Third-party food delivery remains an uncertain business | Hacker News Reader

Third-party food delivery remains an uncertain business

restaurantbusinessonline.com

26 pointsXnoiVeX50 comments

- Restaurants have to pay a big chunk of their margin to delivery apps.

- Consumers see increased food prices and other misc charges, greatly inflating their bill (sometimes up to 2x), and get a sub-par experience (long delivery times, cold food, incorrect orders).

- Drivers get no benefits, have to pay for fuel/depreciation/taxes, and sometimes end up making less than minimum wage.

- Uber Eats, Grubhub, Doordash etc. all lose billions of dollars every quarter (and are still valued in the tens to hundreds of billions).

I genuinely do not understand this industry.

My chief motivation for using these apps is that I don't want to deal with a phone call. I'm happy to pay a premium for that. I switched to primarily ordering online around 2000 and go out of my way to avoid ordering from places that are not accessible somehow. I hope that in the fallout of the obvious bad situation we're in now is not to roll back to days gone by on this front.

But.... why? I don't know where you're ordering from but calling the place is generally way faster than trying to futz about with an app to order a burrito or whatever

A typical exchange for me is:

"Hi, Jose's tacos"

"Hi, I'd like to place a to-go order."

"Sure, go ahead"

"Get me an OMG burrito and a large diet coke please"

"No problem. What's the name on the order?"

"tomc1985"

"Ok tomc1985, that'll be $8.43 and be ready in about 15 minutes"

"Thanks!"

I think its always a good exercise in empathy to try to imagine some reasons :)

- English as a second language. You need fairly basic proficiency to order online vs far higher proficiency to order via phone - specific jargon, high pressure, no non-audio clues

- even as first language many people dislike phone. Again, lack of visual feedback and other aspects

- harder to be certain you ordered correctly. You can review online order, you can easily mishear even a repeated order. Same for address, which can be complex in some cases. Then you get into discussion with either driver or restaurant on whether you did or did not specify east vs west, crescent vs road, sixteen vs sixty.

- timing. You can take all the time in the world to order online vs a very specific real time slice requirement of phone call. You can order online while on 2hr phone conference or watching tv etc etc.

Heck I've just persuaded myself not to use phone ordering :-)))

re: English ( or whatever main language of the country is), in a lot of cases traditional restaurants ( various Asian, Italian, Spanish, Mexican, etc.) are owned and run by non-native speakers. As some anecdata, i tried ordering by phone from my local Korean restaurant, and i could barely understand the person on the other side due to their heavy accent, especially on Korean words ( which the menu items are in) and the fact i'm non-native myself.

A few reasons:

1) I hate talking on the phone 2) Your experience is very different than my experience. I find it much easier to click through what I want than to do it via voice 3) My original motivation was around accuracy. There were many times where I'd get off the phone and was pretty sure there had been some miscommunication. Now they get a readout of exactly what I requested.

I hate talking on the phone too, but ordering food is usually the simplest of all phone interactions, unless they put you on hold and forget about the call.

And for order accuracy its a wash. There's no guarantee the restaurant will fill the order accurately even if its printed out in triplicate. Now that I think about it, the app experience is generally worse, accuracy-wise

My angle here is that I don't want to see these delivery companies rent-seeking on mom-and-pops profits when they really need them. Restauranting is a harsh industry and these delivery apps are really putting the squeeze on, and the app experience isn't even really that good unless you're picking from the featured list.

"ordering food is usually the simplest of all phone interactions"

It's reaaaaallllyyyy not though... Or at least not for everybody :-)

Never mind the jargon of main order you prepped for, I still freeze when I encounter dozen unexpected follow up questions on sizes sauces cooking cutlery garnishments combos packages savings whatnot. :O

I am with you on morality and approach and downsides of these apps, and how sustainable or fait the model is. But that's an entirely separate chain of reasoning from whether phone or app ordering is preferred :-/

4) I have had my credit card number stolen by restaurant employees in the past, and will now never give it out over the phone

I’ve had just a couple restaurants text a payment link for a phone order. I wish this would become more popular.

For me, I highly value switching to an asynchronous order system and the apps give me that. In the pre-app days, I'd sit on hold for significant amounts of time trying to get an order in on a Friday or Saturday night. (For one of my favorite local places -- in Chicago -- this is still the case as I have to fight through a busy signal every single time.) If a restaurant offers a self-managed online order system, I'm all for doing that instead.

Um, no. A not small number of my orders go like this:

"I'd like to order a pizza."

"Okay, man, like, I just need to find the pad."

"Okay."

"... ... ... Oh, there."

"I'd like to order a large <some hipster name for pepperoni pizza> for delivery."

"Okay, so that's like, a pizza, right?"

And it went on and on and on ...

"Oh, shit, who let <soandso> pick up the phone." <stomp> <stomp> <stomp>

"I'm sorry. I can take your order now."

Had we been quicker on the uptake it would have been a viral recording.

I sincerely hope that the dude was blazed out of his mind and that wasn't his normal state.

Imagine having to do this every day, sometimes multiple times in a day. It gets annoying really fast, especially just having to repeat the same thing all the time.

Also you have to "please hold" for variable amounts of time.

Giving my address is a huge PITA. you dropped it from your process too.

Couldn't agree more; but some people are genuinely, staunchly opposed to making a phone call. We all have our crosses to bear, and I'm glad that particular one is not mine. I find a 30 second phone call way more appealing than futzing with an app.

Worth noting that if I'm calling the restaurant, I'm doing a pickup order. Delivery, whether its through an app or not, is a pretty awful (and expensive) experience; and I avoid it whenever I can.

Just another instance of VCs pumping money into a bad but appealing idea and propping it up indefinitely at the expense of society at large. This kind of investment really needs to be more closely regulated - the businesses never even have to be successful for the investors to profit as long as they go public in time to leave retail investors holding the bag before the crash.

And here's the latest one, Deliveroo set to float with an expected $10bn valuation: Deliveroo: taste test [1], (non-paywalled version) [2]

From the article: That Deliveroo could not turn a profit in a year when sales were up more than half is concerning. It is operating in a ferociously competitive market. Deliveroo is proud of its gross profit margin — as a percentage of gross transaction value it is up from 5.8 per cent in 2018 to 8.8 per cent in 2020 — but it is slim by the standards of other industries.

[1] https://www.ft.com/content/17dc510c-b396-4dc5-84a8-243a5bfa7...

[2] https://archive.is/i1Mor

> I genuinely do not understand this industry.

A great many restaurants do not know how to run their own effective delivery operation or do not want to. Third party apps handle all of this.

> I genuinely do not understand this industry.

Consumers are willing to pay for the convenience and deal with cold food.

Here's the thing. Most food doesn't deliver well. So what delivers well? Pizza, Wings, Subs. and some Chinese food. Who already has their own delivery drivers usually. And when they do they run 3 and 4 deliveries at a time. way more efficient.

Right now the dynamic has a lot of power towards the delivery services. So, restaurants will subsidize some of the delivery cost to sell the food. But in a few months a lot of the restaurants are going to be crowded as F. because there are less restaurants to compete with. So, most deliveries are going to cost $7 plus tip or more. and it won't be as good as right from the restaurant.

And I see some of the service really pushing their own shadow stores because they can make profit off that.

The most frustrating thing is that once upon a time, even local pizza places and Chinese restaurants had delivering food at max quality totally in hand. Heated bags, good delivery logistics, and well-planned menus meant that everything you could buy showed up on time, at the perfect temperature and correctly cooked. If there was an issue with delivery and you complained to the restaurant, they had a meaningful amount of control to provide that feedback to the deliverer.

In my area these days, most of them (other than perhaps the chains) have outsourced their delivery to one of the sites, using unaffiliated drivers with no interest in maintaining the reputation of the restaurant. What happens? Collapse in the quality of the delivery, along all axes.

I only do pickup as it’s cheaper and more under my control - but only Jimmy John’s and Dominos do well with delivery - JJs because the sandwich is already cold, and Dominos because that’s what they specialize in.

I also prefer pickup because if I’m going to pay I’d rather it go to the restaurant as much as possible. (And an added bonus - they start to recognize you!)

I only do dine in. Even a 5 minute drive and getting it unpackaged and into my mouth, I basically feel I’m eating leftovers. Which I do not like.

Also I enjoy the atmosphere and change of scenery, it breaks up my day vs always home or at my desk.

During WFH, I even go to a gas station a couple times a day and buy a drink just as a way to force breaks, get fresh air, change of scenery.

I actually prefer leftover pizza. Guess it depends on where its from.

I think we've discovered in this pandemic that a whole lot of other food actually delivers just fine and restaurants could have been doing it all along!

At least where I am and at least on GrubHub it seems like the standard delivery type places you cite are using their own drivers. I have only done pickup with DoorDash, and have only used Caviar & UberEats a combined total of 1 time. But when that's the model the primary advantage is being able to do it all through a website and not the phone

> “In 60 years,” CFO Stuart Levy said on Thursday, “we’ve never made a dollar delivering a pizza. We make money on the product, but we don’t make money on the delivery.”

Domino's charges a $5.99 delivery fee whereas UberEats is charging me a $4.05 service fee plus a $3.49 delivery fee plus $2 CA Driver Benefits bringing its total fees to $9.54.

Unless it's completely dead, every pizza shop runs multiple orders at once and their drivers are in and out swiftly. The food stays fairly hot thanks to commercial heat bags.

For the delivery apps, the driver has to possibly wait in a line, check it out, then deliver the order a single order at a time.

Many of the apps will actually batch multiple orders from the same restaurant to multiple near(ish) dropoffs.

Presumably this is the reason the food delivered by all these services is cold whenever it arrives.

The delivery models are fundamentally different. Domino's (and restaurants like it that have historically had in-house delivery drivers) is always single source, multi-destination.

Uber, Grubhub, DoorDash et. al. are multi-source, multi-destination.

Domino's runs a business designed around delivery with a delivery-friendly product and runs delivery in-house. UberEats does none of that.

On the other hand, every time I've ordered papajohns [directly from PJ] I get a doordash driver, interestingly.

They are punting their delivery costs to the cute little DoorDash while they can. I personally hate these third parties being interjected unexpectedly. I feel like the local business is probably being hijacked (like Yelp does) because I don't know the terms of the transaction. Furthermore, I don't trust DoorDash or whatever delivery app-dujor is running the food this week, I used to trust the business I was ordering from. Leaves a bad taste in my mouth ...pun partially intended.

Don't forget that Uber is also charging the restaurants nearly the same amount.

It seems to be that the primary driver is an aversion to social interactions but a desire to have the food. I wonder if vending machines could make a come back, hah.

In all seriousness - are there vending machines that serve warm food in the USA? I know these exist in Japan, but have never seen one in SF, NYC, Boston or Chicago (not that I checked every inch in those places).

An interesting idea would be to use statistics to find out what categories of food are popular at specific complexes (apartment or housing) at specific times. Then restaurants could bid to get space to put prepared food in the "mystical vending machines" at the predicted quantity with the predicted types of foods that would sit well.

Then you don't even need your food to be delivered. Just go to the thing and get it. Done.

Automated vending machine shops were around in the 1950 https://www.thoughtco.com/the-rise-and-fall-of-the-automat-4...

I'd like to understand why Japan has a vending machine culture. I would guess it's regulatory, but it might be crime related.

I suspect it has more to do with trying to serve “all hours” without the associated staffing costs - an American example used to be rest stops before everything went 24hr. They used to have soup dispensing machines and more.

I don't think you'll ever be able to get the requisite quality required to pull this off.

> “In 60 years,” CFO Stuart Levy said on Thursday, “we’ve never made a dollar delivering a pizza. We make money on the product, but we don’t make money on the delivery.”

This is playing with words. HR at any company never made a profit. Doesn't mean recruiters are an uncertain business.

I do think looking at pizza delivery is interesting. And I also think Dominos is interesting, although they are becoming a little cult like.

Pizza is delivered because the food fits with delivery. It would be interesting to look to see if Domino's or pizza in general has changed to make it better for delivery.

Pizza is one of those foods that can sit under heat lamps and not become incredibly bad - which means it will travel and deliver well. Anything above the fast food level gets progressively more difficult- until you’re at fancy dishes that waiters have a hard time delivering to a table at the restaurant let alone across town.

I concur with the article. My frequency of online ordering has increased with the pandemic, but I can't imagine doing it much after we can go back out. In some respects I'm the prime target for online ordering (young working professional) but in others I'm not (single, somewhat discerning in terms of food quality).

I've kept an informal tracker of deliveries I've received over the past year, noting issues and an overall rating for each order (good or bad).

A few insights:

1) In the past 20 orders, there has been some sort of issue in 15 of them. There has been what I categorize as a major issue in 10(!) of them. Major issues include missing items, incorrect items, >30 delay over estimated arrival, delivered to the wrong place, a delivery person entering my house (!), hot/cold food arriving at room temperature. Overall, execution quality is awful! I have basically come to expect poor service at this point, and I really question if I want to bother with the aggravation of delivery every time I order. When your convenience service is arguably not as convenient as just getting takeout yourself, there's clearly a problem. In terms of fixing these issues, I don't see an easy solution. A lot of the problem seems to stem from not having enough drivers. This is surprising since I live in the SF Bay Area, which I imagine to have a bigger driver population (perhaps mistakenly).

2) Quality varies a lot between delivery vendors and restaurants. Despite over a year of time to adjust to this new delivery-first world, some restaurants consistently make mistakes with orders again and again. Taco Bell seems to always forget an item or two, which is especially annoying given how marked up their food is on the apps. Chipotle and Sweetgreen have the best consistency. Uber Eats has the worst record among the delivery apps - I have recorded an abysmal 60% favorable experience rate with them. The biggest problem seems to be that they'll happily send your order to the restaurant to be prepared but then take 40+ minutes to place that order with a driver. That's happened to me multiple times and has led me to stop placing orders with them. The best is Doordash, though I suspect that this has more to do with them delivering Chipotle, which seems to have their delivery operations dialed in and holds up relatively well in transport.

3) Not captured in my data but of note is how many times I check the apps for dinner but decide to either cook at home or get takeout because of how expensive delivery is. I understand that getting food delivered is a luxury, but it feels really bad to pay above menu prices and then pay up to three additional fees. Often times the fees add up to 50%+ of the base food price. I think that scales a bit better if you're ordering for two or more, but in my case I get sticker shock a not insignificant portion of the time I want to do delivery.

As I read what I wrote here I realize it comes off as spoiled and lacking perspective. It's definitely true that in 2021 you can tap a few buttons and have food from any culture left at your door in less than an hour (sometimes, at least :P). It also ignores the problems encountered by restaurants and drivers. Really what I'm trying to say here is that third-party food delivery doesn't seem like a long term sustainable business post-pandemic. There are too many hard problems associated with it that simply can't be solved with technology (short of far future robotic automation).

I think a lot of these problems come down to poor quality control, which may have roots in bad UX design and misplaced incentives. I've had food delivered to me which had someone else's name on it and completely the wrong number of items. Most of the problems I've seen have been of this variety - where the driver didn't take even the smallest amount of care.

How hard would it be for DoorDash to ask the driver to verify the number of items in the bag? If there are drinks, the driver should be forced to verify they have X number of beverages (since drinks are screwed up CONSTANTLY).

I think it's really because the delivery app companies don't care. They often use dark patterns to make it hard to complain about bad deliveries. If you can't figure out how to ask for a refund or tell them that they messed up, then you may forget about it the next time you order with them.

And yet you continue to order using these services! That means you are still seeing significant value despite these issues, and I suppose why these companies have such massive valuations.

You're 100% right. My revealed preferences do indicate that I'm willing to put up with it. However, my ordering volume is definitely lower this month as compared to mid pandemic (November/December). I expect as case rates fall and things open up more my cadence will drop down to once per quarter or below.

Having a similar experience with delivery apps. ordering directly from the place is almost always better to. Happy to realize that for 50-60€ you can have a super luxury dinner if you plan ahead. we are talking champagne and steak here. Can you pivot your data around order price? would be interesting to see if my impression that price and quality are pretty much linear where I am. (Not US)

Having ordered for 6 people via a delivery app more than once, I can confirm sticker shock scales just Bistromath promises.

If I lived in a big city where parking and traffic was a nightmare that's one thing.

But I live in a small city and am not paying twice as much for the food to save a 10-15 minute drive to pick it up myself.

If you lived in a big city there'd be a gazillion places within 10-15 minutes that you could drive to without dealing with traffic or parking issues, assuming you're not talking about SF or Manhattan. Even with high-density places like those, depending on where you lived there might be a gazillion places within a 10-15 minute walk. The people that live in those cities still enjoy getting stuff delivered though, for the same reason that people in small towns do (time is money and convenience is time, so if you have more money than time, it can be totally worth it).

I lived in LA and ordered Uber eats all the time to avoid finding parking.

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