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Comment by vvpan | Hacker News Reader

This is tangential, but I worked for a food delivery startup (a conscientious one) for a couple of years and food delivery is a terribly extractive business that kills restaurants. Either order from the restaurant directly or just go there yourself, Doordash et. al. will kill your favorite restaurant with your help. The numbers don't add up in the kitchen's favor.

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This has been one of my strongly held beliefs and pet peeves - the fact that you need fast food delivered tremendously increases the human cost of making that food.

For example, making a pizza is what, 10 minutes, or less, when adding up all the labor involved in a restaurant setting.

In comparison, taking said pizza, even around the block, with the courier having to arrive take it somewhere, is I'd estimate at least 15 mins.

Someone has to pay for that human labor, and considering how expensive it is, and not only that, VC funded food delivery startups want to take a huge markup on that. Something has to give. Crap wages for couriers, restaurant staff, skimping on raw materials etc.

It's much better for everyone involved to cut out the middle man, have restaurants on every corner (considering in most apartment blocks, nobody wants to live on the ground floors anyways), with the upper floors used for apartments or offices.

This is hardly an original thought, tons of European cities I've been in do this.

A city I lived in had this, but when the restaurant owner retired, they explicitly forbade the ground floor from being used for some food-related business. It turns out the residents upstairs were always complaining about the smell. NIMBYism won.

A better solution would have been some mandatory grease/odor filters.

Just to point out that "restaurants in every corner" is not always easy to do, especially in residential blocks. I honestly think that "cooking your own food" (with the help of modern kitchen utensils, time-saving equipment, and the exception being collective canteens/cafeterias for specific groups such as students) is economically advantageous. Because even today in many European cities, many of those tending to restaurants are immigrant labor or somewhat disadvantaged groups who are implicitly pushed towards such jobs due to lack of alternatives.

I used to rent an apartment exactly like this in Vienna, the only problem was the somewhat loud and lively crowd late in the evening, never had any smell issues, and this was a 100 year old building

Could you explain further? The restaurant gets the order at the same price, Uber adds delivery fees and a 25% markup on the cost of food. Why would these numbers not work out in the kitchen's favor? Maybe I'm missing something. Genuinely curious.

While you pay a markup on the application, UberEats and others keeps 25/30% of the price based on the marked up price. If you make the calculation they usually have to cut into the kitchen margin while the price for the customer stays more expensive.

Can't the restaurant just say no?

Unless something has changed over the last couple years, restaurants opt in to being available on those apps. Uber Eats and the others are generally integrated into the restaurant's point of sales system.

That would explain why they sell less or cheaper food, which appear too high on the app due to the markup they have to add to the price to handle the fees. This would be an alternate explanation to why things seem inflated. Even with inflated ingredients prices, it actually still doesn’t add up how the volume dropped so much such that each unit would need to cost that much more (I’m arguing it can’t just be the ingredient prices being high). The fees adding to the perceptual inflation make sense.

It’s more expensive volume or less cheaper volume they can make due to higher ingredient prices PLUS the fees they have to add to cover the delivery service cut. That’s how you get a $20 burger for delivery.

This all gets worse when the prices become sticky at the retail place itself (app prices enter the real world). These delivery service are a serious agitator, true disrupter.

Nah. Those delivery services were opt-out until California passed a law in 2021 prohibiting that kind of behavior.

Ok, but if they're doing it without the restaurant's buy in, then they're presumably just acting as a middleman and ordering from the restaurant themselves, at which point I'm not sure how they're stiffing the restaurant 20-30%. If I were running a restaurant and Doordash kept calling me trying to submit an order for cheaper than the food costs I would simply decline to take their business...?

Doordash puts up a listing for a restaurant and siphons off take-out traffic. Once Doordash gets a critical mass they can turn around and "negotiate" with the restaurant.

And the restaurant can say “no.”

If I were a restaurateur and caught a glimpse of a Doordash driver in my finest establishment, the first thing I would do is put together a simple online order form and start advertising it in every order. If you just disappear from the app one day, your customers trying to reorder would probably go somewhere else – but if they know they can order on your site instead, they probably will (if your food is good enough and your ordering experience is top-notch, or vice versa).

  And the restaurant can say “no.”

And now you have hordes of angry customers who can't understand why you have a Doordash listing (that you didn't create and don't want) but won't fulfill orders.

  If I were a restaurateur and caught a glimpse of a Doordash driver in my
  finest establishment, the first thing I would do is put together a simple
  online order form and start advertising it in every order.

Whether it's not wanting to give Doordash a cut, not wanting to sell food that doesn't travel well for delivery, not wanting to crowd out local customers, not wanting Doordash to hijack their brand, not wanting Doordash to crowd out their own in-house delivery, or whatever actual restaurant owners litigated these forced listings because they didn't want to be listed on Doordash.

e.g. https://boston.eater.com/2016/3/4/11160924/legal-sea-foods-s...

The claim isn't that your saying no to fulfilling orders, it's that your saying no to giving them a discount.

  The claim isn't that your saying no to fulfilling orders,
  it's that your saying no to giving them a discount.

Well, no. This is the comment I responded to:

  Unless something has changed over the last couple years,
  restaurants opt in to being available on those apps.

That very much asserts that the issue is about accepting orders. Doordash et al were initially opt-out.

Yeah, like the restaurant can say “no” to giving a discount, they can say “no” to people wanting their food to get delivered now. It’s just that now it’ll be a bad business decision probably.

Everything is possible. And every choice has its own set of tradeoffs. But no, there’s no time machine to the pre-Doordash world now.

If restaurants didn't put themselves on the platform, wouldn't that mean the restaurant is getting full price? Its equivalent of paying someone to call in your order and picking it up. What are the negatives?

This is all, of course very fuzzy, but "I will spend 30 dollars on food tonight" can turn into "I call the restaurant and order 30 dollars of takeout" vs "I use door dash to get 30 dollars of food from that restaurant", and in the latter the restaurant sees less sales. But if I'm already like "I will have food from this place I like" and it's not on doordash or w/e, I might still be motivated enough to head over there!

There's a lot of dynamic variables here (including of course the "the person doesn't order from the restaurant"), but the few times I've used those delivery apps I end up ordering very little food for a lot of money.

I try to just do takeout instead.

You're just arguing against delivery food generally, not against Uber.

Of course delivery has a cost, was even typical for pizza delivery before the apps. If you're that price conscience, takeout always exists.

While I won't go as far as to say that Dominos & co. are trying to run delivery entirely at cost, it is not clear to me that delivery from a shop directly vs delivery with a middle layer (having to pay lots of engineers fancy salaries mind you..) is an equivalent operation.

Remember, delivery apps take the costs and then their cut. That cut theoretically has some pressure from markets or whatever, but ... well.....

I'm splitting hairs here, granted

Dominos uses door dash in my area.

Not always

- https://www.eater.com/2020/1/29/21113416/grubhub-seamless-ki...

- https://www.knoxnews.com/story/entertainment/dining/2018/10/...

- https://lawstreetmedia.com/featured/restaurant-sues-doordash...

- https://www.golocalprov.com/news/legal-but-unethical-ri-rest...

- https://www.wctv.tv/2023/12/19/phony-restaurant-listing-door...

These stories are horrible, but that doesn't prove restaurants lose money on Doordash. One of my clients bootstraps online ordering for restaurants. About 80% of those restaurants request to be on Doordash, and have been on there for many years. I assume they're not all dumbasses losing money on every order.

Doesn't excuse Doordash taking advantage of anyone.

Not every restaurant can handle the deferred payout either. Their business is based on receiving payment at the time of service. The restaurant model operates on razor thin margins, and they don’t buy their food on net 30 terms, but they have to absorb costs as if they do.

There are other issues, but this setup looks a lot like paying the mafia due to the imbalance of power.

Sure but you're blurting generic talking points that don't address the evidence of Doordash hosting millions of restaurants obviously profitably for the restaurants

That's mixing up different concerns. If they make an unauthorized site for a restaurant, with no agreements, then the restaurant is getting full menu price.

While the unauthorized sites potentially deliver poor customer service and (the appearance of) higher prices, potentially driving away customers? Who do you know that comparison shops all the different ways to order from the same restaurant?

Price shouldn't be the only thing the restaurants care about.

> Price shouldn't be the only thing the restaurants care about.

Did I imply otherwise?

"Different concerns" means there is more than one concern...

When the market is captured by the marketplace apps: No, not really

Sure they can, and go bankrupt because people order more than they go to restaurants nowadays.

That's my understanding. Uber takes 25%, but by default that's offset by increasing the on-app price 25% relative to the in-store price, and the owner has to explicitly opt out of that behavior. So at the end of the day, they should be getting the same amount as in store orders unless they opted out of the markup, right?

That calculation doesn’t work. If an item costs $10, and Uber marks it up 25% then Uber lists it at $12.50. When Uber takes 25% of the marked up price, they’re taking $3.125 and the restaurant is getting less than $10.

Under would just mark up the price to $13.33 so after they take their 25% the restaurant would get $10.

I have seen Doordash statements where commission + fees added up to 60% of the price. I asked the person who mostly worked with restaurant owners why they do it. He said:

1. A lot of restaurants are passion businesses and they don't realize how much money they are losing.

2. Morale in the kitchen is important, orders coming in keeps morale up.

From myself I would also add that they get a FOMO, cause it's hard to sit and watch others get business, however unprofitable. The most stable and profitable businesses in towns where we operated only worked with us, cause we offered cooperative ownership and small commission. It made no financial sense for them to work with anybody else.

To be really honest, neither of these reasons add up. Are you really suggesting that restaurants are losing large chunks of dollars yearly in every order to keep their staff and themselves "passionate"?

Doordashes filings as a public company have stated that the average revenue share with restaurants is 18% and maximum is 30%

That number includes chains. Those restaurants (McD's for example) get preferential treatment - they are on the front-page and they pay no or little commission. That would skew the average. And maximum probably does not include all the potential add-on fees.

I don't buy it for a second that restaurants don't know they are losing money. Just sounds like some made up bullshit because you have an axe to grind with Doordash.

What is making you skeptical?

You just claimed that hundreds of thousands of business owners don't know how to run their businesses, but that you know better. In general the idea that there is a one sided transaction being freely entered into is almost always a conspiracy theory riven by dislike of one side in the transaction.

It's like any e-commerce platform where the platform cares only about maximising revenue and minimising costs.

Pitting restaurants against each other on who can cut corners the best. You often get worse meals at higher prices.

This business model essentially makes sure all the surviving ones are those who can get by on the lowest profits.

> This business model essentially makes sure all the surviving ones are those who can get by on the lowest profits.

And what’s wrong with “lowest profit”?

If that equates to lower quality, you as a customer are free to select the more expensive restaurant on DoorDash.

Airlines have tiny profit (single digit $ per passenger) yet there’s no sympathy for them.

So “big greedy corporation” vs “mom and pop shop” is the core reason, yeah?

And then you wonder about the obesity crisis.

> And then you wonder about the obesity crisis.

China has drone food delivery. Lower profits than American delivery.

China ain’t obese.

Try again.

https://en.wikipedia.org/wiki/Obesity_in_China

> Obesity in China is a major health concern according to the WHO, with overall rates of obesity between 5% and 6% for the country,[2] but greater than 20% in some cities where fast food is popular.

> Rapid motorization has drastically reduced levels of cycling and walking in China. Reports in 2002 and 2012 have revealed a direct correlation between ownership of motorized transport by households in China and increasing obesity related problems in children and adults.

> A leading child-health researcher, Ji Chengye, has stated that, "China has entered the era of obesity. The speed of growth is shocking."

You're sooooo clever.

Edit: extra LOL at creating the account to criticize and then downvote facts in the reply.

> Edit: extra LOL at creating the account to criticize and then downvote facts in the reply.

Not me, I made this account 7 days ago. Check my history.

> And then you wonder about the obesity crisis.

And for the record:

I don’t give a shit about the obesity crisis.

Or any other drug, mental health, crime, or demographic problem facing any country.

I only care about the number on my bank statement.

Well, my private equity partner accounts, but you get my point.

> I only care about the number on my bank statement.

> Well, my private equity partner accounts, but you get my point.

When they bury us, the money won't matter.

People complain about monopolies. People complain about competition.

Amazon is the model to observe here; before that, Walmart. Red Widgets and Blue Widgets are sold. The platform rewards whichever product is cheaper. Initially this will lead to the two competing their margin away, and then the only way to compete is to start substituting inferior materials or craftsmanship. Consumers can theoretically make the choice to switch away from these products, putting the bad actors out of business, but there is a cost associated with this switch, and consumers may not always be aware of product substitutions, nor of the availability of potential alternatives.

Soviet-style command economies aren’t a better alternative, but it’s an incentive problem with market economies without an obvious solution; market fundamentalists get around it by just insisting that if consumers really cared, they’d seek out alternatives, but this doesn’t solve the problem until after it happens.

This problem is mirrored by an incentive structure observed in government where a concerted interest group can expend more time and effort lobbying for a budget allocation than an individual can expend resisting it.

The whole goal of a market is to reduce profits for all sellers, which is equivalent to reducing unnecessary costs for buyers. If a company makes a huge profit, by definition that means its customers are paying a huge premium on every purchase.

When I worked at a restaurant b2b company that helped pay invoices I learned how razor thin margins most operate on. We even ended up giving out effectively a payday loan to one when they asked for assistance but jeeze those businesses struggle sometimes.

If the numbers didn't add up Doordash wouldn't have millions of restaurants signed up nor drivers. If not for Doordash, they would've gone out of business during COVID.

Now I wonder what conscientious delivery app you've worked for, and if they are still around

numbers don't need to add up if you don't have an alternative to survive. That is why a lot of jobs get away with paying peanuts, because 3 peanuts is more than 0 and people need to eat.

It can work, pizza delivery has been able to be profitable for example. But they are set up from the concept to be delivery businesses, and they have that accounted for in their pricing. Doordash trying to extract profit and pay a driver and put that all on the restaurant? No that's not going to work. As a restaurant I'd refuse Doordash orders at any less than full menu price, and paid on pickup not maybe three months later. If the customer wants the convenience of delivery to their door they need to pay for it.

Of course it can work, the delivery companies need to restaurants to stay alive. But they will be barely alive.

Are middlemen ever a good idea? What about middlemen that become the gatekeepers of your business.

Middlemen are often a good idea, yes. Can you imagine if for every single item you wanted to buy you had to go to the original manufacturer? And now suddenly every manufacturer needs to also become a seller and distributor?

Without middlemen every restaurant would have to be farm to table, which is a significant burden from many angles and would probably result in more shutting down than delivery services could.

Cutting out the middleman is great... but only when you run the numbers and it makes sense, not as a universal truth.

Middlemen are good when they add value. Like offering delivery when restaurants don’t normally deliver.

But they can deliver without being a middleman. E.g. they can work as contractors for the restaurant.

But now, instead, they are the ones taking the customer's orders, and hence they become the portal for the business (and thus, middlemen). Which is a bad situation for the restaurant owners.

> Are middlemen ever a good idea?

You need some toothpaste, some eggs, and some toilet paper. Would you rather go to the supermarket, or to the factory, the farm and the mill?

> Doordash trying to extract profit and pay a driver and put that all on the restaurant?

Profit for services? Dastardly.

> If the customer wants the convenience of delivery to their door they need to pay for it.

They do.

I worked for a food delivery company (Uber Eats / Doordash / Deliveroo / Just Eats / GrubHub — one of them), and while I can't argue with what you are saying, the company wasn't making any money either. I think after 5-10 years of working there they finally managed to make like 20 pence per order. No one is winning with food delivery, not the restaurant, not the rider, not the company.

We would have loved to have reduced the % taken and pay our riders more, but customers wouldn't pay it — they'd just go to Uber instead.

Oh the hypocrisy of people picketing in the streets against gig work but not willing to pay more than 3 or 4 bucks for their food to be delivered... I found it incredibly frustrating because we truly weren't the bad guys. Sigh.

Most people I know who lampoon delivery services were around for the days before they came upon the scene, and they think that was better. Restaurant owners I've heard on the subject, tend to agree.

The economics should not work out, delivery services should allow for economies of scale, but greed and anti competitive pressure eat it all.

There is no scale to be had at local delivery. Between various services, banks, and credit cards, I get the paid tier of all the delivery apps for "free", so I am paying the absolute minimum.

It makes no sense to me for these "scalable" companies to pick up my food, drive in the wrong direction, wait at another restaurant, then continue to drive in the wrong direction to drop off that order, and then get me my cold food that I still paid more for than menu price with an expected tip the driver can see before they even pick up my order. I gave up on the whole concept once I moved somewhere with more than two places that are walking distance. Not all of them are great but it's still a better deal than a terrible delivery from an amazing place at a huge mark up.

The worst time line is the cheap places that used to offer free delivery growing up having their delivery handled by a lightly skinned version of DoorDash.

If you think you can use a coupon for a discount you actually are just paying the full price of their delivery fee without the delivery service discount you get directly from DoorDash.

> The worst time line is the cheap places that used to offer free delivery growing up

Its not even a vague old memory. Until COVID, free delivery with low minimal order € and regular prices were the norm, Now it's €3-5 for delivery, €20 minimum and 25% markup on item prices.

Pooling together delivery drivers should make things better for the customer, instead of significantly worse.

  Pooling together delivery drivers should make things better for the
  customer, instead of significantly worse.

Sure, if Doordash operated at a loss.

No, no loss. If things were working well, pooling drivers would reduce costs and doordash would charge some percent of that reduction.

Yes, loss. No matter how much efficiency (lol) Doordash were bringing to the equation there's always the matter of profit and paying back the vulture capitalists.

The way they achieve profit is by charging money. Which I accounted for.

If your reduce your client's costs by $3000 and you charge $2000 to do it, everyone is happy and you can make a nice profit.

And remember the "efficiency" is relative to tons of restaurant-specific delivery drivers. It's possible.

Door Dash famously was not profitable during the time period when everyone was locked inside their homes and couldn't go to restaurants directly.

It's a fake business where the only play is to be a middle man that causes prices to go up so they can deliver cold food.

This conversation thread starting with jorvi's comment is a hypothetical about what delivery is supposed to be.

  It's possible.

Not with the Doordash model it's not. Sure you have the low paid serfs which help restaurants sidestep the various requirements applied to actual employees (e.g. transit and health insurance benefits). But you also have duplicate payment processing and customer support infrastructure, the legal staff required because your business model requires skirting or outright breaking the law, the higher rate of refunds/returns due to hawking food that's ill suited to travel (against the restaurant's wishes), drivers that now have to drive all over town to different restaurants, orders that are prioritized by the size of the attached "gratuity", etc.

The Domino's model was cheaper for the customer because it's inherently more efficient than Doordash. There were no angry restaurants suing to get off of your platform. Drivers were either making deliveries or at a specific restaurant ready to make a delivery. Customers didn't have to pay two separate merchant fees or ensure profit for two separate companies. Plus Domino's incentivized fast deliveries (there were external costs to this however), ensuring that the restaurant could efficiently utilize their delivery drivers.

Plus you're also likely underestimating the return that the vulture capitalists are demanding.

For the handful we checked near us, ordering via the restaurant site (for delivery) is cheaper the via uber, even with Uber one

Second this, it also allows you to build a real relationship with the other folks in your community

My favourite chinese restaurant doesn't take card in person - they say if you want to pay by card then order through JustEat. So clearly they are happy to not only take the hit on card fees but also on whatever JustEat takes over just having a card machine in-store. I would actually go and pick up in person more often but the lack of a card machine kills it for me.

remember back then a lot of restaurant have their own delivery service that can deliver at no extra fees

good times

Honestly, food delivery from restaurants is one of these things that is a big economic mismatch. The restaurant is spending tons of money on their nice dining room and part of the price of the food is supposed to be the experience of eating there. Yet, when you are ordering delivery, you are getting a subpar dining experience, plus you have to cover the additional cost of transporting the food. This means that someone is getting squeezed --- the restaurant is not getting paid enough, the delivery person is getting paid peanuts, or the buyer is having to pay a ludicrous price for the food.

The dining experience depends on your feelings and home, and you have to pay for transportation for the entire party to the restaurant.

That really depends on the place and the person. I don't get much value from eating inside a Chipotle or a pizza parlor.

If half the business is delivery, then the dining room can be half the size and there can be fewer servers. That saves a good fraction of the cost. Apply those savings to a delivery driver, add a $5 delivery fee, and the math can work out fine.

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