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Comment by falcolas | Hacker News Reader

Are any of these food delivery app services actually making profit right now, or are they just burning VC capital? A news podcast I listened to yesterday made the statement that every food delivery company is doing deliveries at a loss. This seems problematic for making delivery a viable business without forming a monopoly to get the scale required to make things profitable.

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drivers bringing restaurant food to individual houses doesn't really seem like something that scale helps. More people using the service requires more drivers.

It could scale if there's enough people ordering food from the same geographic location to the same geographic location at around the same time.

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.

That's likely the only path to profitability; making deliveries more efficient by saying we'll deliver your food, but it'll be sometime between 5-8pm.

So several hours old food that's sounds like its going to be really delicious NOT

No. If the delivery service knows that they need to send 4 orders to a single neighbourhood, instead of sending a driver back and forth 4 times, they instead can have the restaurant prep the 4 meals at the same time and send the driver to that neighbourhood once. Pizza places do this all the time. You'll often see them with multiple delivery bags in their car.

Brazilian iFood already does this. You can order a 1.85 USD meal (with no extra fees) a day in advance. It arrives at a predefined time in a generic iFood package. I've never seen such an unappetizing dish in my life, including what I've seen children be fed in a really poor orphanage I used to volunteer in. I really hate the distopic future we're heading into.

more order flow means you can pool orders together more efficiently. i.e. several people in the same neighborhood order food from the same restaurant within a few minutes.

Nope, they don't make any profit even when charging 30% fees. So this 10% cap will probably cause them to withdraw from the market.

If thats true, there is not a market to withdraw from ...

I've had delivery takeaways in British towns and cities for 2 decades, well before the likes of ubereats and deliveroo.

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?

Honestly, those delivery companies are probably underpaying their employees for delivery. I've worked at a pizza delivery company, and including tips, I earned about $140 a day (inflation adjusted, post-taxes) for delivering pizza all over town. It was certainly not enough to provide for a long-term living, given the vehicle upkeep costs and gas.

If I worked that full time, I could easily afford my apartment and other expenses. (Castletown, Isle of Man.)

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.

My only real comment here is that you do also have to put anywhere between $5,000 to $15,000 into your car yearly. Between elevated maintenance costs, additional fuel (somewhere around a tank every 2-3 days), and replacing the vehicle when it fails, it eats into the money pretty quickly.

At least, that was my experience.

No disagreement. The car would actually eat more of my budget than housing.

When I think of "Uber", 'well-compensated employee' is not something that comes to mind.

In personal opinion territory: And that’s a damned shame. Contract drivers should be able to survive on their full time work (and afford any of the externalities pushed on them by Uber) like any other full time worker.

It's a harder problem, though. I can order from practically any restaurant at any distance on ubereats.

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.

I suspect this is the real answer.

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.

Individual restaurants don't do many of the things delivery app companies do: offer an multiplatform app, have a sales team, 401k matching, expensive MBAs, software engineers, and lawyers, etc... A lot of overhead, and how can they really save money? Compare that stuff to just hiring a delivery person for near minimum wage.

And my local Chineese has a phone number, prints a new menu delivered round the estate every year or so.

Maybe throwing billions of dollars of AWS scale microservices isn't always the solution

Often the person doing deliveries also does other work in the restaurant when there's no deliveries to do. They clean, fold napkins/silverware, etc. The delivery person probably makes more money than an uber eats driver, and it almost certainly costs the restaurant less.

Yeah, it's less convenient for consumers, but at least it won't drive your favorite restaurant out of business.

The issue is that there is a race to the bottom in terms of price. Effectively chasing margins in an already margin squeezed industry.

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.

I mean, they're free to recoup the losses by charging a more realistic delivery fee directly to the customer.

I went to order Taco Bell on Doordash last night and the fees were crazy high. I added everything I wanted for me and my family and the cost was something like $60. So I packed up the kids and we drove to Taco Bell. It ended up costing $30. There was a $6.99 delivery fee and each item had $1-2 tacked onto the cost. I guess if they charged a $30 delivery fee at least I wouldn't have gotten "tricked" into getting all the way to the cart before bailing out.

They're not profitable with 30% fees; they won't be profitable with 10% fees, but they won't withdraw, they'll just adjust their burn rate in the hopes that eventually they'll dominate the market through undercutting prices that they can start to jack them up again through other channels, or bully municipalities into changing these rules.

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