Restaurant loses money on the percentage.
Driver loses money on the vehicle depreciation much of the time.
The delivery company loses money on the delivery.
I just don’t think a burger can be profitably delivered 15 minutes away for 1.99.
Do they? For delivery, FOH is out of the equation, so there is a very big cost of running a restaurant that is not impacted.
"The delivery company loses money on the delivery."
They're a software/customer support service. At scale there has to be an inflection point.
"I just don’t think a burger can be profitably delivered 15 minutes away for 1.99."
It's way more than that... 1) the upfront cost the person pays (these services are sneaky about how this is calculated, often times the menu prices are adjusted for delivery + the hard fee) 2) the amount the restaurant pays 3) tip for the driver. The end user will end up paying $5 for say a $10 meal, and the restaurant might pay $2.
I guess the question is - does a person want to spend 30 minutes driving + gas vs. pay $5 for the convenience of delivery for a $10 meal? I think quite a few people will pick the latter.
The only question is if delivery services can find scale and a price point where they're profitable.
Ghost restaurants, which are restaurants run out of commercial kitchens away from downtown areas, and with no physical presence to speak of, using the Internet to drive orders, are trying out running FOH-less operations, but for an existing restaurant that's a bit more difficult a move to make. (Since a restaurant with ~no FOH staff has no human servers/waiters, maybe we could call that model serverless.)
Delivery driver: Paid a portion by restaurant, paid a portion by tips
Telephone: $60 / month utility bill
----
Today:
Restaurant: Keeps 60-70% of order
Delivery driver: Paid a portion by Uber, paid a portion by tips
Uber: Paid 30% + delivery fees, service fees
See the problem?
Not so sure about pizza, but the tip issue probably comes into play there again. The customer covered the delivery cost and a 15% tip is more than most delivery fees in my area even on small orders.
But other than that, there is essentially no marginal cost to the delivery infrastructure, you pay part of the driver cost directly (via tip), they at most take a cut to go to drivers (minimum) wages, but that's a fixed cost not % of checks.
Thing is when I did we kind of optimized for the trip costs / payout. Deliveries only happened (for free) for orders over a certain value. During peak times (around dinner) we’d also batch orders. I’d often go out with 3 or 4 deliveries at a time and come back in about an hour with $30 or so just in tips. The 3 hours or so of dinner rush basically paid for the rest of the day.
1. From what I understand restaurants doing delivery largely were breaking even on it considering the costs - there was no third party looking to take 20-30% of the gross.
2. Again anecdotally, I suspect the old school pizza/chinese delivery places are more efficient in terms of deliveries per driver per hour. What I see with a lot of UberEats/Grubhub etc is drivers waiting a lot at restaurants, bouncing around a bunch to pick up one or 2 orders each. Vs the old-school pizza model of a driver being able to pick up a bunch of orders at once.
Precisely this! It's amazingly inefficient to dedicate an entire person (and their 1000kg car) for the delivery of a single 2kg takeaway meal.
Uber tries to "solve" the problem by giving drivers two orders at the same time, but their implementation is terrible:
1. Sometimes the restaurant doesn't have both orders ready at the same time, so one of the orders is growing cold and soggy.
2. Uber's dispatch system has such a strong preference for batching deliveries together that a driver will often get assigned two orders that are going in opposite directions from the restaurant!
3. The high-volume restaurants (like McDonald's) have managed to exempt themselves from the double-delivery system [for the obvious reason that customers hate getting cold food!].
I think the old world was restaurants squeezing delivery drivers. Now it's the app squeezing both the restaurant and the delivery driver.
This shouldn’t be as much of an issue, compared to the ride share market, as you can make deliveries in a $2k junker for years before it gives out.
Old cars are definitely cheaper to run (net) than new ones, but they aren't free.
How would it work in the US? Would it work if the app did not take a cut at all? Is there just little demand for delivery in the US?
https://patch.com/virginia/fairfaxcity/robots-make-food-deli...