Hacker News Reader

Comment by b_tterc_p | Hacker News Reader

How does this work? If the food costs 80% less on the app than at the register, either the restaurant is losing the lion share of its massive margins (unrealistic) or they’re just subsidizing it with investor money. But that would seem to be impossibly high subsidizing. Is it simply that in China you can quadruple down on Amazons strategy of promising profitability later? The article doesn’t explain this well and even goes to say that this guy is the conservative spender with founding money. If it is the latter... this feels like a terrible strategy.

View on HN

The places that sell food on there have optimized to keep costs down ==> no physical locations except for a kitchen, no waiters, etc. They're literal food factories that optimize for food delivery capacity and probably only buy a few main ingredients in bulk and shorten down their menu selection to minimize costs even further.

They are only restaurants in name. Also I've noticed that these kind of "restaurants" are also appearing in Western food delivery apps too where the price + delivery is actually cheaper than buying from a physical restaurant, I once experienced this buying shawarmas on a food delivery app.

only buy a few main ingredients in bulk and shorten down their menu selection to minimize costs even further.

Taco Bell and Pei Wei leap to mind.

It's like they have a grid listing all their few ingredients and constantly try to figure out new ways to combine them into different products.

My favorite Onion article of all time is "Taco Bell's Five Ingredients Combined in Totally New Way". It's from 1998, as true today as it was then, and short enough I will quote it in its entirety:

> With great fanfare Monday, Taco Bell unveiled the Grandito, an exciting new permutation of refried beans, ground beef, cheddar cheese, lettuce, and a corn tortilla. "You've never tasted Taco Bell's five ingredients combined quite like this," Taco Bell CEO Walter Berenyi said. "The revolutionary new Grandito, with its ground beef on top of the cheese but under the beans, is configured unlike anything you've ever eaten here at Taco Bell." The fast-food chain made waves earlier this year with its introduction of the Zestito, in which the beans are on top of the lettuce, and the Mexiwrap, in which the tortilla is slightly more oblong.

http://www.theonion.com/article/taco-bells-five-ingredients-...

This is commonly done in most industrial food service verticals. It will be called product innovation, reformulation or some other R&D adjacent term. Large food companies have the equivalent of a commodities trading desk built-in.

The trigger to act commonly occurs when a key ingredient is hit with a supply related crunch. Avian flu just tripled the price of powdered egg whites? Guess we're using another binder for our ToasterOvenPastryTart. Another popular alternative is to stealthily decrease portion sizes.

Dark kitchens - the quality is shit, that's how. Plus slave work.

https://www.sustainweb.org/jelliedeel/articles/dark_kitchens...

https://www.theguardian.com/commentisfree/2018/oct/09/dark-k...

I really don't get the whole negativity about "dark kitchens". There is nothing wrong in theory with a delivery-only restaurant, and there are clear cost savings that can be passed on to the consumer.

Articles such as the ones you cited talk about the stifling "windowless boxes" but restaurant kitchens have never been windowed comfortable places. At least in the UK these kitchens are subject to the same hygiene and labour laws as any other place where food is prepared. They seem to want to imply that "dark kitchens" flout these laws but I've yet to see any evidence.

In third countries with lax food safety regulation i feel they matter. When there are more layers of separation between you and your end customer i think its human nature that you will be little less vigiliant / anxious about seeing a cockroach or rat in your kitchen. At some point it isalmost anonymous like an internet crime.

dumb article, no pictures of the kitchens. Who tf cares if their food was made in a container vs. the back of a restaurant as long as it's sanitary? Guess where the meat in your supermarket comes from or the processed food you eat? Not a particularly appetizing, homey environment there either

That article doesn't make any claims about the quality or the labor except to quote a chef saying that "conditions in a container kitchen are probably better than in many traditional restaurant kitchens."

Plus massive VC investment I’d assume, but freely admit I don’t know for sure.

This doesn’t answer the question because it’s relative to the price of buying at the restaurant. Who is losing the 80% of normal cost? Is it the restaurant or the delivery company?

> If the food costs 80% less on the app than at the register, either the restaurant is losing the lion share of its massive margins (unrealistic) or they’re just subsidizing it with investor money.

Or the materials cost is low, the unit labor cost of prep is low, but the unit labor cost of handling in house transactions and service is high, and in-house service and takeout are charged similar prices because having separate prices posted in the restaurant depresses in-house service volume and takeout unit profit without improving takeout volume to match.

(I suspect it's a little of this plus some investor business-building subsidy.)

I wonder if these are everyday prices or promotional ones. You could conceivably discount food items for someone's first few orders in order to acquire users (rather than offering a discount, free delivery, etc.).

At the end of the day, though, many of those users will churn. I'm happy to pay when VCs subsidize my orders...sounds like a cooked meal + delivery costs less than what the restaurant is paying in food costs. The unit economics of that model are not sustainable.

Nobody read the article I guess. The delivery companies are subsidizing the costs as the battle each other.

Had to scroll three-quarters of the way down the page to find the first person who read the article. Hi!

Hi! :)

but this is absurd levels of subsidy. Seems too much to be believed.

Get the monopoly established, then you work on making it profitable. Being the only game in town is more important to them right now.

Is it sustainable? of course not. Does that matter to the people who want ALL of the money, not just some of the money? of course not.

If you have restaurant or takeout place you need to pay for pest control, cleaning. You have to be in accessible part of the town. With delivery you don't need those.

No, because they already have a restaurant. That’s a sunk fixed cost.

80% less, I don't believe that. 1) apps will have promotions, vouchers can be used for discounts, from app, not restaurants; 2) delivery doesn't occupy tables in your restaurant, it is the 'extra' money you can make; 3) sometimes restaurant will sell for a small loss or no profit to promote their names.

Reply on news.ycombinator.com