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Comment by fluxic | Hacker News Reader

Love to revisit this piece every few years. Why food delivery will never be profitable: "The Food Delivery Death Star" https://medium.com/@review/the-food-delivery-death-star-85f9...

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Pizza delivery is profitable. Pizza comes in a shape easy for transportation, the size and value of the delivery is economical for a delivery business and there's an established culture around ordering pizza for delivery.

The food delivery companies just need to figure out these problems, which a hard, for non-pizza foods.

Also helps that pizzas themselves are dirt cheap to make. Anything that makes them expensive is chargeable. Continuous production is easy and cheap, so doubling your volume by adding delivery is achievable with the same kitchen.

"When it gets down to it — talking trade balances here — once we've brain-drained all our technology into other countries, once things have evened out, they're making cars in Bolivia and microwave ovens in Tadzhikistan and selling them here — once our edge in natural resources has been made irrelevant by giant Hong Kong ships and dirigibles that can ship North Dakota all the way to New Zealand for a nickel — once the Invisible Hand has taken away all those historical inequities and smeared them out into a broad global layer of what a Pakistani brickmaker would consider to be prosperity — y'know what? There's only four things we do better than anyone else: music, movies, microcode (software), high-speed pizza delivery"

Snow Crash never goes out of style.

...and fucking delicious

Is it though?

Most pizza delivery is an ancillary service to the restaurant itself. Are there very many profitable pizza-delivery only businesses?

Also you could argue that for the genre of restaurants where delivery is profitable as an ancillary service (pizza, chinese, etc.), they already offer delivery and there isn't any profitable market for the restaurants where they didn't have it before.

> Most pizza delivery is an ancillary service to the restaurant itself.

Are you sure? Seems like the restaurant mostly exists for marketing, awareness, and as a place for people to not come in and eat.

90% of Pizza Hut’s orders are deliveries. 65% of Domino’s are deliveries. Over the entire industry, carry-out and delivery account for over 75% of revenue (delivery alone is 30% or so).

• https://www.cnbc.com/2018/12/05/pizza-hut-execs-dissatisfied...

• https://www.reuters.com/article/us-dominos-pizza-delivery/do...

• https://www.statista.com/topics/1610/pizza-delivery-market/

Is that really profitable though? Your article talks about how Pizza Hut is struggling as it switched to digital delivery.

Also according your statista link, delivery only accounts for 30% of revenue in the pizza industry.

Your intuition is probably spot on. Dominos stock has been doing terribly and pizza delivery will likely cease to exist because it is a constant money loser.

This is...not correct at all. Dominoes stock has been on an absolute tear the past decade. I don't know what charts you're looking at...

They've plateaued this past year with negative growth. Is what dominoes was doing a decade ago really relevant?

They have an excess return compared to the S&P 500 of 200% in the last five years. That’s hardly ten years ago, and the story for Domino’s is still very strong. There’s tons of market share left to eat up and many international opportunities.

Pizza Hut has already moved into EM markets (like Africa) and is gradually expanding. Domino’s could do the same thing, and probably better with their superior tech stack.

I agree. Pizza is a good market. I live in a small town, <8k people, and we have 5 places that deliver pizza, a take and bake, not to mention gas stations and supermarket pizza.

I was making fun of the guy claiming pizza delivery wasn’t profitable.

Dominos has out performed the S&P 500 by like 200% in 5 years. In the last year it returned -2%, so that’s not good, but still a positive story overall.

Lookup the stock of Domino's[0] - they've been on a years long tear by scaling delivery and adopting tech

In theory this could work better for some food delivery companies as they charge the restaurant rather than produce themselves and run the overhead of stores, etc.

[0] http://www.google.com/finance?q=NYSE:DPZ

I think it's pretty obvious that nobody buys a Domino's Pizza because it tastes good! They buy it because someone shows up at your door and gives you food!

I mean, they’re not terrible. I think I prefer them to other Pizza chains. And they have a dope app.

Domino's and Little Caesars are the second and third largest pizza chains in the US. Some of them may have space for a few people to eat there, but their entire business structure is based on delivering pizzas. Sure, they have pick-up options as well, but I wouldn't say that changes them from being developed around the idea of delivering the pizzas.

It's not profitable because every single restaurant does it for itself only.A post office service would never make a dime if it was only covering a small town.Scale it up to the entire city and it becomes very interesting

Back in frontier west, outside US territory (and therefore not served by the Post Office Department or the Pony Express), people would set up highly profitable transportation companies. These companies would make deliveries for local shops but also carry mail, bringing stuff to somewhere served by the Post Office Department or the Pony Express or the Wells Fargo freight routes.

I read all this in a book ages ago but I was skimming through some wikipedia articles that mention some of what I'm talking about if you're interested:

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

https://en.wikipedia.org/wiki/Pony_Express#Stations

I mean this was how Wells Fargo started.

Yes, I understand economies of scale, but there is a point where the time and resources spent driving take-out around is not profitable. That's what I mean about certain restaurants and cafes not offering delivery, because even with a third party full time delivery service it's not profitable to deliver certain goods.

Well, Chinese food is also a commonly delivered item in many places--including but not limited to cities. So I'm not sure pizza is all that unique.

That said, a lot of food delivery is some high school kid driving his car around mostly working for tips. You start tacking on the costs of a large delivery-as-a-service company and your costs go up a lot without all that much economy of scale.

Even at a busy Pizza Hut a lot of the delivery drivers will help with making the pizzas, folding the boxes, and cleaning when not delivering. You can pay them X amount with fixed hours and they can stay busy the entire time.

With just delivery services there is a lot of standing around time.

I was recently at an Indian restaurant with my girlfriend, and half to three quarters of the people in the waiting area weren't trying to be seated, they were delivery drivers waiting to pick food up. Most of them sat for upwards of 15 minutes.

Lol but what about the person who makes the pizza? Taking 30% is steep.

Grubhub makes a profit? https://en.wikipedia.org/wiki/Grubhub

If fund raising is any indication of this prediction (my bet is yes), look no further than the two big players in India - Swiggy and Zomato [0] and [1]. Losses are in the range of 70 million dollars or so for FY17-18 [2]

[0] https://www.livemint.com/Companies/9cuyxq0GMXuDWaGuMWYsZL/Sw...

[1]https://inc42.com/buzz/zomato-in-talks-for-1bn-war-chest-to-...

[2]https://www.livemint.com/Companies/cjK3T36vZl1easaVBMXVNN/Sw...

Grubhub has been profitable literally since the late 90s. This article is terribly researched.

Great article, thanks for the link.

But I can't help but notice that these numbers are all for US, and US is a very prosperous country with low income inequality and high-paid workers. In other countries, where labor of low-level workers costs less (compared to the purchasing power of those who order delivery) it could be a completely different picture. Here, I earn a salary which would be around middle-class in US, and yet, my Uber ride usually costs around $3-4 (as opposed to $30 in the article).

Drone delivery will fix that.

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