to a cheaper location that's out of the way, the quality of the food will drop, and/or the staff will be squeezed.
I don't necessarily agree with capping the fee but I don't think supply-chain transparency ever hurt the customer.
If the apps charge too much the restaurants should leave. If that means they end up not delivering what consumers want then they should change their business model or go out of business. If the delivery apps can’t survive under those conditions then they should change their business model, or go out of business.
The hospitality industry has always been ultra-competitive and low margin. Bad restaurants go under all the time. The only thing that is different now is that they have somebody else to point the finger at. The other thing I think they all miss is that without these apps, most of the businesses would have had to immediately go under when Covid hit. Those services were the only thing that gave them a shot of keeping the lights on, and for the ones that can’t find a way to make things work, consumers can do without them.
What gets me is that Doordash is triple dipping here. There's the fee to the restaurant, which may or may not translate to higher menu item prices. There's the fixed $2-5 delivery fee which is pretty obvious. And then there's the percentage-based fee in addition to that, 10 or 11% I believe, that's kind of hidden along with the taxes.
I mean come on. Sometimes I am willing to pay a rather high price to have my food delivered. I'm not willing to have to fire up Wolfram Alpha just to determine exactly how much higher, though.
I used to tip, when delivery was "free" (included in the menu price).
But DD jacks up the menu price (which, at least around here, is already increased to account for their own direct delivery service - they use DD to source more customers) and then adds a delivery fee - if I'm paying that much more of a premium to use a specific delivery person, I don't really feel I owe them a gratuity on top of it.
Picking up food usually has no tips. Delivery involves tipping the driver, which delivery apps already support and they don't take any fees from it.
Legally, any tips go solely to the individual waiter to whom the tip was given. Restaurants may not legally require a tip sharing program, either between servers, or from the servers to the cooks.
In practice, you are right.
I typically tipped even when picking up food. And restaurant staff remember that, precisely because so few people do it.
Sometimes legit emails go to spam, though I look over the spam folder pretty carefully too.
(I hate tips, restaurants should just charge what they need to charge. But that's not how things are done in the US, and it's hard to change the culture...)
I mean, that's not really an issue.
Money is fungible, which means there's no real difference between "charging the customer" and "charging the restaurant" aside from who the customer blames for the higher price.
Not sure this holds in most US cities. Outskirts are usually wealthier suburbs and lots of Urban Cores are quite poor.
"The Order limits our ability to cover operation costs, so we have had to revise the areas Uber Eats can deliver to in the city. Unfortunately, this means we cannot continue to serve customers in Treasure Island. The Mayor’s Emergency Order limits the commissions we charge restaurants for access to our platform and delivery services."
Why doesn't that reasoning apply to restaurants? If the fees cut into their profits too much, then they need to raise prices.
There is no free lunch here (ha!). The customer is always going to be paying for both the food and the delivery. There's no benefit in micromanaging the internal transactions.
It’s the exact same as credit card processing fees. Except that’s 3% and this is 30%
More opaque. The honest approach would be for the menu prices to be the menu prices, and the cost of the delivery should be obvious.
Why can't they? Is this a local or state law?
That just seems as PR from food delivery apps. AFAIK the city put a limit on how much the restaurants can be charged, there is no limit on how much a person ordering the food can be charged.
1. If people knew what it actually cost to get food delivered (as opposed to hiding the delivery fee by increasing per item costs or charging the restaurant a cut), they wouldn't order
2. Part of their business model is to waive delivery fees, like if you buy the subscription for unlimited delivery. However even if you have unlimited delivery they still make money from service fees and restaurant commissions. If all of that cost gets charged as a "delivery fee", the $20 subscription for unlimited free delivery becomes unsustainable.
3. As others have mentioned, they're probably doing it in part just to make a point
Let me explain:
Predatory pricing is defined as “the pricing of goods or services at such a low level that other suppliers cannot compete and are forced to leave the market.”
For silicon valley startups like Doordash and Grubhub this is accomplished by acquiring customers at a significant loss in ways that may often seem idiotic.
example: Doordash and Pizza Arbitrage https://news.ycombinator.com/item?id=23216852
The End game is to be the dominant food ordering platform in any given town where you get to dictate rates like 25%.
Since predatory pricing is illegal, this response is justified. However, it would be better if regulators enforce predatory pricing rules to begin with, which they rarely ever do.
for more info on predatory pricing rules in America see: https://www.ftc.gov/tips-advice/competition-guidance/guide-a...
You fight back by calling your order in and having them deliver it or pick it up yourself. I do this 99%* of the time as I refuse to pay a web server $8+ order+delivery fee for a meal that costs the same. It's absurd to think that people are so lazy that they cant pick up a phone or walk a few blocks/cycle/drive to get their meal.
*save for the rare late night drunk+high AF Dominoes orders.
They'd likely expect a couple bucks tip for a curbside pickup, though.
Platforms like Seamless go so far as to set up websites for restaurants (that often have better SEO than the restaurant's original website), so the phone number listed routes through Seamless, helping to ensure they get their cut of any order.
Otherwise google maps and Apple Maps is sitting right there not charging any fees for the phone number.
There are a number of restaurants listed on Yelp in my area for whom the phone number listed is answered by GrubHub. I refuse to deal with GrubHub, so I make an effort to search for a direct number, but it is often difficult to find.
I'm not sure how GrubHub is getting themselves set as the primary number for restaurants in Yelp, but it's happening.
If people don’t understand that a middleman adds cost as an adult, then that is an education issue.
I think the point is that middlemen are now using deceptive business practice to obscure the fact they are involved and in many ways cannibalizing direct business to the restaurants using "dark patterns". In the case of middlemen changing the phone number of the restaurant on services like Yelp/Google Maps without the consent of the restaurant should be fraud...its almost like I go to a bank and put my ATM machine in front of the bank ATM machines and charge customers withdraw fees...then claiming well I am a 3rd party of course I had fees (even disclosed it in order to proceed), while ignoring the totality of the circumstances.
You can try.
https://www.yelp-support.com/article/How-did-the-information...
> Yelp provides Apple with access to some of our business page information
This is the sort of thing one says to either feel very, very clever about themselves or because they don't want things fixed. Which is it?
If people want to give their money to middlemen because they are too lazy to call or use a search website, that is their problem. We don’t need laws around every single idiotic behavior people do, and if they find value in paying an app maker an extra $10, so be it. I’ll continue to do the common sense thing and spending 30 seconds calling them because I can’t afford $10 to door dash for what is a useless service to me.
How much money they may or may not have is irrelevant.
You are falling for the okeydoke.
Break these assholes' backs and we are all in a better place.
actually it was all cash nm https://qz.com/1045776/grubhubs-purchase-of-yelps-eat24-may-...
This cap... is not that.
You don’t have kids. Calling me lazy because I don’t have time to load up for small children in the car to drive a few miles then have to wait 0-25 minutes — potentially having to get out of the car and unloading said four kids to pick up the food, then reloading them to return home. Such an assumption that I am “lazy” is just bullshit and represents a failed understanding of a good portion of the market. We aren’t all childless adults sitting around smoking pot playing XBox waiting around for a key lime pie to be delivered. (Not saying you are, but that people who value their time more than the delivery costs are “lazy” is exactly the point you are making.)
I am happy to pay 25% for the time I am saving. It’s the same reason I don’t wash my own car: sure I could do it, but I have more valuable uses for my limited time.
If people ARE paying 25%, (i.e. 60% of US consumers order at least once a week [1]) then the service is valuable enough to them (for whatever reason) to pay that much.
[1] https://upserve.com/restaurant-insider/online-ordering-stati...
My mother did that all day long when we were children.
Why stop at delivery apps? Why are lazy people driving cars instead of just riding horses? Why are you ordering things online instead of just going to the store? Why are you farming using that tractor instead of a horse drawn plow?
Small conveniences add up. I don't want to live in a world where we aren't allowed to make things slightly easier.
And for the same reason that we don't allow health insurance to charge people different rates on the basis of their genetic profiles, the exercise of government prerogative to optimize for the greater good, on behalf of all, is apt here.
Whether or not this particular approach is the best way to produce that good is a valid debate.
See Exhibit 1 at https://www.healthaffairs.org/doi/full/10.1377/hlthaff.2018..... The "sky high" jump you portray doesn't exist. It's been a quite steady annual rise.
If pre-existing conditions were the primary cause for premium increases, the ACA's one-fell-swoop removal of them would've had far more significant impact on that chart.
That’s the whole reason for any kind of insurance. It’s a mechanism for lucky people to pay the costs of unlucky people. And even lucky people pay for it it because you never know how your luck will change.
If you take your idea for a pricing model to the extreme, everybody pays pretty much what they need to cover their own costs, which could be extremely low or extremely high. This is no different than if nobody had insurance at all.
Insurance is pooling of risks so participants in the pool are insured against medical costs they can’t afford.
I care about supporting my favorite local eats. Same reason we should all be tipping full even when getting take out. Support your local restaurants. Many are about to go out of business.
I get that for some of these small local restaurant owners the margins are tight and I’ll do my best to make sure my money goes directly to them and not GrubHub/Yelp/Uber but I also understand that most of these places aren’t run by front-end developers and SEO experts. I’m not sure what the answer is but I also don’t think it’s always quite as simple as you’re making it out to be.
A restaurant doesn't need more than a page with contact info and link to a pdf menu. But even standing that up is a massive hurdle for <people who don't browse HN casually>.
The problem is that consumer advocacy and anti-monopoly are practically the opposite thing. The end result of government action here should be short-term higher prices to the consumer, that reflect the actual cost of operations, rather than lower prices to the consumer (i.e. "free delivery") that is achieved by pricing at a loss to drive out competitors.
Then local depots could store them in thermal insulators.
Not sure if anyone would ever eat a pizza that has stored below freezing point
DiGiorno would like a word.
https://foodscene.deliveroo.co.uk/promotions/deliveroo-editi...
They take existing, established chefs or restaurants and clone the cuisine so that the food can be produced in a larger kitchen, potentially reaching a wider delivery area.
"We combine our customer insight, logistics experience and relationships with restaurants all over the world to bring an Edition to you." blah blah.
Generic corporate speak is so overrated.
Food delivery is an awesome service but it costs money, consumers should expect to pay a higher right for food and grocery delivery in the long term.
And delivery companies should expect smaller margins for coordinating it.
Assuming you can't make money at 10%, why would even a well-capitalized company that's OK with having a loss leader enter that market? The Uber strategy has been to enter a market fast, drive competitors out (possibly taking a loss), then (and looking at their earnings, this never happened, probably because there's a competitor in most of their markets) raise prices and finally turn a profit. If you can never turn a profit, why would you enter the market?
Netflix delivered DVDs at a loss to build a brand and content licensing for their streaming service.
If I remember correctly Netflix’s original business model was more like a gym membership than brand building for an online platform that was a decade in the future.
source? I've never heard that one before
If the delivery companies start shifting the burden to consumers, or if they start forcing bicycle couriers to comply with the rule, or if they can successfully contest it in court, then it makes sense to some degree to stay in the fight.
Because you can still raise money, sell your company, and make money in the process. An extreme form would be a pyramid scheme where early investors make lots of money, leaving later investors with the problems.
Only true in the short term. Long term, monopoly prevents competition and is bad for consumers.
The correct industry action: push through higher pricing for the end users, share gains with drivers and restaurants to get to a sustainable business model, and accept the resulting decline in unit volume. (which also means fewer drivers will have jobs, so there's a human cost here as well)
It's easy to tell "corporations" to just suck it up, but you're dealing with a pure variable cost business here. If you make it unprofitable to serve a particular geography, they'll just exit the market. That only consolidates future market power in the surviving businesses....
It's unclear to me if this industry would exist at all if it were profitable. There's a minimum volume needed to make the industry viable, once you fall below some (quite high) density of people ordering food delivery, it doesn't work.
Ah, yes, Grubhub, the Silicon Valley startup that was founded in Chicago, is headquartered in Chicago, and has been a public company for 6 years.
Uber eats I know is losing money and Deliveroo are losing a few hundred million per year on revenues of about $500m. Basically cutting the food percentage like this to 10% would imply delivery services are permanently unprofitable?
Why have all these restaurants signed up if 25% is so unfair?
https://www.theverge.com/2020/1/29/21113876/grubhub-seamless...
What is everyone's problem? Why do we want to interfere with this?
These apps can lead to poor experience and perception of the restaurant due to the delivery short comings and customers tend to transfer any unhappiness with the delivery as being the restaurants fault (eg late delivery and cold food).
Should a manufacturer have the right to say that you can't re-sell something that you bought from them fairly? That doesn't sound great to me. If Doordash fairly buy the food then they can sell it to me (as long as they follow food regulations). That sounds fine, doesn't it?
In addition, most restaurants will not just accept takeout orders from a random person that shows up on a bike, it’s an organized partnership. I wonder how they even achieve that.
Why not?
- they don’t have the appropriate packaging, ie don’t actually do delivery
- it’s inconvenient for their order pipeline / system
- they can’t vouch for the carrier handling, is the food going to arrive still hot? A shaken mess?
- is the carrier going to add or remove something before it reaches the customer?
Any of those can be damaging for the restaurant, losing a customer, or even downright dangerous in the case of incorrect handling.
Sure, they will get some deliveries but what about the people that would buy at $10 but not $15? And what about the people that won't dine in because they think prices are 50% higher than they are.
GrubHub is skimming valuable customers while discarding others. That's good for them but ultimately harmful for the restaurant.
It's marking them up... yeah. Is that a problem? Do you realise when you go to a store all the products are 'falsified' by marking them up on top of what the producer sells them to the retailer for?
Doordash or whatever says 'for $x we will put a WhateverBurger burger into your hand'. As long as that's what they achieve, this seems fundamentally honest to me.
As a consumer I don't really care where that $x goes to - Doordash, WhateverBurger, delivery person... doesn't seem my business to interfere in people's private financial agreements.
The diner gets offered a deal and can take it or not.
The restaurant gets offered a deal and can take it or not.
The delivery person gets offered a deal and can take it or not.
Seems to me like everyone is acting ethically here, and everyone is accepting a deal they're presumably happy with. If they aren't, they can turn it down and go elsewhere.
That's not what they do, though. The receipt shows line items with a cost for the food, a fee for the service, and a delivery fee.
The problem is there's an additional fee for the service hidden in the supposed cost of the food; customers don't actually know what Doordash's cut really is.
But why would you care? I don't need to know the bill of materials for all my transactions. When I buy a coffee I don't expect to know how much they paid for the beans.
If you wanna say "delivering a pizza will cost you $20" and leave at that, fine. If you tell me the Grubhub fee is $5 and it's actually $10, I'm upset.
...but this is exactly how other industries already work and everyone's fine with it!
When you buy a TV from Amazon they both mark it up and also charge you delivery!
And they didn't give you the option to save by managing delivery on your own!
Why don't you get mad at Amazon for marking up products as well as charging delivery?
What percentage of customers do you think understand that Grubhub is marking up their food?
>If they aren't, they can turn it down and go elsewhere.
That's precisely the problem. Some of the restaurants customers are turning it down and going elsewhere because Grubhub has misrepresented their prices.
Why do they need to care about the markup? If the burger price seems like a good deal, go for it, otherwise don't.
> Some of the restaurants customers are turning it down and going elsewhere because Grubhub has misrepresented their prices.
Well then that seems like the situation is fixing itself due to everyone's free ability to do what they want? So why are we complaining?
Why don't you answer the question?
>Well then that seems like the situation is fixing itself due to everyone's free ability to do what they want? So why are we complaining?
In what way is the situation being fixed?
Well I'm not the one who cares about it. I don't understand why anyone else would. So I can't answer it!
> In what way is the situation being fixed?
People who don't want to do business with Doordash don't have to. If you don't like Doordash you can just forget they exist. It's not a problem.
And let's not act like this law was passed because of consumers- this is restaurant owners trying to have their cake and eat it too.
Doordash or whatever says 'for $x we will put a $y WhateverBurger burger into your hand,' but $y is already higher than a WhateverBurger costs. People are left thinking that $x isn't that high a cost for delivering a $y burger, but the actual delivery cost is $x plus some percentage of $y, so both the numerator and denominator are falsified.
They're lying about their value proposition.
So add $x and $y together. If that price works for you go for it, if not, don't.
A markup plus a fee is already a common thing. It's done so that there is a minimum to cover expenses plus something that can vary with higher value items because you can get more profit from people who are willing to pay for more luxury items. It's not strange or unusual or a foreign concept to anyone already living in a Western economy.
I don't see why you'd care how they arrive at the final price. Just look at the final price.
These vendors are distorting that signal by misrepresenting the price. If it were clean-cut, and the original price were still visible, and the delivery as a separate 15-20% fee, then fine, I could do exactly what you suggest. Is it or is it not worth it to have this delivered right now?
But it's not. Let's say I see an arbitrary restaurant serving the kind of food I'm in the mood for, say Vietnamese food. I can then look and see the price to know roughly what quality of food to expect: Is it closer to $10 or $30 for an entree, since those are two very different things.
The total price might not even matter to me. But if I order a $20 entree with an extra delivery fee, and what shows up is a $10 entree, then that's a problem and most people will believe that the restaurant offers terrible value, because they were lied to by the intermediary.
That's the issue. It's not "am I will to have my In-N-Out burger delivered for $6 extra," it's "with Doordash lying to me about these restaurants I've never been to, I have no idea whether this is worth doing or not until I've already paid and accepted delivery."
But that’s just not true. Branded products vary in price on different retailers. A can of Coca-Cola can be wildly different prices in different places. Are you not used to this as a consumer?
> Having a 3rd party, which may still add value to both the brand and end-user, interject and abstract from the brand's determined prices is unethical, period.
I don’t understand - have you never bean to a supermarket or a department store before? They sell other brands in their store. Do you not realise they’re also marked up?
I think everyone else is playing dumb!
They're telling me they're shocked that a business would mark up a product they buy from someone else to re-sell? And I think it's a bit off they're calling it 'unethical'. It's no different to what other companies do all the time and people consider it acceptable and the only distinction is the label of delivery/retailer?
The restaurants do it themselves! They resell wine with their own markup plus charge a service fee!
Also, this is a luxury product we're talking about - restaurant food delivered to you home. Why are people so aghast that they're having to pay a marked-up premium for it?
Imagine you’re selling chocolate that you want people to associate with luxury/wealth. To achieve this you might want to limit resellers to be 5 star hotels and luxury stores rather than the 1 dollar store.
Of course you can. What makes you think you can't?
People are free to resell any goods they own (exceptions for things like controlled substances, other things with regulations etc.)
Took you long enough, thread!
In general we don’t expect resellers to reveal their cost of goods sold.
That's exactly what Grubhub is doing.
Because customers who order through Grubhub/Doordash blame the restaurant for issues such as high prices and wrong orders instead of Grubhub/Doordash. So on one hand, the restaurant gets increased business but on the other they never interact with the customer directly and so their business' reputation depends on Grubhub/Doordash/etc to not fuck up, which is unlikely.
It would be better and fairer to legislate that GrubHub and others must be clear about where their pricing comes from rather than legislating what their prices should be.
They can still charge whatever they want for their fee. They just can't hide their fee in the list price of your sushi.
Legal: "Your pizza is $10. Our fee is $3, delivery is $5. Total bill $18." Restaurant gets $10.
Not legal: "Your pizza is $10 (but we quietly take $3 of that). Our fee is $3 (but we hid an extra $3 in the pizza!). Delivery is $5. Total bill $18." Restaurant gets $7.
Legal: "Your pizza is $7. Our fee is $6, delivery is $5. Total bill $18." Restaurant gets $7.
Legal: "Your pizza is $10. Our fee is $6, delivery is $5. Total bill $21." Restaurant gets $10.
Legal (but not great for business): "Your pizza is $10. Our fee is $600 because 'fuck you, we have VCs to pay', delivery is $5. Total bill $615." Restaurant gets $10.
Let's pare it down to only you and the unsolicited service - You come home from work and the neighbor kid from six blocks down you've never met bills you for mowing your lawn while you were away.
Let's pare it down to only the unsolicited service and the business - Hi, we put out a bunch of ads that say we're you and have a bunch of customers lined up ready to order. We'll tell you who they are for a 10% service fee. Also we lied to your customers about your prices.
Imagine you bought a new car two months ago, then find out the sales person was just some guy who hangs out on the lot, told you he works for the dealership, and charged you a 10% markup over the dealership's actual price. Imagine your elderly neighbors fell for a door-to-door roofing scam that works the same way.
Then they charge the customer for an additional service actually rendered - the delivery. They charge this as a delivery fee and a markup that they can vary on more expensive items. This is pretty normal for a retail business to do.
When they're marking the item price up, that claim is false. Given these apps' SEO juice and ubiquity, users are left with the false impression that Restaurant X sells a pretty expensive burger.
Like when you shop on Amazon - they say 'the TV is $x and our delivery fee is $y' - really the manufacturer charged them < $y but they mark up and then also charge a delivery fee, don't they?
Nobody looses their mind at this.
I would be upset if Amazon had brick-and-mortar stores and they sold me a $100 TV with a $10 delivery fee online, but that same product was available for pick-up at $90. I'd be fine with it sold in-store for $100.
We do flip out when these sorts of pricing tricks are used. One I can recall: Best Buy ran a bestbuy.com intranet in-store to wiggle out of online deals. https://www.engadget.com/2007-03-03-best-buys-secret-intrane...
This seems like an information problem rather than a pricing problem. As long as the customers understand the relationship between GrubHub and the restaurant, I don't see any problem with GH charging whatever the market will bear. But right now they seem to be deliberately misleading the customer by listing fake prices separate from the delivery fee.
I agree that it's scammy that grubhub etc. is pretending to be the restaurant. But if they made it clear, we are a delivery service giving you access to this restaurant, if you want to order this food you can do so for $17.99, I think everything would be fine with that business model.
Previous discussion: https://news.ycombinator.com/item?id=23216852
Once a substantial portion of a restaurant's orders come in this way, they can cut off the flow at will. "Sign a contract with us, or these folks will go elsewhere".
- products sold directly by Amazon: you have products sourced through (nominally) a legitimate supply chain, where there are legal agreements for Amazon to be a distributor of the products. If the product is faulty, Amazon is likely protected by those agreements and the liability will likely ripple back to the OEM. But, Amazon sold the product to you, and depending on consumer protection laws in your jurisdiction, may ultimately be responsible if, say, the manufacturer goes out of business.
- Fulfilled by Amazon: this gets trickier. In this case, it’s relatively clear that you’re not purchasing the product from Amazon, but rather from a company that has stored their product in Amazon’s warehouse. It seems to me that Amazon is less likely to be on the hook for this.
- Third-party sellers: Amazon is mostly just a catalogue and payment processor in this situation, not to different than Etsy. Most likely the seller is on the hook here and not Amazon. Depending on how the seller came to acquire the product (legit supply chain or other), the manufacturer may or may not be on the hook via the distribution-agreement ripple. (For example, an independent company that refurbs broken phones and resells them on Amazon is unlikely to create liability for Samsung)
In the delivery case, we’ve got an unlicensed (health inspector-wise) company distributing prepared food from a vendor they have no formal agreement with. If someone were to get sick, it seems pretty reasonable for the restaurant to shrug and say “we followed proper food handling protocols, maybe the liability should go onto the unlicensed company that bought our food, did who knows what with it, and resold it without our permission”.
You're right that if Amazon sold it directly they're definitely liable. But even if a third party sold it, there's an argument (which some courts have accepted) that Amazon is the "real" retailer. Substance over form.
Note that Amazon doesn't even give FBA sellers the customer address anymore. They're effectively a retailer who just pays suppliers on consignment.
The delivery company may or may not have the ability to rectify issues at the end of the month with the restaurant depending on their relationship.
At my local pizza place, the delivery drivers are also wait staff and cooks (not primarily, but are able to serve in those capacities). When there are no deliveries, they're working (and getting paid) - the majority of the time, they're a pizza place and doing deliveries. Dominoes excels at doing this at scale.
But if you're the local sit down brew pub delivery isn't part of your standard thing. You can't hire a person to be a driver with the expectation that they'll do one delivery a night... and then what do you do on the nights they don't work?
A restaurant that isn't set up with deliveries being a primary source of getting to food to the customer - which includes having the staffing levels/tasks for delivery high and low - the economics of it doesn't favor adding staff to do it.
Note that deliveries also take a certain commitment of capital to make sure that the packaging for the food is appropriate for take away and that the delivery vehicle has the proper things to make that work (keeping food hot or cold as appropriate).
Having staff that can meet the demand as appropriate is key there for customer expectations. If you call for delivery and the wait time is 2h because they only have one driver that does an out and back each time - that's not going to be good.
So they could... but it an investment in staff that needs to be flexible in time and task, in packing for takeout, and in vehicle equipment. Unless this is to add a reasonable bit to revenue, the additional planning and logistical difficulty isn't worth it.
When the delivery service makes its own website/phone number, pretending to be the restaurant and intercepting its normal business, or starts doing deliveries without notifying the restaurant (potentially hurting the reputation of the restaurant), that's where the issues emerge.
https://www.saddlebackbbq.com/how-google-doordash-grubhub-co...
Previous discussion: https://news.ycombinator.com/item?id=23194727
https://www.buzzfeednews.com/article/venessawong/grubhub-pho...
It's not at all clear that they really need to spend that much money on their expansion or that they're doing so ethically, but either way, don't weep at their losses. That's not the reason they're charging so much.
As for the restaurants, they're in a bind. The services that deliverers provide should be much cheaper at scale. They need somebody to do delivery and to take online orders, both of which are a hassle to set up yourself. Not impossible, but you'd expect economies of scale if you're effectively sharing a driver pool and software development cost with all of your competitors.
If your competitor has a delivery service and you don't, you'll lose a lot of business. If you develop it yourself, you pay the overhead. If you buy in to the services, they have a lot of power to set prices where they want.
I don't know why the delivery services aren't forced to undercut each other's prices to get the businesses. Customers don't seem to care which service they use; they have all of the apps anyway.
That's why it's expensive. That's why you need marketing who doesn't just take out a facebook ad but literally visits and calls restaurants, IT teams to literally teach the basics to restaurants, and an ops team who can assist your delivery folks when a restaurant runs out of onion rings or accidentally slips an allergen into an order. All of that adds up real fast because you need all of those services running at all the times the business is running.
Nobody is going to order from a delivery service that only gives you two options. Nobody is going to deliver for a service that only gives you two or three delivery runs a night.
> economies of scale if you're effectively sharing a driver pool and software development cost with all of your competitors.
The software is so cheap as to be fungible here. It's the drivers who have geographical restrictions, dynamic shifts (gig economy) and also the freedom to not take orders. If you're a runner and you know Chik-fil-a has horrendous lines all the time, you may just never want to run those orders - and in the gig economy, that's a viable choice for you. The delivery service still has to handle those cases (pay more on them, offer incentives, argue with the restaurant for a way to get orders to drivers more easily, etc).
> I don't know why the delivery services aren't forced to undercut each other's prices to get the businesses.
Delivery services don't generally struggle to get customers, they struggle to get and keep drivers.
You might be missing a step there though. They struggle to get and keep drivers at a price that consumers are willing to pay, which is obviously tightly related to the problem of getting customers.
If they paid $100/hr, they'd have more drivers than they knew what to do with. They only struggle with getting drivers because of the economics of the customer.
People were able to find restaurants and place take-out orders before these apps existed. It's just harder now because these apps have spent big on SEO and marketing to push them down the search result list.
You are the only one on this page making any sense... HN has become a socialist dystopia. I looked through your comments and I can tell you right now that we will welcome you at Voat with open arms. There is zero censorship also.
At least this is what I've seen recently. I look at a restaurants menu, and it will have a dish for $9. When I try to order it, Postmates & Uber Eats say the same thing is $14 (though they both agree on the price). This isn't just one restaurant. This is most restaurants I've checked in Pittsburgh.
In this example, I would probably never go to the restaurant for the $14 meal. I'd go once a week for the $9 meal. This seems bad for consumers because it's tricking you on how much the food costs and how much delivery costs.
No, delivery apps charge you extra and pretend it's part of the restaurant cost. If you can buy your burrito at the restaurant for $8, the delivery service is going to show you a price of $10 on the order screen (and add in their $4 delivery fee, etc).
Citation: my family runs a restaurant that has slightly higher prices on Uber Eats despite the rule against it. It wasn't Uber that set those prices though, it was us. It still doesn't fully offset the 30% haircut we're taking though.
The delivery companies hide their true costs by making the delivery fee seem cheap. This law simply shows the true cost of the service to customers.
If the only way these companies can survive is by leeching money from restaurants with extremely slim margins, they simply shouldn't exist.
Here is my impression of the problem: Say the restaurant was taking $10 for each order, making $3 in profit per order. i.e, cost is $7.
Before delivery apps: 100 orders/day. Total profit $300.
After delivery apps: 200 orders/day, cost $7, sale $7.5 (-25% fee), $0.5 profit per order. Total profit $150.
After delivery apps, if you don't sign up for the app and agree to their 25% fee: 50 orders (because people are mostly using the app now), total profit $150.
If true, it is a lose-lose for restaurants. Their profit margin is going down either way. On top of that their costs are likely going up, since they have to serve more orders.
Because these delivery services are Moloch[1].
The value these services provide is to customers, not businesses, and the service they provide to customers is pretty minimal. But it's a slight convenience for customers. That means that if one restaurant uses a delivery service, and their competitor doesn't, the first restaurant's ordering experience is slightly easier than their competitors', which gives them an advantage. Let me reiterate that, because it's important: if and only if one restaurant uses a delivery service and their competitor doesn't, using the delivery service gives that company a competitive advantage.
So what happens is first one restaurant starts using a delivery service, and they have a competitive advantage, because none of their competitors are using the delivery service. But one by one, their competitors notice, and start using the delivery service. Finally, there's only a few restaurants left not using a delivery service, and by this point, they have to use a delivery service, or they can't compete.
So let's go back to the competitive advantage here: if a restaurant uses a delivery service and their competitor doesn't, using the delivery service offers a competitive advantage. But that's not the situation we're in any more: the restaurant is just using the same delivery service everyone else is, so none of them get a competitive advantage from using it. Instead, the entire restaurant industry has just let this middle man into their business that provides no competitive advantage, but charges rent.
The rational thing, of course, is for restaurants to create a united front and all agree not to buy into the delivery services in the first place. However, it only takes a few short-sighted restaurants breaking rank for a short-term profit, for that to all fall apart. Cooperation at this level has to have teeth, because there are incentives to not cooperate. But in the US, there's a strong faction of people who think any regulation is bad, so regulation that actually solves the problem won't happen. The best that can be done is to limit the problem with measures like this 10% regulation.
Ultimately, the best solution that can work without regulation might be local delivery service cooperatives, which allow businesses which don't have the delivery throughput to maintain their own delivery staff to pool resources, while not giving up a large percentage to rent-seekers outside their community.
[1] https://web.archive.org/web/20200528004232/https://slatestar...
Nobody's forcing restaurants to enter these partnerships, there's competition, and delivery people still need to be paid.
There are two obvious outcomes here: either food delivery apps will restrict delivery to profitable orders only (stop working for some restaurants, require higher order minimums, etc.), or they'll stay to avoid bad press but then this is essentially the city blackmailing investors to subsidize food delivery.
It's one thing for COVID-19 to restrict business services, and deeply unfortunate that businesses wind up closing. It's another thing entirely to force businesses to continue operating but at a loss.
If Portland or other cities believe it's a necessary public service to provide subsidized food delivery, then they ought to pay for it themselves through tax dollars. Either hire city-employed deliverypeople and make them available to restaurants, or pay GrubHub etc. to do it through a normal business contract.
But capping food delivery rates to far below what they were pre-pandemic is not a fair approach.
Also, there is an apparent lack of competition in this space, given that restaurants end up signing contracts that allow delivery services to setup fraudulent phone numbers to capture customers that would otherwise have a direct relationship with the restaurant.
Presumably the ordinance only applies during Covid times because afterwards the restaurants will regain a fair amount of bargaining power with their dine-in customers. Currently a restaurant can only see so many orders coming from a delivery service, and has no way of knowing how many of those customers would have been direct if not for the front running.
This is a cap on the commission charged. The article doesn't say anything about total price or about misrepresenting prices. Where are you getting that? Why are you saying people aren't reading the article?
And the fraudulent number thing is a separate issue, totally unrelated to level of competition. It's scummy but irrelevant to this particular issue.
Competition exists because there are multiple mainstream food delivery services and restaurants have been delivering food on their own for decades.
The commission is the cut of the "food price" that the delivery service gets from the restaurant, in addition to charging the customer-facing "delivery fee". So if the customer sees "Pizza $20, Delivery $5", and the restaurant is paying 30% to the delivery service, the actual breakdown is "Pizza $14, Delivery $11". It's misleading to say that the pizza costs $20 when $6 of that is actually a hidden delivery fee.
How this falls out depends on whether the listed food price was the same as the restaurant's list price, had been inflated by the delivery service. But continuing the example, with the cap we'd expect to see the explicit delivery fee go up to ~$10 (if customers will bear it), and the food price to end up between $14 and $20 depending on the market for the food itself.
> And the fraudulent number thing is a separate issue, totally unrelated to level of competition
My point there is that the services are only allowed to do this in such a misleading way by the restaurant signing a contract allowing them to do so (otherwise it would be straightforward fraud). Despite the presence of many delivery services, it would seem they're all pushing similar scummy terms. This is an indicator of a lack of competition.
No it's not. While some delivery sites do list higher prices than in-restaurant (arguably misleading), that's not the norm. And as long as they don't, then if a pizza is $20, then if you're eating in-house $6 of that is going to dining space, tables and chairs, plates and utensils, dishwashing, etc. If it's delivery, the $6 is going to the delivery service, which includes listings, website maintenance, etc. All businesses spread their costs out among customers in different ways. There's nothing misleading about it.
And again, "scummy terms" in no way implies lack of competition. Not sure where you got that idea from? Tons of industries are full of scummy terms while competition is thriving. Scummy terms have nothing to do with lack of competition and everything to do with which marketing funnels and pricing strategies turn out to be most effective. It's mainly about consumer psychology.
> All businesses spread their costs out among customers in different ways. There's nothing inherently "hidden" about it.
The restaurant is front and center as being the provider of the food. The delivery service is explicitly stating that this food costs one specific price, and delivery another specific price. Meanwhile this breakdown is false and arbitrary, with a seeming goal of misleading customers about how much getting your food delivered actually costs.
> And again, "scummy terms" in no way implies lack of competition. Not sure where you got that idea from?
Effective market competition generally results in reasonable terms, due to many meetings of minds. A lack of reasonable terms shows there is not effective competition over the relationship. If a restaurant could instead sign up with a delivery service that didn't front-run their customers, they wouldn't take to writing exasperated blog posts about it.
And your idea that competition results in "reasonable terms" is just wrong, I'm afraid. You're stating this as fact when it's not. There's tons of competition in airfares and in signing up for credit cards, but they're full of scummy terms. And restaurants objectively have lots of choices of delivery services to sign up with. In fact, there has never been a time in human history when they had more choices for delivery. Those are facts.
In general, sure. But the combinations generally simplify the transaction rather than obscuring it. Shipping cost can be built into product price. People balk when a product cost gets hidden in the shipping price.
As I said, the specific problem here is a delivery service purporting to charge one price for delivery, while hiding the actual cost of their service within the purported price of the food. That's borderline fraudulent.
Your whole argument is to keep insisting that there is nothing wrong with this. But it's akin to soliciting collections for charity, and then taking 20% of the donations as your administrative fee. Just because some money went where you said, does not mean you're entitled to allocate the rest how you see fit. We've also seen similar play-fast-and-loose-with-customer-money behavior from this industry where tipping a worker caused their wage to be reduced.
Since our argument has consisted of mostly talking past one another, I have to ask - what exactly is so repellent about making delivery companies disclose the actual price of their service?
> In fact, there has never been a time in human history when [restaurants] had more choices for delivery. Those are facts
I'm not disputing your "fact", I'm disputing your framing. If we were talking about orders from a restaurant's own website, being handled by a contracted delivery vendor, it would be appropriate. But the Silicon Valley nouveau-middleman business plan is to become popular and capture entire markets through network effects. It's disingenuous to frame signing up with a given service as some isolated choice, when those services actively work to inject themselves into existing customer relationships.
And sure, there is general competition between services. It's just not competition that results in reasonable market terms. Just like your examples of airlines and credit cards, market failure generally invites regulation, which is exactly what we're seeing here.
I’m curious. How long does a company need to lose money on each unit of work they do, funded by endless foreign vc money, before it’s clearly an abuse of their financial power and destructive for the market?
No company can compete fairly against people willing to lose billions just for market share.
So as long as consumers are benefiting, and the situation can't go on forever, where's the abuse?
Abuse is generally a characteristic of natural monopolies, etc. Not merely a competitor with deep pockets. That's just healthy competition for the good of consumers.
I believe it's better to fix shady practices. If I pay 25% to Uber, I want to know I paid 25% to them and not the restaurant. Then I can decide if the time savings is worth that 25% or not.
So what if the food providers sell off to the delivery services? Perhaps it will result in a better match for the market demands. Preserving jobs isn't the goal of capitalism, profit is. Those businesses who try to go too far toward extreme profit usually fail when smaller, more nimble upstarts dig the foundations out from under the bigger ones.
Isn't this what this does? It's a cap on the hidden cut these apps take from what the bill shows as the restaurant's revenue.
Instead of taking 30% of my $10 pizza, Uber/Grubhub/etc. now have to decide to put that $3 in the fee they show to the user if they want that revenue.
The delivery apps aren't forbidden from charging the customer a sky-high fee. They're just not permitted to hide it in the supposed cost of food.
Before: Pizza ($10), Grubhub fee ($2), delivery fee ($3), but the Grubhub fee is actually $5 because they're taking 30% of the restaurant's revenue behind the scenes.
Now Grubhub has to accurately show their fee as $5 if they want that revenue still. The restaurant either makes more money to stay afloat, or can charge less for the pizzas if they're doing fine.
The law sets a cap on fees (including delivery fees!) of 10% of the menu price, and prohibits delivery companies from withholding wages or tips from delivery staff.
> “Purchase Price” means the menu price of an online or phone order. Such term excludes taxes, gratuities, and any other fees that may make up the total cost to the customer of an online order.
> It shall be unlawful for a Third-Party, App-Based Food Delivery Platform to charge a Restaurant a fee (including, without limitation, any delivery fee) for the use of its services that totals more than 10% of the Purchase Price of the order made through the Third-Party, App-Based Food Delivery Platform
Nowhere does it say they can't charge customers a huge app/delivery fee.
Do delivery apps charge "delivery fees" to restaurants as well as to the customer? Yes, the ordinance applies to restaurant charges, but this provision reads ambiguously to me, as I don't know if third-party platforms charge the restaurant a delivery fee while also charging the customer a (possibly different) delivery fee.
They can't charge a restaurant a big delivery fee. Whether they are or not currently is immaterial; that wording prevents them from going "fine, we won't charge commission, we'll just tack on a different fee that replaces it".
Legislation often includes these sorts of "we know you think this is a loophole, it isn't" wordings.
If a luxury delivery service drives Lamborghinis and charge 200 to wealthy people, so be it. If a Toyota Corolla wants to charge up to 25% for your local pasta restaurant, so be it.
One can argue that food delivery isn’t really just a “luxury,” but probably best in terms of preventing spread during the coronavirus pandemic.
This is, in effect, forcing these delivery companies to be more transparent about their pricing. Instead of charging a restaurant an invisible 25% it will be capped at 10% and the delivery companies will have to move the remaining 15% onto the consumer. Or I guess they can eat the 15% but they can't make money as it is, so I doubt that.
I would be fine if it was instead just a total price transparency law. I think consumers should know exactly where their bill is going. However, these delivery companies are extraordinarily shady and I believe they would leave no stone unturned to obfuscate the fact that they are secretly ripping off restaurants. I think capping the invisible restaurant fee at 10% is the simplest approach to reach the same desired end result.
This forces Uber to more clearly tell the customer how much their convenience costs, but it can be anything Uber wants.
Because the demand for delivery services on behalf of restaurants is inelastic right now -- they are relying on delivery for their revenue, and it's difficult to manage that in-house. This leads to price gouging.
This is an extremely simplistic perspective on the matter.
Competitors have proved that they are willing to lose money on the short term, because the goal is to dominate the market in the long term. This has a name, and it's "dumping".
On top of that, these services are saturating and cannibalizing the food delivery market share, not by driving restaurants out of business, but their delivery services. At some point in time, the perception of such services would be that they are the only available options, giving restaurants no chance to compete, even when they are the actual providers or manufacturers of the goods.
That's true of any company/workers/suppliers. People only know and care about how much they end up paying. As long as there's a minimum wage, people don't know, and usually don't care how much a company pays their workers/suppliers.
A better analogy would be extra baggage. I appreciate being able to save $25-$50 in domestic flights by not bringing an extra bag.
However, if this means that the supplier can’t charge the restaurants but can charge a higher delivery fee and it’s explicit. That seems like a win. A free market operates more efficiently when all parties have enough information.
Why have this expire post COVID though?
Are any of these food delivery companies even making money? What will capping their fees do except make them lose even more?
With automation, it might change the economics. I think that's what everyone's betting on. I think the Ubers and all are just trying their damndest to not completely drown until driver automation reaches a certain stage. They obviously can't openly say that because there would be revolts from their drivers.
Uber at least has been quite explicit about that. It's somewhere between delusional and what's known in the vernacular as "lying" but investors who are either naive or are cynically bought into the greater fool theory lap it up.
Delivery specifically can work in dense areas but it mostly relies on local kids or family members working for peanuts and can't really pay for overpriced SV engineers or VC yachts.
In fact, with all their tech and economies of scale, I'm surprised food delivery services are doing worse in terms of per-unit profitability than the low-tech restaurant-provided ones despite already charging excessive fees.
I guess the reason is that the various venture capital firms poisoned their own well by subsidizing the services and competing at below-cost pricing.
- Restaurants say they are paying too much.
- Delivery companies are losing money.
- Customers are paying fees to the sites in addition to the delivery cost we used to pay.
What gives? It seems these can't all be true.
But yes, all of those can be true. Paying someone for 30 to 45 minutes of their time is expensive.
Definitely, but this was also the case before Uber Eats et al.
Not to mention that crazy high costs of developing, running and maintaining slick apps that work for all restaurants, restaurant and customer acquisition, and tech support. Those costs have to be made up somehow.
- VCs continue to pour money into the delivery companies
... that is all that is required for this to continue. If that stops, presumably a whole bunch of these firms will fail and that will be the end of that.
With food delivery, it feels like everyone is getting screwed.
Of course, Uber's objective is to acquire you as a customer and not give you free food, so it's limited to new accounts only and presumably they check credit card and phone numbers to prevent multiple accounts being created.
However, if you try hard enough, you can indeed take advantage of it and automate the process assuming you have a good source of phone numbers and non-fraudulent credit card numbers.
But I don't really get it.
To be clear, the people doing well out of this are the delivery customers who are receiving a subsidy from all other participants.
Requiring market places to advertise the actual fee (i.e. anything that doesn't go to the restaurant directly) would probably help here: I might be willing to pay a 5% extra for the convenience, but at 30% I might think twice. It would both improve competitions between marketplaces and marketplace vs direct order.
Of course I'm sure that companies will do anything to game it (for example shifting costs to restaurants to fees not directly connected to the orders themselves).
Only like maybe 5% of the restaurants offered delivery on their own, mostly pizza chains and Chinese places.
The restaurant I regular order it's family run and either the father or son will deliver to us.
What we have now is a lot of abstracter layers of services, payment processors, workers, cloud computing, and VC. All these layers add a cost in an industry that can't afford the overhead. Unlike software and services, restaurants are high capital, high labor intensive businesses with low margins.
Perhaps the idea behind not imposing such regulations is a free market argument, in which the most efficient price won’t be selected for, thereby not producing the optimal supply/demand.
I would argue against this point that we would be assuming perfect competition, and given the anti competitive behavior of gig economy companies in this space (such as buying restaurant domain names, making fake websites with phone numbers they own to trick people into thinking they’re ordering directly) and lack of competition, this seems appropriate for now.
Though the policy timeline should be extended, I don’t believe it should be indefinite. When the aforementioned issues are resolved, I’d agree with the free market side.
In China, if I recall correctly, they have a food economy such that it’s cheaper to order take out, and have the food delivered, than actually cooking. We have inefficiencies In the infrastructure, less population density, and lack of competition that prevents us being in a similar boat.
Is this true?
Here in London, a typical delivered meal would cost ~$20, whereas a weekly shop and cooking probably takes 5 hours/week, but costs only ~$2 per meal.
I agree that the ideal solution would be hitting the anti-competitive behaviors directly, rather than an rate cap. The overall issue is the pressure that a large delivery company can exert on individual small business restaurants, with the solution being coordination between restaurants to ensure they all get a good deal, or strong competition between the delivery services.
Because COVID has entirely transformed the economics of owning a restaurant. It might be worthwhile revisiting this in the future when eating in restaurants is available (and safe).
All of these restaurants are paying rent on their dining rooms, when they're only using the kitchens. The customer experience, paid for by waiter wages and dining room rent, is now being provided by the delivery companies. The whole customer interaction, from taking the order, to processing the payment to bringing the food to the customer has been taken over by the delivery companies, and that's a huge part of the cost and the value of the meal.
Restaurants can't reasonably expect the delivery companies to just eat all of their substantial costs because the Restaurant has a stranded asset that used to provide that service. Really, it should be the landlords that are taking the hit because all of that prime dining space now has the same value as some tiny cloud kitchen off a back alley.
Ultimately though, the problem of the pandemic is that restaurants need customers to pay for both the dining room and the delivery, and that's just too much money. If you're running a cloud kitchen, you don't expect to be able to get the same amount of money for a meal as a sit down restaurant, but the sit down restaurant is now providing the same product as the cloud kitchen.
Those companies do their own deliveries and manage to make enough money to not even charge more for delivery (or offer a collection discount) - although usually a minimum cost of say £20.
Why can't VC companies do it that efficently?
Now, if I still lived in London? Different story.
Certain restaurant types (high margin, food well suited for delivery) and locales (high population density) seem well suited for delivery. The local steak house? Probably not, for a number of reasons:
- The main profit generator at many sit down venues, drinks, are unlikely to be ordered.
- Impulse add-ons, especially dessert, are less likely. Even with dark pattern upsells on apps. Dining out has many minutes or hours during which additional ordering opportunities are available. Ordering out is a single discrete event.
- On platforms that don’t work with the restaurant, the option of a higher margin delivery-only menu doesn’t exist. Items with low or negative margin can go out the door that otherwise wouldn’t.
- Delivery services seemingly take more for merchant processing than many restaurant chains I’ve helped secure acquiring for. Likely due to much higher chargeback/fraud on digital apps than through traditional delivery or in-restaurant. This is a killer on a low margin vertical such as dining.
At least, that was my experience.
It's trivial for me to concoct an order that will take ~1h to deliver. With a $15/h minimum wage, that means ubereats needs to charge $15 in fees before making any money just to cover labor.
It probably takes at least twice as long as an equivalent uber ride. The delivery person needs to find somewhere to park twice and spend time waiting in line.
Maybe throwing billions of dollars of AWS scale microservices isn't always the solution
Yeah, it's less convenient for consumers, but at least it won't drive your favorite restaurant out of business.
If you think about what a food delivery platform is doing - they are trying to service convenience for customers - they need to deliver on speed at the lowest cost possible. How do you do this when your task is labour intensive and there are few barriers to competitors? You’ve got to drive price down.
Likely there will be a period of consolidation until one service rules a region and then maybe a slow grind back up to profit.
Imagine a bunch of ghost kitchens next to each other in an industrial park, offering discounts to certain neighborhoods if they agree to order in a certain time frame.
They are a true oligopoly taxing the entire economy and have acted in a highly anti-trust fashion. Limiting their fees to something like 0.1% of the transaction is plenty to not lose money and would put back something like 2.8% of every transaction back into lower prices or into the businesses hands.
[1] https://usa.visa.com/dam/VCOM/download/merchants/visa-usa-in...
Restaurant customers really need to change their perceptions and understanding of restaurant economics before it collapses under the current pressure – many will not return for a long time, if ever.
At most i support a law requring that resturants can set different prices for uber eats than for walk in customers
Sure, but it didn't translate into anything concrete. Pearl Jam suffered a lot by not being able to book major concert venues and pretty much stopped touring for a while. Ticketmaster went on to bigger and better things to where it's pretty much the only game in town for most artists/concert venues.
As video game pricing has shown, consumers don't give a shit about fair value when it comes right down to it.
What's really needed for the restaurant industry is for a co-op model where a bunch of restaurants in a city/locality pool together their resources to hire a fleet of delivery drivers and a common ordering platform.
A simple online-ordering system, plus a map that shows the location of the driver is all that's really needed. Craigslist makes tens of millions with a minimalist interface. No reason why you couldn't build a relatively cheap site like that for this co-op model.
Unfortunately no one has the incentive to build this platform for them. Because you can't return billions to your VCs this way.
I'm too ignorant of all the moving parts to confidently make that analogy, but I can't help but wonder if this sort of collapse could be a net positive thing. I think there are opportunities here for all the participants, even if some of the incumbents will not survive.
Seems like charging for the distance traveled and even the time of day would make a lot more sense
Also, a maximum %age is easier to regulate, while the factors you mention are significantly harder to regulate. Moreover, %ages don't need readjusting to account for inflation.
orders for 1-2 people yes, but that doesn't handle large orders for parties, etc
f(number_of_items, distance_traveled, time_of_day)> noted that the city rule has a provision that drivers’ pay can’t be reduced because of the fee caps
This seems impossible to enforce right? The city can't reasonably have any insight into why driver fees change.
What you pay as an Uber passenger is not even remotely close to what Uber pays its drivers. So a $10 cost for a food delivery may not be realistic.
How much an Uber trip costs Uber depends on a lot of factors, but I can tell you from experience that very often if a passenger paid $10 for a trip, the driver saw far less than $5 of it. That's why they're always angling for tips.
When I drove for Uber, a very common run was from the airport to a specific large convention hotel. The trip was maybe five miles. The passengers often complained about having to pay $25-$40 or more for the short trip. As a driver, I got maybe $3.50 out of it.
The whole restaurant industry is so messed up with coupons and all sorts of marketing tricks and manipulations that I just wish there was static price with single delivery fee so I could enjoy my meal and get over it without having to be constantly vigilant to not feel ripped off. I hope more places follow Portland.
Basically a middle man to replace restaurant's own custom ordering systems (which are often janky, and all act differently). The delivery would still be done by the restaurant's employees, but the service would handle billing the customer, building the UI, and so on.
Such a service could charge a far lower fee to the restaurants, since they would not need to employ, ensure, etc. drivers. I doubt the customer would care either way, as long as the UI is just as convenient as the existing food delivery services.
So this seems a win on my part.
One extreme example is a burger restaurant in SW Seattle that charges $6.80 for a burger if you buy it in the restaurant and $12.00 if you order it on a delivery app.
With a normal uber ride you have to walk out to the curb to meet the driver, who does not have to find somewhere to park. If they brought the orders out to the curb like when an uber arrives rather than having drivers park & wait maybe that would make delivery far less expensive.
Price caps, fee caps, rent caps, and "price gouging" bans produce shortages. [0]
This is an economic fact as strong as the law of gravity.
[0] https://fee.org/shows/audio/words-numbers/the-law-of-demandi...
Some restaurants don't even know that they're listed on these delivery services and get their search results more or less hijacked by internet savvy delivery startups with infinite money.
In other cases they feel as though they have no choice due to the popularity of the online ordering services, and they get into contracts they don't really understand and have their already razor-thin margins eaten into.
Now all they have to do is force delivery apps to deliver at that price point. But since they can't do that, they'll simply skip Portland. Maybe 30% is too much, but 10% is way to little. The company, drivers etc have to share that $5 off a $50 order and a lot of that is cost (car, gas, insurance)
I read this article and actually looked up my city councillor and emailed him. I asked if council had considered this and told him I would support this type of move.
Oh and ticketing too, venues and artists pay an absurd amount to Ticketmaster etc. Needs to stop.
Personally I think a provider of any 'value add' service being able to dictate the price without their service is insane.
That should, in my opinion, be outlawed.
Oh wait, they just did.
Robber Baron
I suggest we update the Wikipedia to add "technologist" behind "industrialist" on the title.
Wikipedia is not an effective venue to litigate whether technology companies are good or bad. Thank you for not wasting Wikipedia editors' time.
You can still tip the delivery person as much as you like.
Since all these services are operating at the loss, the "delivery worker" might actually get more than the full fee.
But in any case, my point is that the cap is not on how much that person can make, but on how much these companies can charge.
But by increasing the prices of each menu item by 20% (to cover the app's cut) and having a palatable $3.99 delivery fee (so the total cost to the customer is the same), you can increase sales.
Amazon and other online retailers figured this out a long time ago. Moving some of the shipping fees into the price of the product can boost sales.