Restaurants rebel against delivery apps as cities crack down on fees | Hacker News Reader

Restaurants rebel against delivery apps as cities crack down on fees

nbcnews.com

167 pointselorant222 comments

I actually looked into opening a restaurant in the London suburbs. A friend of mine runs a chain of sushi delivery shops in central London, so I had some advice from an insider.

It seems to not work at all with a 30% cut going to Deliveroo and those types. I went to look at some locations to find out the rent, and I had a look at the ingredient and staffing costs. Then I threw it all on a spreadsheet to make a guess about the breakeven, and I checked it with my buddy.

The thing about Domino's and the sushi delivery is that they run their own delivery network. They don't have the costs that Uber Eats or Deliveroo have with marketing and tech. The delivery management is fairly complicated, perhaps not in a tech way (except for Dominos, who have a big tech arm) but in terms of marshalling a bunch of drivers to efficiently drop off food during the evening rush, it's a fair bit of work in itself. My buddy talked more about that than making sushi.

Deliveroo and Just Eat in Europe seems to have an explicit delivery fee shown at checkout (and distance based according to each restaurant).

Not sure if they take an extra fee on top of the "pre-delivery price" or how does it work.

I wonder if European policy drives that because we don’t have that kind of transparency in the US

What do you mean? I've used Doordash, UberEats, GrubHub, and others like it, and they've all explicitly listed a "service/delivery fee" at checkout.

But doordash, Uber eats etc...receive MORE than just the service delivery fee that they charge you. These platforms separately charge the restaurant itself a fee (rumored to usually be between 10% - 30% of the order total) for every order.

This is the lack of transparency discussed in this thread. People would like to know at the end of the day, how much of the order money goes to the restaurant.

They also change prices so you pay higher costs per item just by using Doordash.

Agreed. In an ideal world, whatever costs associated with delivery should be completely borne by the customer, not the restaurant.

If the restaurant isn't the one providing the actual delivery, the service provided provides most of the benefit to the customer, and it should be us customers that pay for the convenience.

This reminds me of the debate around NYC banning landlords from forcing tenants to pay brokers fees. The landlords are the ones benefitting the most from brokers' services, and should bear the brunt of the cost.

I'm curious to see if any cities/states take a similar approach with food delivery and prohibit delivery companies from charging the restaurants themselves fees.

Technically UberEats etc aren’t charging the restaurants for delivery, but for marketing - “you’ll get more orders by being on our platform” - at least that’s how they’re selling it, and I suspect it’s true at least for some restaurants

They do not. There's a nebulous category that fluctuates. My credit card currently has a deal with door dash they made to kill grub hub so that delivery fees are covered yet there is still a seemingly small random service fee tacked on. I feel bad for grub hub but I absolutely will take vc money propping up a failing business. I usually check all the apps and the restaurants website before putting in an order to account for different menu prices

>Not sure if they take an extra fee on top of the "pre-delivery price" or how does it work.

Not sure about those but others in my country do - I've talked to a restaurant owner here - he has two companies with marked up prices for the same menu to get arround the app policy that prices must be the same as buying directly from vendor, if you order directly from him it's ~20% cheaper. That's on top of explicit delivery fee.

Same debate happens here in Europe for Just-Eat (originally Danish), and Wolt (bike courier, originally Finnish). There's a cut taken from the restaurant separate from the delivery fee visible.

With an industry that runs on ~10% margins (and lower in many cases), how could one possibly imagine a 30% cut to fees being workable?

Costs don't scale linear with the production of more meals. If the variable costs (like food and staff) are lower than or roughly equal to the fixed costs (like rent) then 30% off the face price of food might be still be a money making proposition.

That being said, it's becoming increasingly clear that restaurants and delivery services need to be co-designing to make widespread delivery work long term.

Increased prices :). Consumers are paying more than 30% more for delivery.

I wonder a bit why there is no player like amazon in the food business. I mean a completely integrated one from buying ingredients to cooking to delivering.

As the article notes, Amazon tried it and bailed out (presumably because it was not worth the trouble)

For reference:

> Amazon, a company that many would consider an expert in e-commerce and logistics, tested the market and left about a year ago.

https://www.nytimes.com/2019/06/11/business/amazon-restauran...

> Since it started in Seattle in 2015, Amazon Restaurants has struggled to gain a foothold in the restaurant delivery market. Together, UberEats, Grubhub and DoorDash control nearly 80 percent of the restaurant delivery business, according to the research firm Edison Trends.

> Still, Amazon Restaurants is unlikely to be the company’s last venture into restaurant delivery. Earlier this year, Amazon invested heavily in Deliveroo, signaling its sees long-term interest in the area.

A lot of things that typically fall under the heading "women's work" are tough to make profitable as a business. This includes food prep and child care.

Restaurants have notoriously slim margins. Yes, there are many restaurants on the planet. But it's a tough business. Adding delivery or what not just makes it tougher.

What you are describing is like a personal chef, which is out of the price range of most people. (Or it's called a full-time wife, which is also out of the price range of most people these days.)

Thanks. That was sad and insightful at the same time!

As a husband of a now full-time wife, who decided to stay on external parental leave to spend more time with our child and improve her career skills (in whatever little free time), I'm deeply saddened by how society sees this kind of work. Every couple of days I have to reassure and remind her that what she does - raising our child, feeding us, caring for the home - is a real job, is a hard one, and it's more important than mine. I just push buttons on the keyboard for 8 hours a day, and somehow convince people to pay me for it.

I don’t know why you don’t think child care can be operated profitably. In Seattle you can have something like 6 kids per caretaker can charge about 2k/month a head. There is a minimum size though that makes sense because you get to take credit for contact staff so you can up that to 8+ if you have a cleaner or receptionist on site.

It’s not programmer money but it can generate decent stable revenue. Better that most non high tech low education required jobs.

2k/month a head

Minimum wage in Seattle is $12/hour. $12/hour x 40 hours per week x 4.3 weeks in a month is $2064.

Presumably, that's before taxes, etc. (Yes, I know Washington doesn't do income tax, but you still have to pay federal income tax.)

Obviously, boutique-style businesses aimed at wealthy clientele can be made profitable. But that's not what most people are dealing with.

I never said that daycare cannot be profitable. Just that these tend to be tough things to make profitable.

Similarly, some restaurants are making a killing. But most restaurants have slim margins. And daycare is generally considered to be a tough business as well for various reasons.

Is running your own delivery system actually cheaper?

I can see it being the case if you already have scale, but assuming deliveroo collects 1 billion in fees from 100 thousand restaurants, for an average restaurant, it's 10 thousand per year, that is not a lot of money for setting up a delivery system.

Provided, delivery being expensive is probably the reason most restaurants didn't offer that option before. And those who started off as delivery-first probably optimized their business to have the delivery cost in mind, like picking a cheaper location to save on rent (one of my favorite pizza place is in a shady back alley), reduce menu size to optimize kitchen efficiency, increase price to ensure profitability, etc.

For a dine-in focused restaurant to offer delivery option profitably, their incremental revenue needs to be greater than the incremental costs. If a restaurant is not operating at capacity, their incremental cost of more orders is low; if a restaurant needs to expand capacity to fulfill new online orders, then the math becomes more muddy, is it just hiring more kitchen staff? does it require more equipment? does it require more kitchen space or even a completely separate kitchen?

> Is running your own delivery system actually cheaper?

For two reasons: really not. Deliveroo barely promisses to make a profit and that’s with a lot of things for them.

1. It’s surprisingly complicated to run that kind of service. They key issue is schedule: sure, if you have a couple of cousins of yours on mopeds, that’s simple enough but that has no economies of scale. If you want to have 15 people, your sanity will be challenged whether you try to use pen, paper & text messages or dedicated scheduling tools.

2. Scale is everything. More specifically, if you deliver from one restaurant, half of the time, your riders are coming back empty. That really lowers your effectiveness. Deliveroo works by having many restaurants and many customers spread out so that a bike can pick up from a restaurant that is closer.

If you want more details on the numbers, I‘ve answered lower in the thread: https://news.ycombinator.com/item?id=23292414

> If a restaurant is not operating at capacity, their incremental cost of more orders is low; if a restaurant needs to expand capacity to fulfill new online orders

Most restaurants can easily increase how many meals they serve if they know about it days ahead. The market for fast-order cooks and front-of-house personal is fairly liquid (shockingly so); tables not expandable especially at peak shift. A way you can see that is how enthusiastically restaurants expand their terrasse as soon as it’s possible — there’s never a second kitchen that opens in the back alley to match. Deliveries were leveraging existing capacity most of the time. “Dark kitchen” or delivery-only kitchens were suggested exclusively to be closer to customers.

I got to question this. For at least 30 years before these apps, pizza places and Chinese restaurants had figured out how to handle their own driver service. I think the apps want people to think that it’s. Or possible to handle your own delivery.

I'm not questioning that some restaurants do it. I’m not sure how it can be cheaper for a single-address restaurant to do it, compared to a pooled service. If half of your workforce is just driving back, that can’t be efficient.

I’ve been building a better Yelp of sorts, trying to do a variety of things to basically fix ratings and have a great app for finding food even down to the dish.

We’ve been working on it for a few months and are getting close to a beta. But I’m starting to think we may look at building out a “Shopify” market for restaurants. You handle the delivery but we still give end users a consistent experience and single nice app.

If you or anyone reading is interested even in just giving some feedback, we’ve gotten quite far and would love to work with one or two more really great developers. I really do think many restaurants would be happier like this: they already manage staff and do support, and down the road we could add on interesting collaborative tools for them to share drivers.

I think Kevin Rose looked into recommendations at the dish level with a startup (milk?). You might consider checking to see if he posted any lessons learned.

Really appreciate the heads up, I’ll reach out.

> We’ve been working on it for a few months and are getting close to a beta. But I’m starting to think we may look at building out a “Shopify” market for restaurants. You handle the delivery but we still give end users a consistent experience and single nice app.

Sounds cool. Take a look at ChowNow, which is a bit similar to that description, if you've not already.

I don't know why there isn't an app that simply only lets you order from places that are within 30 min walking distance. (I don't know why this isn't written in law - having someone drive more than a few minutes to deliver you food should be considered a crime against humanity because it is so dumb, inefficient and demeaning to those involved)

That way people on bikes, mopeds, whatever can do the delivery and it's fast, easy and cheap for everyone involved.

The people making the deliveries have to live within a specific radius of you and the delivery spot, that way people in affluent neighbourhoods get paid more to deliver, because it costs more to live in that neighbourhood and people who live in poorer neighbourhoods, get paid less.

You know where I'm going with this - it should be teenagers and college/uni students doing these deliveries part time, not grown adults. We as a society should be moving beyond menial labor, not creating new 'gig economies' that prey on folks who have trouble finding stable jobs because we've optimized away any semblance of community and dignity in exchange for billionaire mansions and yachts.

How difficult it is to build a B2B, white labeled software and charge as subscription for these shops? These shops can market the link on social media and yellow pages?

Is it because Deliveroo also is the default source for online order making customers? Curious.

In Amsterdam, plenty of small pizzerias also have or had their own delivery. It doesn't sound that hard to do. And especially with the Corona crisis, turning your waitstaff into deliverers sounds like an obvious solution. That seems to be what a lot of restaurants here have done.

Of course we also have Deliveroo, Uber Eats, and of course our home-grown giant Thuisbezorgd (though I think Thuisbezorgd restaurants still do their own delivery, though they too have recently been complaining that Thuisbezorgd is raising their margins too much). But it seems to me that if those are more expensive to a restaurant, the restaurant should raise their prices only for those orders. Let the customer swallow the extra cost of the expensive delivery. That way you get cost transparency and fair competition between different options, and restaurants will get their share.

I delivered for Pita & Sticks in 2015 when it was a new restaurant. The owner refused to pay me my last paycheck after I quit and found another delivery job.

Point is.. delivery drivers were treated like shit before GrubHub and Uber. Before it was restaurant owners. Not all, but many.

Now that the deliveries are all centralized to a few companies, it’s an opportunity to get delivery workers better wages and benefits.

This is the first time I've ever seen anyone suggest that Uber has treated their drivers with anything but contempt.

where do they suggest that?

How much income do they make on grubhub outside the tip the customer pays?

Here's one data point

https://news.ycombinator.com/item?id=23217005

Other data points can be found here (take with a pinch of salt, but gets you the right ball park) are here:

https://www.reddit.com/r/couriersofreddit/

I used to deliver pizza around 2010, and was averaging 5~6 dollars per delivery (half from the pizza shop and half from tips) and 2~3 deliveries per hour, it was a very exploitative job, but actually better than many other manual labor jobs I've had...out of 10 or so such jobs, it's probably top 3.

There thing that really bugs me is that the net fees to the restaurant are usually hidden from the user, so when users who care (which I admit was probably few, until this recent wave of indignation) couldn't take this into account.

I hope that the result of this new wave of concern is forcing the delivery apps to display the total fees they are charging the restaurant.

Are you similarly annoyed that you can’t learn the rent, ingredient prices, or wages costs?

I think that businesses have all kinds of expenses and that they’re in business to abstract that away and offer me dish X for $Y at place P and time T. I’m not inclined to care about their bank fees, advertising costs, health care costs, or SEO strategy.

Delivery cost is different in that you normally avoid it as a customer if you go in person. So it's not actually abstracted away from you. You can't avoid their rent, wages, etc.

If you're ordering from a chain then taking delivery could allow them to arbitrate on the rent part. And you wouldn't be taking up any of their table space either.

While we may not be able to know those exact costs we can get close.

I know that a restaurant in an upscale mall is paying more for rent. I know the minimum staff costs depending on the city they’re in (minimum wage).

What I don’t like is that these companies will flaunt “No delivery fee!” And then in the cart you see a $5 “service fee”. Okay, what’s the difference? Who is actually getting that money? Is any of it going to the driver? The restaurant? All of these factors would help me decide which platform to use, which restaurant to order from, and how to tip.

Restaurants are very competitive and few can charge exorbitant fees. They are the opposite of cartels.

With regard to ingredients we can likely guess ~60-70% discount over supermarket prices.

In any case this has been a business model for centuries and people have a decent idea of how it works. With delivery apps the economics aren’t well understood by end users, moreover users don’t fully understand the impact they have in the restaurants they want to support.

This is different because it’s the app you are USING. It’s been added to the chain late in the game and therefore we as a society care about how the restaurant has been affected by this new development. Like are they in a race to the bottom now.

It’s a bit like the Trolley problem where you only agonize about the latest decision, and not what happened before you came on the scene.

Yes, in general all prices ought to be transparent. It's a basic necessity for a competitive market. You want people to be able to easily find out if some firm is making a lot of money, so they can do it cheaper.

I suspect two factors are at play here:

One is that people are obtaining the delivery service and are billed through a third party. There is a reasonable expectation to know how much of that money is going to the intended recipient.

The second is that this is something new and very few people have any concept of what it is costing the business. While they may not know the particulars, they have a general idea of how much rent, labour, food, and credit card fees cost since they have been part of business planning for a third time.

I also hope that a third factor is starting to come into play: an understanding of the barriers to creating businesses and the costs of operating. It will, hopefully, help consumers make conscious decisions of how they interact with small businesses to make them more viable.

Yes I would be annoyed if, in addition to charging rent to the restaurant, the landlord appeared when I tried to go in and pestered me into paying a ‘service fee’ or ‘entry fee’ and ‘landlord tip’ or whatever other nonsense that these services come up with.

The general public increasingly does care about wages. They care about it in a seemingly random manor, chiding certain industries and completely ignoring other, larger industries. But nonetheless, people do care more now than they seemed to in the past.

If you ask politely most chefs would just tell you the approximate costs. That information is well known, only minor details of rent might be off a bit.

I do care that the people who make my food are properly paid for it. But more than that, I really care when I'm wasting money to pay extra for delivery when I might easily be able to pick it up.

Why does it matter though? it doesn't matter if the burger cost $1 + $9 fee or $9 + $1 fee, from my perspective the burger cost $10.

You might care that you are paying $10 for $1 quality burger?

But more I think people want their money to support the businesses that are making the food. Restaurants are very difficult businesses, and people that like them want to support them vs the VC backed startups.

I care, so I judge the quality according to the money I paid to obtain it, in this case I judge it as $10 quality burger.

With the extreme cost disparity in your example, it’s only Taking your example a tiny bit further to say if the restaurant was paid zero by the app but the app somehow got their food, you’d be be okay with it.

It’s not much more extreme from what your comment said to say if you value a burger $10 it doesn’t matter if the $10 went to someone who involuntarily coerced the restaurant and $0 went to the restaurant. What is the name for workers who do work without pay?

Most people have some sense of moral rightness in their supply chain when an injustice is visible. That is why the apps hide their exorbitant fees.

>if the restaurant was paid zero by the app but the app somehow got their food, you’d be be okay with it

If I'm the customer: yes. If I'm the restaurant: no, I would not agree to give out food if I'm getting paid zero.

> What is the name for workers who do work without pay?

Same thing if I'm the worker, it doesn't matter if the pay is $10 - $9 deduction or $1 - $0 deduction, in both case it really is $1. I then decide whether it worth my effort to do it for $1.

>If I'm the customer: yes

Well of you enjoy that restaurant you shouldn't be ok with it, because with price margins like you describe, that restaurant's not going to exist for very long.

I am specifically discussing about comparing net price, nothing to do with price margin though.

Why are you limiting your consideration to such and artificial and limited scope?

No one else is going to object if you consider whether a wallet vote is pretty blatantly encouraging and rewarding exploitive behavior.

It’s very hard to pretend the relationship is not exploitative.

The price of the item is real for me.

Limited scope? Sure, its for my benefit and my convinience.

> Well of you enjoy that restaurant you shouldn't be ok with it, because with price margins like you describe, that restaurant's not going to exist for very long.

That's only true in a vacuum though. There's so much more variable that makes it absurd to happen, except if we live in some kind of tv show.

Let say Uber eat charge too much and it kill their customer, will they keep doing it? Why would they? Theses customers are the one bringiner them this cash.

Why would no competitor see that and decide to charge 1% less? That would be absurd for the restaurant not to consider that one instead. That strategy would be incredibly easy to apply locally too.

Let's not forget that restaurant still can have their own delivery drivers too, like in the article we are talking about right now. That also means that you will have to pay for the marketing too that the delivery service provided for you beforehands... but that's normal business.

It matters if you like the burger place. There are restaurants in my community that I am genuinely worries will go under in these COVID-19 times, not only because of the good food, but because of the good people I want to see succeed and the people I see when I go there. I don't want to screw them over if I can help it.

To the extent price is correlated with quality, you should very much be concerned about how much the restaurant is getting out of your $10. If they get $9, you can expect some quality food. If they get $1, then let's hope you have a strong stomach.

I agree that price corelate to quality.

My point is if restaurant A sell burger for $1+$9 fee, restaurant B sell burger for $9+$1 fee, I would judge the quality of these 2 the same way.

Just because restaurant A burger cost $1 (for the restaurant), doesn't mean I have to judge them lightly.

What if you want 2 burgers?

But at one place, you might be able to pick it up for $1, while at the other place, it would cost $9. The amount of fee matters when the fee is avoidable.

I agree, I'm discussing the case where the fee is unavoidable.

In a related business, AirBNB straight-up lies about its service fees. I got a refund but it was much less than expected and they informed it was their service fees, after pressing them that that didn't add up to the service fee in my receipt, they admitted that there is also a service fee hidden in the part that is labelled as going to the host. So they take a chunk out from what I send them and then they also take a chunk out from what they claim to send the host and this matters both to the host and also to me since it affects how much can be refunded. I can't imagine itemizing a customer's receipt incorrectly like this is truly above-board with the law but what am I going to do?

Charge back for not as described and incomplete refund.

In Europe that's actually illegal. A middle man should represent the buyer or the seller but can not represent both and charge a commission to both. Interesting. This could easily be a point where they can be hurt.

The thing with GrubHub, UberEats, etc... is they are (usually exclusive) marketing services masquerading as delivery services.

What's infuriating is knowing they are charging 30% in addition to the 10% they charge me, the consumer... and still you have to pay the driver. There's one restaurant about a half mile from me... Uber Eats was going to charge me a $10+ fee for the pleasure of using them (not including tip).

I could literally take an Uber there AND back and it would have been less expensive... screw it I'll walk and reheat my food.

It is a completely backwards model.

Open Table seems to be in the same realm... I can't remember if the figure is correct so I'm loathe to mention it... but our favorite restaurant told us Open Table charges $5/head (to the restaurant).

17 years ago a friend was trying to get me to start a restaurant delivery service with him in Houston. He explained most around the country were mom-and-pop businesses utilizing little technology but be had visited 2 millionaires in Phoenix and LA whose delivery businesses served hundreds of restaurants. He found the guy who supplied Windows software to some of these businesses that handled all the specific bookkeeping and proximity calculations for changing fees based on distance, etc. I was amazed they took a 30% cut from the restaurants but he explained that the restaurants were increasing their capacity beyond the seating they had on-site. I don’t really know how all those restaurant customers felt about that, though. Maybe they were grateful to be able to build new customer relationships, but we never got going since the investors fell through.

Recently after reading about restaurants teaming up to share delivery people, I wondered if providing restaurants with generic back-office apps that allowed them to easily partner with other businesses to make small delivery operations (maybe a half dozen or dozen sharing drivers) would blow the giant VC-backed ones out of the water. Basically some lightweight SaaS solution for a few bucks a month, easy to integrate with their website, etc. Customers should be able to get used to the idea that they can just go to the restaurant’s homepage and look for the Delivery button instead of perusing VC-backed indexes of restaurants.

Usually exclusive? Every restaurant entrance in Chicago has UberEats, DoorDash, Postmates, Delivery.com, Grubhub, Seamless, AND Eat24 stickers. Walk inside and theres a table with ~8 iPads, one for each delivery service.

Most of the places I order from are on only one of these apps.

Tipping and the shaming culture around them is what I believe will ultimately kill delivery apps and a lot of in person dining in a post covid world. There isn't a single person in my age range I've ever met that didn't once work in a restaurant (where the owner under paid them) that thought of them as anything besides a sneaky way of the owner extracting more money from the consumer. If the person is from another country or lived abroad the hatred for tips is even higher. Tipping for older adults was once an optional item for exceptional service to the under paid but it is now just something you're forced to do by the owner for their employee doing their job competently.

I absolutely don't think ghost kitchens are the wave of the future in the city when most people would actually prefer to save five to ten dollars on the delivery plus the arbitrary tip in nearly all situations besides being inebriated.

This is a case where restaurants should start a delivery app co-op.

Any time where you have a whole business segment subject to what boils down to rent-seeking tolls, there’s an opportunity for cooperatives.

Business idea: White label delivery co-op as a service

HubGrub!

The delivery apps are going to be hard to compete with. Restaurants have to get a base of people willing g to deliver for them. And even more difficult, they'll have to make a platform that makes it easy for people to see what the menu is and order. Have you ever seen a restaurant website? Even one that does delivery? I'm incredibly skeptical that a co op would have the will, desire, or skillset needed from its members to succeed

Think of like a credit union: it’s not like the members of the credit union have the skillset; they hire people who do. The members just provide the will/desire and maybe some small amount of pooled capital EDIT: and most important, a pool of customers with an incentive to stick around (the customers ARE the owners).

> The delivery apps are going to be hard to compete with. Restaurants have to get a base of people willing g to deliver for them.

This isn't a problem. DoorDash et al aren't particularly good to work for.

A local Pizza joint bootstrapped CarryOut Kings[1] off of their existing delivery staff after the pandemic started, and is now delivering for any business in town. They're making a killing, and I've got friends who work there who are making a lot more money than I was when I delivered from DoorDash. If I lost my clientele for my business I'd be driving for CarryOut Kings over the delivery apps without hesitation.

And even putting aside the numbers, there's a lot to be said for working for someone who has to look you in the eye if he screws you over.

[1] https://www.carryoutkings.com/

How much are they making (drivers)? Its a good idea but the site is a tad messy.

> How much are they making (drivers)?

I don't know exact numbers; I know one did make $150 in 5 hours on a Friday night. I am not sure if that's typical, but I do know it was not possible when I was driving for DoorDash.

> Its a good idea but the site is a tad messy.

Yeah--developing a slick app and web 2.0 webapp isn't always the value add that silicon valley claims it is. It's great for GrubHub or DoorDash because it puts you in front of clients everywhere, but it's not that great for users or restaurants. The website sucks because the business runs primarily over the phone: A phone call lets you interact with a restaurant and delivery service in a lot of ways that aren't possible in an app--there's a reason the apps fall back to the phone when something goes wrong.

As far as I know most of these delivery companies are loosing money themselves. Are there any sustainably profitable delivery services?

https://www.vice.com/en_us/article/pa75a8/worker-owned-apps-...

It doesn’t make sense to describe Grubhub as “rent-seeking”, though. It’s not like they are sitting on some monopoly with power over the restaurants. Restaurants are free to simply not deal with delivery apps, the same way that all restaurants operated 10 or 15 years ago.

The idea that this is just GrubHub or DoorDash or whoever being greedy doesn't seem to jive with these companies losing money too.

It seems more likely that the economics of general delivery service just don't work out very well for most restaurant types. It ends up costing the restaurant too much, such that the prices to compensate themselves and the drivers fairly are higher than consumers will tolerate paying.

A nice, friendly co-op would probably work okay for restaurant types that were already known for delivery (e.g. pizza), probably not for others.

> The idea that this is just GrubHub or DoorDash or whoever being greedy doesn't seem to jive with these companies losing money too.

The executives of GrubHub and DoorDash aren't losing money.

Note that "not making as much money" is not the same as losing money.

I mean okay, but I doubt the executive pay is really moving the needle in terms of whether these companies are profitable.

> Note that "not making as much money" is not the same as losing money.

I'm talking about the company being profitable, not whether employees are able to draw a salary or whatever. I would think this would be obvious. Both companies are currently unprofitable. Granted, the pandemic obviously isn't helping things.

https://craft.co/doordash/metrics

https://investors.grubhub.com/investors/press-releases/press...

> I mean okay, but I doubt the executive pay is really moving the needle in terms of whether these companies are profitable.

Sure, but executives being paid does jive with "[t]he idea that this is just GrubHub or DoorDash or whoever being greedy", which is what I was responding to. The executives being the ones who make the decisions for the corporation.

Wouldn't it hurt them that they're trying to service every resteraunt in every area simultaneously, with massive marketing budgets? Seems like it would be much cheaper to just service your local area

Economies of scale usually mean it's the opposite.

Preamble: I've been living almost exclusively on fast food deliveries since the start of the lockdown. Mostly because the only shop I'm able to get to easily has been an absolute nightmare, 30 minute queues and stuff.

I frequently order through takeaway.com, which is sort of centralized but most retaurants have their own drivers, but some seem to be shared across restaurants. I've had at least ten drivers ask me to order through the restaurant's own website in the future, buttering me me up with a 15% (!) discount. I can only take this to mean that takeaway.com is charging more than that as a fee, which seems like a lot.

There's probably a market for restaurant websites with an easy to use order management system and cheap payment integration.

In Europe there’s CoopCycle[1], a “federation of bike delivery co-ops”: https://coopcycle.org/en/

Idk, Austin had a non-profit ride sharing app that sprung up when the big players left town for two years. As soon as Uber and Lyft returned, they undercut the non-profit and bled it using investor cash until the drivers stopped turning on the app.

VC-backed gig economy apps are a pretty significant threat to the cooperative model because they can operate at a loss in order to regain market share.

This is happening here in Colorado (northern CO - Fort Collins, etc): https://www.noconosh.com/restaurants?collapsable=1

https://www.noconosh.com/faq.xsl

Is Noco Nosh just another delivery service?

Unlike Grubhub, DoorDash, and UBER Eats, Noco Nosh is owned and operated by local independent restaurants, not a large corporation taking advantage of restaurants. We have a local staff on the ground running the day-to-day operations and a Board of Managers (comprised of restaurant owners) who make the decisions for the company. Local is our name, fairness is our game!

Several local restaurants have stopped using Grubhub and the like and moved exclusively to this which I think is a great move on their part.

This sounds exactly like what I was thinking: restaurants should team up and handle their delivery together, independent from the big delivery apps.

Glad to see they already are.

It's fascinating to see people having such strong moral intuitions that restaurant people deserve to get paid for their work, while food delivery people do not.

GrubHub charges a 15-30% fee, of which only 10% goes to the delivery person. On average the app owners are making twice as much as the person who does all of the actual work.

By "food delivery people" I mean the entire company, not just the person in the car.

So it's the app developers and management that don't deserve to get paid?

Despite the large fees, these companies are all losing tons of money. So it's not like anyone is getting rich by overcharging restaurants.

It looks to me like maybe food delivery simply isn't a sustainable business with 2020 technology. Or it needs a whole different business model.

Seems like it. 10-15 years ago I had a bunch of paper menus in a folder taped to my fridge that I would have to look at to order food. Perhaps I didn't have access to every restaurant in the area, but the selection was broad enough. The only extra fee I paid was whatever tip I chose to give the driver which I always assumed got added on top of a reasonable wage. That system seemed to be sustainable--at least it operated fine for many decades.

It's too bad the old system was cannabilized by the apps. I'm sure some smaller operations that couldn't afford to run their own delivery before have seen an uptick in sales, but as a consumer the choice paralysis, screwed-up orders from over-worked kitchens, and insane fees/price bloat has turned getting food delivery into an unpleasant experience I now try to avoid.

> The only extra fee I paid was whatever tip I chose to give the driver which I always assumed got added on top of a reasonable wage.

I would give low odds on this assumption being true :(.

I think the unprofitability is purely due to inefficiency. A lot of "gig economy" companies have taken the startup model of "don't worry about profit yet, just grow as fast as possible to get investor s attention" and pushed it beyond reason. GrubHub has ~2700 employees [0], do you really need that many people to run a food delivery app that doesn't even employ delivery people? And then you get totally avoidable stupidity like pizza arbitrage [1]. There is no reason that most people on this site couldn't build an equivalent app for their city, and in fact people are doing just that [2].

[0] https://craft.co/grubhub

[1] https://news.ycombinator.com/item?id=23216852

[2] https://coopcycle.org/en/

> the app owners are making twice as much as the person who does all of the actual work

If you look at GrubHub's financials, they're not getting rich: https://finance.yahoo.com/quote/GRUB/financials?p=GRUB

2017 was their best recent year. They had a 14% profit margin (which is OK). They lost money in 2019. CNBC says GrubHub is the only profitable delivery service: https://www.cnbc.com/2019/12/13/grubhub-uber-eats-and-doorda...

They both deserve a living but the new middle man has an obligation to make their own business model work based on added value, not to cut into the - already slim - profits of their suppliers. They got in by charging very little, typically 50 cents per order or thereabouts, then changed it to a percentage of order value and then cranked up that percentage once they were in a position to strongarm their suppliers.

That's unethical.

If the businessmodel of a delivery service requires more margin then the company should simply pass their costs on to the buyer, not attempt to play parasite to an entire industry pretending deliver costs are next to nil (which they definitely aren't).

I don't think it's the deliverers themselves that are the cause of the high fees, though. It's that there's an entire profit-seeking industry in between. Plenty of restaurants have their own deliverers, and they're not that expensive.

Good! To summarize what I’ve learned lately:

Grubhub takes

- 20-30% commission

- all promotions are on a restaurants back

- Has a very liberal, no questions asked return policy

This post summarizes how expensive grubhub can be.

https://www.eater.com/2020/5/1/21243966/giuseppe-badalamenti...

In Malaysia restaurants charge 30% more on delivery apps (Grab, Foodpanda). But they have also published phone number to order directly from them in case of pick-up. So those who can't pickup have to pay the extra fee.

That's how it is for me here in the states. The Uber eats prices appear to have the markup baked in compared to calling and ordering for pickup. I am having a very hard time understanding why anyone is upset.

Any time someone else makes money people on HN start a tirade about how evil capitalism is and how they should know exactly who is getting every penny they spend on every product or service.

I stopped using Grubhub because the majority of my purchases were to the same neighborhood Pizza joint. I just phone it in and literally cut out the middle-man. It takes two extra minutes.

For some apps they give you incentives like points that you gain with each purchase to get your free meal later.

Suggests to me that perhaps the local pizza joint should get into that same game.

If they can also offer the ability to pre-pay for delivery on-line, or at the very least equip drivers with card terminals, they could also capture some extra customers who use a third party primarily for this kind of convenience.

skipping out on the "free meal" is worth it to me to not deal with these types of companies

Until the VC money runs out.

I guess I don’t understand the uproar here... is anybody forcing people to use these apps? Anybody forcing the restaurants to pay fees to them? Is there some monopoly force at play here?

My city (Santa Monica) recently passed a 15% cap on fees delivery apps can charge, and immediately grubhub dropped Din Tai Fung from us, I assume because they’re too far away for 15% to work.

They don’t do their own delivery so to get it yesterday I had to place a to-go order and drive and pick it up myself, about an hour total round-trip with no opportunities for efficiently stacking orders. I guess I probably “saved” $40, but I would have preferred to pay it!

Here are the instructions for how to fix this ( from the article):

>Shortly after he put the message on the internet, Singh ended his contract with Grubhub.

That’s it. End the contract, don’t pay the high fees

The new middle men: same as the old. Any kind of commission based service will always use its position as a wedge to either gain marketshare or increase its profits by hammering on that wedge as much as they can. As long as it moves, keep on hammering. I've yet to find an ethical one. Here in NL 'Thuisbezorgd' pulled the exact same stunts. I hate them with a passion and always search to find out if the restaurant I'm ordering from has a direct process as well, they are usually super happy about that.

The delivery fee should be based on distance - not how much you spend on food.

Distance doesn't work the same for all cities. 10 miles in NYC is forever away far. 10 miles in Dallas is up the street. Delivery fees should take distance into consideration, but also how long it takes to do the delivery using actual congestion data.

OK, time estimate is fine. But it should be same for any kind of food.

There must be a business model where every restaurant pays 10 dollars per month to be part of a food delivery program. Each delivery will be paid without additional costs other than the regular delivery rates (paid by the customer) It will be less lucrative than those 30% fee cut companies. But enough to make a good business. Maybe I should start it :)

I’d recommend something more like $0.25/order and a $10/mo minimum. You are going to have per-order costs and the restaurant is almost surely happy to realize that and pay them.

ChowNow charges a fixed fee (not sure what it is, I read somewhere that it's between $99-$150/month). For deliveries, I believe they outsource.

Wix Restaurants is a fixed fee too -- but it's more like an augmentation to an existing Wix website I believe. They don't own a delivery fleet, so the restaurant has to hire its own drivers (which high-volume restaurants are not averse to doing). I tried ordering from a Wix restaurant last week and the process was seamless.

All I (and I believe most users) really want is for a restaurant to have an online-ordering system. We don't necessarily care for delivery apps, but what a delivery app offers is a seamless checkout experience.

See, I've never liked calling restaurants. It's annoying to call restaurants during the dinner rush, be put on hold, be treated curtly because the staff is struggling to keep up, and having to repeat your order several times over the din makes for an awful experience for complex orders.

Side note: I've recently started hanging out at the r/restaurantowners subreddit[1] to overhear what restauranteurs are thinking. Could be good to hang out there to collect data points before embarking on a new venture.

Seems like Toast is a popular restaurant POS that has online-ordering features [2], which could be another commission-free route for restaurants.

[1] https://www.reddit.com/r/restaurantowners/

[2] https://pos.toasttab.com/products/online-ordering

I haven't kept up with this, but why doesn't the restaurant charge the delivery service whatever they normally charge and have the customer pay the delivery charge?

Grubhub, Ubereats, doordash etc charge the restaurant a % of the total bill as a fee for connecting and organizing the clients order.

Some restaurants figured that out, they simply have different the menu price displayed on the delivery app or even different menu set. For customer who prefer lower price they can order directly with the restaurant.

Problem solved.

Now let’s write a Medium post to complain about it

Some platforms ban restaurants who offer a different (higher) price on the platform than they do direct. The problem is that that these platforms flush with VC cash have forced themselves into the market as intermediaries, hoping that they can drive out direct ordering and hold the restaurants to ransom. But food delivery existed long before Deliveroo et al and I always try to order direct when I can. Sure it's not as slick as using an app, but the true price of the app is the long-term viability of my favourite takeaway restaurants, so screw the VCs.

Same but my local restaurants have special delivery apps plates. They give you a slighly smaller portion if you order with an app instead of take out.

Many restaurants do this already. However, its a lot of overhead to synchronize menus between a restaurant and the marketplace apps. Raising prices to make up for commissions means making prices higher on every item and choice. Then there are the customers who do not like to see different prices in different places — pre-covid this would not have gone down well. All these news articles at least raises awareness to help mitigate the customer backlash. That being said, a customer won’t want to pay a 30% up charge plus delivery and service fees. Maybe 10% which can be ok for restaurants that have more than 20% profit margin, but that’s not where many establishments are.

The article conveniently omits discussing this, but I can only assume it's because these restaurants have signed contracts with the delivery services. There's no other way this makes sense, like the taking of commission on fraudulent phone orders (the delivery service setting up a number purporting to the business and then charging a commission).

So it sounds like the restaurants themselves signed up for a terrible deal, and are now trying to change it via the court of public opinion. There can certainly be power imbalances that push parties into detrimental arrangements, but leaving this fundamental fact out makes the article extremely disingenuous.

The real question is are these restaurants locked into some kind of term commitment, or could they sever their relationship with the delivery services tomorrow and set up their own? The delivery services' move would presumably be to blackball the restaurant from the platform (in contrast with how they handle non-contracted restaurants that they're courting), but if enough restaurants got together they could certainly start a competing service.

There is no such prohibition. They can set their own price or even different menu.

Short answer: most customers would find the actual cost of that delivery prohibitive. It’s not impossible but that’s would rapidly be a niche market.

https://news.ycombinator.com/item?id=23295143

If you are ordering online and getting delivery because of the pandemic -- because you think it is a best practice for germ control -- I think you are probably better off ordering takeout and picking it up yourself.

Delivery drivers have been known to sample the food they are delivering and things like that. I am not thrilled with the idea of some underpaid delivery driver having time alone with my food.

Restaurants have to comply with food safety and hygiene laws and their staff get appropriate training. I doubt delivery drivers get similar training (correct me if I'm wrong).

Staff in restaurants are not only trained in food safety, they are typically not alone. This is one of the best ways to ensure that people are behaving. Delivery drivers are going to be alone with your food and therein lies the problem.

https://www.wasserstrom.com/blog/2018/10/12/food-delivery-ri...

It's not universal, but I've seen many restaurants do a pretty good job of sealing the bag, in order to combat this problem.

I have a permanently compromised immune system. I default to preferring takeout over delivery where possible. I occasionally get delivery where that's just not practical for some reason, but it's the exception.

There's a pandemic on. If people are interested in my opinion about best practices for playing defensively in a germy world, there it is. And if they aren't, (shrug).

You'll recall that I also have CF. For whatever reason, I don't fear delivery (though I'm more and more sensitive to how exploitative it is for businesses)

No, I did not recall that.

I do what I do to be drug free. This is probably not your scenario. The degree of hostility I got on CF lists is why I left them all.

I believe we had a couple of conversations in the past under your previous username.

I will agree that CF lists tend to be toxic.

My memory isn't what it used to be and HN gets about 5 million visitors per month.

I assumed you had no idea what my story is. That tends to be my default assumption.

This is a real problem that has existed for a long time, but has really only came to public attention because of the lockdowns. I wrote about it here: https://blog.routesimply.com/why-your-restaurant-should-brin...

My partner owns a pretty successful craft brewery in the bay area, and he's recently decided to get rid of doordash, grubhub and ubereats. What worked for him is using a network of ex-Uber drivers (there are tons of whatsapp and telegram groups where these guys hang out) together with an app (www.routesimply.com) that I built for him.

He takes orders directly on the phone, instagram and fb messengers and tacks on a delivery fee that the customer pays for and gives 100% to the driver.

I drive to all of the eateries I want to support. Some of them don't do delivery, others do, but it's a chance to leave the apartment and it's all money going straight to the eatery, not an exploitative delivery app.

Are there any food service establishments out there that solely focus on delivery? No walk-ins, no dining in but only delivery? Their staff would pretty much consist of cooks and delivery employees and the facility would be big enough for a kitchen and prep area.

I would think a setup like that with good food would do well in this new reality we are in.

I imagine it would challenging for a restaurant to focus on a good dine-in experience alongside a good delivery service, especially considering the low margins.

Yes, Cloud kitchens. Guess who has the most high profile one?

Travis?

Yep

Yes, I’d split them in two types in the markets where Deliveroo operates:

* existing restaurants (or food trucks) that were identified as promising by the Deliveroo; there’s a program to help them grow and the most common step is to lend them spaces in delivery-only kitchen. The key thing is to have a menu that is meant for that, so the food and the containers can survive a 20-minute ride. Some use the same brand; other create a different one for delivery only. Compared to the experience of getting a loan from a bank to open a second restaurant with a front-of-house in a busy street and having to commute between the two without experience is managing a kitchen remotely, that program was described as far sensical and likely to succeed.

* restaurants that were designed with that idea from scratch. Taster is a start-up (founded by Anton who ran the afore-mentioned program for Deliveroo in France). They identify concepts that would work, develop, finance and grow those brands from scratch. I believe that the idea is working really well.

So not only the unprofitable gig-economy apps are going under, they're actually dragging everyone else down with them. How long until the VC and other funding runs out?

This was written in 2013:

https://www.ribbonfarm.com/2013/04/03/the-locust-economy/

Year after year, I'm appreciating the analogy to locusts more and more.

Resteraunts should just put "GrubHub fee" on the bill

Maybe delivery costs would be lower if people could subscribe way out into the future... then, set it up like a paper route.

Deliveroo offers a subscription service but you still order on demand — the subscription just lowers your fee.

Competitors have suggested options with regular deliveries to pool them. Few offer hot food, many it’s fresh but cold (Frichti in France), sometimes it’s frozen (AllPlants in the UK) and you might include food-prep kits (Blue Apron in the US).

Based on the growth and successes that I’ve seen, I’m not sure that warm food on a route is far cheaper to operate; dish to re-heated seems to work, but not as well as food prep.

If the delivery platform is not evil, it can charge as low as PayPal do. But if they charge less, they can only do less advertising, which makes the network effect weaker.

Is there a way to let people discover suitable service without paying a lot for advertising? Like the real word-of-mouth, not the "KOL" one.

As a foreigner, it seems to me that the problem in the US is that too many people live alone.

My favorite pizza shop in northern Germany has a minimum order of $22 and charges $4 in delivery fees.

For one person alone, that wouldn't work. So you order together as a family. Or together with your flatmates in university.

In Germany, 41.8% of households have just one person.

In the USA, 28.4% of households have just one person.

I'd wager they count in different ways. Or I'm living in a total bubble. None of my friends is living alone. All of them are either sharing a house with others or living together with their girlfriend/wife.

Edit: it might be that your statistic is dominated by houses being owned by old people

Maybe it's just me, but I've never ordered a pizza alone, even when I did live alone. I only ordered pizza when friends or family came over.

If it's just me eating I'd go get a burger or some other single serving fast food.

Dominos in the UK has similar incentives but put in place less rigidly - any medium/large pizza will run you £18-£20, but there are loads of 40%-50% discount above £x (x >= 35) or 2-4-1 deals. This makes it more difficult to justify a solo order (unless you get 2 pizzas, which, fair enough) and incentivises ordering with friends or not at all.

Restaurants aren't free from unfair practices, often they charge the same price for takeway as for dine in, whereas takeway should be cheaper not including delivery charges.

Costs including for facilities/rent/upkeep for dining areas shouldn't be added to remote orders. In some jurisdictions(esp in 3rd world), even are supposed to be different for takeaway and dining as orders made in air-conditioned dining areas are often taxed at a higher rate.

> Costs including for facilities/rent/upkeep for dining areas shouldn't be added to remote orders.

of course they should, where do you think they make the food?

What an odd reaction to this article.

Do you believe there is some sort of moral or ethical obligation that restaurants must operate at the same margin for every transaction? Should liquor prices be reduced to meet the margin of the steak entree?

Those "air-conditioned dining areas" help create the overall economics available to supply you takeout; few restaurants could sustainably survive on takeout alone. Takeout orders also either cannot buy higher-margin items (alcohol) or typically do not (dessert) so it's not like the are a strictly equal value proposition.

Takeout and dine-in are not two separate business, they both operate together.

I'm not sure what you mean, takeout is typically 10% to 20% cheaper than the same food served to you at the table.

Do you suggest they make the food on the street or is it ok with you that they rent a space somewhere? By the time you factor in the costs of the delivery service the cost to the restaurant is about equal. Unless you have experience in the industry I suggest you do the math first and then complain, assuming by then you still have something to complain about. Restaurants are nothing at all like the software industry.

Amazon, Expedia, Grubhub and others are just middlemen sucking blood from small businesses and consumers.

I started using chownow, who has upfront cost for takeouts. Haven't done delivery yet.

My friend runs a restaurant. He changed his prices for the delivery services.

That sounds like the easiest way to handle this.

> owner John Stamos

I had to check; it's not the "Full House" John Stamos.

How long until Grubhub starts mandating the drivers to check for such notes?

The restaurants can “seal” the bags. Getting the drivers to break those seals to search for marketing materials won’t look good for grubhub

If the seals are removed entirely, not merely broken, then there's a good chance the customer wouldn't know they'd been screwed with.

Are restaurants allowed to have Grubhub specific pricing?

Yes and many do

I could write a lot about the benefits these apps provide, but I think we can all agree their ease of use and flattening of the marketplace into a centralized data source is a very powerful combination. This means restaurants essentially have to be on them to compete. Before, more decentralized factors like geography and word-of-mouth helped restaurants gain and hold marketshare.

This isn’t a new phenomenon, but it’s a definite shakeup of an industry that didn’t have to deal with this issue as much before. It’s similar to how credit card networks like Visa and Mastercard inserted themselves into the payments space. The ease of use these services offered customers simply outweigh the option for sellers to not use them. Sellers already didn’t like how these companies skimmed a few percent off of every purchase. Now you have delivery apps which are taking far more significant chunks of revenue out of each transaction.

However, how many customers know how much of what they’re paying is going to transaction costs? Some stores and gas stations offer slightly lower prices if you pay with cash instead of card. Customers are given this awareness so they understand that they are paying more for a feature.

Takeout apps not only add to the transaction cost, but also control the interface between the customer and restaurant. A restaurant wouldn’t even have the option to tell the customer how much of the price of their food goes toward middleman fees because it’s not in the takeout services’ interests to surface that info in their app. Instead, they can hide away the details of price differences between restaurants and then play sellers off against each other for their own benefit. Even credit card networks don’t have that much control over the entire transaction process, but these new end-to-end marketplaces control both factors in order to pawn off blame on the sellers.

If this continues, I foresee these takeout services exerting so much control over small-business restaurants that the restaurants either fold or all be homogenized under whatever the takeout services will. Given the propensity for vertical integration these days, the takeout services will probably just stand up their own food services in place of the restaurants, similar to what Uber ultimately wants to do with its drivers. Small business won’t be able to compete and even more local restaurants will disappear. Some will continue to exist as a niche as demand for variety/personable service and low prices/convenience fluctuate back and forth between stabilizing somewhere in the middle. This will probably be at the expense of customers and society as a whole, given that restaurants are one of the last bastions of small business in the ever globalizing economy.

In order to combat the shock that restaurants face while takeout apps hold a huge level of control over the marketplace, public institutions and personal will are needed to keep these apps from becoming too powerful. I see it as a more proactive form of anti-trust enforcement. Otherwise, you’re looking at a future where local restaurants probably won’t exist.

While I'm not sure I'm on board with it, I have to admit that it's impressive how much restaurants have managed to moralize their pricing disputes with delivery apps. I didn't expect this genre of article would survive a ban on in-restaurant dining.

The fees some of these apps charge is criminal. You’re an advertising and coordination company, do you really deserve a huge percentage per order? Gross.

Yeah, it’s terrible that we force these restaurants to be on these platforms and don’t give them any free market choice in the matter to opt out. /s

I think your being facetious, but in case not I'll emphasize that you it is indeed terrible. The way these predatory companies go after restaurants until they're added to the roster or create fake restaurant websites and phone numbers is ridiculous.

Yeah sorry. Text doesn’t carry tone well. I’ve added a trailing /s now.

I feel for every business that’s hurting right now, especially the small business restaurants that have been a staple in their local community. That has limits though, which fall short of barring “if someone else can package up directory services and make a buck off it, they should be able to, because that makes life better for consumers and I care about consumers more than businesses.”

Yellow pages used to charge what I considered obscene rates for ads before the internet. What did they do to deserve thousands of dollars per year from my local plumber? He’s the one who actually got in his truck, got dirty, and fixed my problem! Well, they’re the one who helped me find him...

I simply reject the label of "predatory" here. Restaurant owners are sophisticated businesspeople who negotiate supply contracts and such as a matter of course; it's not predatory for delivery apps to offer them a deal, even if they'd prefer a better one.

The fake phone numbers and websites, yeah, I'll grant you those are dishonest. Anyone calling a restaurant's listed phone number is expecting to reach that restaurant.

For every sophisticated business person there are four that need basic math and accounting explained to them.

It's all too common to see them base their entire business around a single percentage above total raw ingredient cost.

While I agree predatory is a strong word, you are missing the point. There is an ecosystem of small businesses that are being cannibalized by delivery app companies. These are the places I enjoy eating, places that are unique and amazing but not necessarily the top rungs of the business ladder.

This is happening because these delivery apps that are run by sophisticated business people haven't even worked out their business model yet.

Asking for transparency isn't asking for too much.

Most of the time I order delivery, I'm not trying to support my favorite places or really any places at all. I just want some noodles, and I'm entirely insensitive to where they come from. The restaurant industry has no intrinsic moral right to make money from my order; it's strange to propose that I should go out of my way to spend more money and waste more time just for the sake of some random owner's bottom line.

When I'm trying to support my favorite restaurants, the ones I do care about for their own sake, I of course go pick the food up myself. I think most people do the same.

If you feel the restaurant industry has no intrinsic moral right to make money on your order then you are 100% mistaken. If they don't make money on your order you don't get food, so it is in your own interest that they do make money on your order. A race to the bottom will get you either crappy food or no food at all.

What surprises me is that on a website with lots of top earners people would still begrudge others to make an honest living. And running a restaurant is a lot more work than writing software.

I'm not sure how you are mistaking my want for transparency on where my money is going with a moral decision.

Is every purchase a moral decision to you perhaps?

It seems you are very much pitching libertarianism here. Perhaps I am not familiar with this part of the dogma.

You can think of those fees as a substitute for the front-of-house: waiters, laundry, dishes and real-estate.

A restaurant typically hires twice more waiters than cooks, as equivalent (minimal) wages. Real-estate is often a third of the overall costs and most of it is the front, i.e. tables not the kitchen.

Some intermediaries are genuinely nothing but advertising and restaurants have to organise deliveries themselves. But if you include delivery costs, I’m not sure 30% isn’t cheaper than dining in.

I'm all for banning grubhub, ubereats, postmates, and doordash. If people want to order take out, let them get off their lazy ass, come down and pick up their own order.

Would you apply this to all convenience based services you use?

Some people order delivery because they don't have transportation. Others order delivery because they are handicapped and, for example, in snowy, icy weather, their wheelchair plus snow and ice and so forth mean going somewhere is not very feasible at times.

I mostly get takeout and pick it up myself. I think these delivery services are generally a bad idea, but some people getting delivery aren't simply "lazy ass" people.

I have a brain tumor that gives me seizures, meaning I'm unable to drive anymore. But sure, you're right- maybe if I wish real hard and pull myself up by my bootstraps, that will solve the problem.

It really blows my mind that you're not able to even consider the idea that your situation isn't universal. Good grief.

My question is how long this can go on for before these delivery apps have to lower their fees. The fees are pretty obscene, and it's clear that apps like GrubHub pass that cost to the restaurant rather than the customer because they know that the customer won't want to pay that much and that restaurants at least want some amount of attention and visibility in these apps, especially since more customers are wanting to use these apps rather than ordering through some crappy website or by calling in.

But I'm not convinced that apps actually should require the amount of overhead they might try and claim is responsible for these high fees. Customer and driver support for delivery apps is pretty minimal and almost always outsourced. Nowadays, most driver support is handled via text, which means you can have fewer support staff and they can just multitask. When I drove for GrubHub, when I visited the regional office, it was usually staffed by one or two people who were only there maybe a few hours out of the day(which is why, at least a few years ago, you couldn't just randomly show up). It's possible that they have way more employees at their HQ... but I have to wonder just how much of their costs are essential and not fluff generated by excessive growth from VC funding. Why bother building a lean organization if the money will just keep coming in whether or not the business model brings in enough money? All it has to do is bring in enough money to make lenders confident in the future of the business.

In any case, there seems to be room for a delivery app, or a system of delivery apps, to compete with top-heavy companies like GrubHub and DoorDash. Why not run a leaner delivery app business, charge restaurants a flat fee, don't bother with a big marketing department because partnered restaurants will do most of the marketing by visibility, have restaurants pay the base delivery fee, allow drivers to keep all their tips to encourage more drivers, and pass the $3-4 deliver fee to the customer? Say you charged partnered restaurants $199 a month, and you acquired the market share of GrubHub, which is ~115,000 restaurants; that would be $22,885,000 per months of revenue. Is that really not enough to run a successful delivery app? Or is this a matter of everyone wanting to run a bajillion dollar unicorn?

Completely agree. I think you can even ask just 10 per month. A team of 20 people is sufficient to run this entire business.

GrubHub has 2700 employees. I think there's more going on there than you realize.

Ignoring marketing won't help, since the restaurants aren't inventivised to promote your app. There's huge opportunity cost switching away from the incumbent apps, too much risk for most businesses.

And you have to get the restaurants to sign up, which requires marketing/sales.

It does seem like the sort of thing where someone could develop the app/framework and either focus on some specific lucrative markets (denser areas of higher income cities) and/or have some sort of franchise model.

Very few people do a significant amount of take out delivery when they're traveling. So long as you have a profitable business in a city, there's no particular network advantage (other than any economies of scale) to serving other cities.

As a consumer of takeout, I would totally install and use such an app, assuming it was any good.

The restaurants would be incentivized to let all their customers know about it, which means they would be more than happy to have folders around etc. Not out of the goodness of their hearts, but because they would then not be held hostage to the other apps.

Your issue is building the app, getting restaurants to sign up in the first place and running the nextwork.

It's going to go on until someone finally decouples the delivery from the discovery of the restaurants. Right now monopolies have the advantage because people don't go to restaurants and check if they have a delivery app, but people use delivery apps to see what restaurants are available.

If ever there was a killer app for the semantic web it would be a delivery API. It's not going to happen because none of the parties involved have both the motivation and capability to pull it off, but one can dream.

> Right now monopolies have the advantage

Real monopolies are singular.

> It's going to go on until someone finally decouples the delivery from the discovery of the restaurants.

There's probably a business in setting up a really simple delivery network that just focuses on connecting delivery drivers/riders with restaurants. Restaurants could take orders on their website or whatever other platform they want and then send them to the delivery network.

There is. It's called Postmates, and from comments I read on delivery driver subreddits, of all the apps drivers hate this one the most for various reasons (doesn't pay well, poor coordination, etc.).

Now Postmates uses an elastic workforce, so it's subject to the supply/demand constraints of driver availability.

What if it were possible to hire an permanent workforce of delivery drivers to serve a restaurant cluster (say large ethnic neighborhoods)? Not all cities have restaurant clusters so this wouldn't work everywhere, but maybe with some tweaks it might.

I don't think the delivery part itself is the main problem, there's no inherent problems with restaurants needing a long term contract with delivery personel/companies, if they get unfair terms there are no real barriers for them to do their own delivery or go to someone else.

However if their delivery isn't easily discoverable then this does hurt them, and unlike with simple delivery there's not too many options to make yourself discoverable when the de facto standard is run by a single company.

Have you heard of ideas are easy, execution is difficult?

If you think its that easy why dont you do it yourself?

I'm sure HN has no shortage of ex-Uber engineers given how many people from their tech divisions they have let go of recently.

I am curious to hear what they think about this, in light of them being let go en masse, which in itself shines even more light on things that are outside of this discussion.

Was the company ever sustainably profitable? If so, which divisions/apps? When did they start becoming unprofitable?

Gouging restaurants who are already working with razor thin margins is really strange to me.

I am guessing they thought that as long as VCs kept pouring money in like gasoline, they could turn a blind eye to the fact that they have destabilized a fragile ecosystem that _a lot_ of people depend on (remember: knowing how to cook is an anomaly these days).

I'm guessing they didn't learn anything from Groupon.

Unfortunately in exchange for severance, these folks likely had to sign some sort of agreement limiting what they can say about the company

Not Uber but Deliveroo — and it was long enough that I can talk freely. Mind you: that was a while ago.

The vast majority of people underestimate the cost of delivery, more specifically two things: the duration of delivery or rather how many deliveries per hour of work at peak time, and the utilisation rate.

It’s hard, in the best circumstances (good weather, constant demand, professional restaurant, dense habitat) to have a driver handle two deliveries per hour. If you take a £2 free from the customer and a £5 commission over a £17 order, you can pay a rider £14 per hour. At that rate, you typically would get the left wing press to call you exploitative every other day. That’s excluding everything else: marketing, customer service, tech. You can’t improve anything without capital that has to come from investors.

All that ignore the key problem availability: if you have 100 riders on schedule, about 60 would show up. They are not employees after all, and you can’t fire half of your contractors every day when you are growing like weed. Probably fewer than 30 will show up if it rains, but 80 might if the weather looks nice and there’s nothing on TV. If you have reasons to believe that you’ll get 360 deliveries during the three hour dinner shift, you should be good but… if you get 350 orders and 70 riders show up (nothing unusual exceptional) they’ll all get one fewer order than expected and they will complain they are are not making enough money. More likely, half will do six, a third will do five and a dozen not enough to justify them showing up. That’s excluding any exceptional case: hail, Premier League finals, etc. 20 riders for 4,000 orders wasn’t out of the question with bad enough weather. Your marketing team is quite likely to tell you that means 3950 unhappy customers because most riders will switch off the app after the second of third customer insults them because the website isn’t responsive.

There are many ideas about how to increase the number of delivery per hour of work:

* telling people to pedal faster isn’t a good idea;

* asking more than 30% from restaurants will get chef’s knife thrown your way (not a metaphor);

* paying people any less than £14/h gets you call a slave trader by the international press;

* asking customers for more than £2 is a crime against humanity and will tank your retention faster than spilling broth and bringing cold pizza;

* setting an ordering minimum to something as high as a meal for two people, i.e. £20, is an effective way to become a trending topic on twitter for all the wrong reasons; reasons that my grandmother would wash out of your mouth with soap;

* handling over two deliveries from the same restaurant to a single rider can work at times, but it’s hard to find the rare good cases and you get very angry customers ver fast; handling two deliveries from different restaurants is… ::shivers:: Let’s not talk about it.

So, you are right: razor thin margins at best in most cases.

What works is looking at the above and seeing in as a stats game:

1. 360 orders ± 30, 60 riders ± 20 isn’t a great combination. 3,600±100 and 500±50 are better: your margin can be improved with just the large number theorem. That means, in any places without the population density of central Paris, to feed a significant portion of the population. It sounds absurd but having 20 riders out in a hail storm means you will have none within an hour, even if the sun goes back (thank you non-sensical May weather); having 200 means they see their peers riding and wait it out.

2. Another thing where scale really helps is opportunities: if you have more than 3,000 deliveries in three hours per square mile, that’s 50 deliveries in the last three minutes. One is bound to be nearby, less than two minutes away. So rather than pay riders to do delivery, then shlep for the next one to a restaurant half a mile away and only then to start carrying food again, you get to pay them to deliver food, then turn the corner and do it again. That way, you can hope riders to handle more than two deliveries per hour. That considerably helps your business models.

3. What can help a little bit more is that with ten times more order, the rare cases when one rider can pick up two orders and not make it awkward increases as O(n^2) so they go from rare to worth the time to implement an assignment logic for those.

That should give you a hint why you’ve heard the words “billion raised in a new round of financing” used around that business model: there is path to profitability but it has to go through extreme growth.

I’ll let you do the math on rider pay, restaurant, fees, possible subscription models, population density, etc. but if you do, remember that a service like that requires, at maturity, thousands of engineers hoping Silicon-Valley level pay.

You are approaching this from the wrong end of the ledger. If someone orders food to go 'cheap' then they are not your customer if that squeezes out more than your delivery service needs because it will have to come out of your suppliers pockets and they are vulnerable already.

The simplest way is to charge more to the buyer, and leave the restaurant their margins. Delivery is added value, not less value, and should command a higher price. And if your business model can't work that way then don't go into the delivery business in the first place.

> * asking customers for more than £2 is a crime against humanity and will tank your retention faster than spilling broth and bringing cold pizza;

This was not my riffing around a hot-and-cold theme. This was the actual comparison that I made when I reported on the impact on retention of an AB-test on raising the order fee above £2: I used an established internal standard: unhappy meal (i.e. spilled liquid container or food is declared cold; either way the order is deemed inedible by the customer).

Deliveroo (myself included) had a ton of ex-Facebook: opinions were not welcome, hard data was. Key levers like the fee was tested in countless ways (including a subscription model) and the company is well-known in London for their experimentation practice. I’d know: that’s what I’ve done full time since, including a workshop at last PyData London.

You _can_ ask for more. Supper is a competitor to Deliveroo that offered a more premium experience in central London. Given how few restaurants they list and how expensive those restaurants are, I’m not sure they take a smaller commission: maybe the rate is lower, but not the amount. Fact is: no one has heard of them; no restaurant in this conversation recommends to use them; if you ask for options, their name don’t pop up. Last month, when all restaurants in London had to close, they were not mentioned as a potential option. Maybe they have the worst sales team in the world; I don’t know. But that’s when they barely take the fee to £3.25.

* handling over two deliveries from the same restaurant to a single rider can work at times, but it’s hard to find the rare good cases and you get very angry customers ver fast; handling two deliveries from different restaurants is… ::shivers:: Let’s not talk about it.

I think this is the area of most opportunity. You can’t really do this with a guy on a bike but in the us there is no reason you couldn’t establish delivery windows for certain neighbors and pickup windows to restaurants then have a guy with a meals on wheels like truck come, pick up items from adjacent restaurants and deliver them to customer.

It messes up the delivery driver as disposable and replaceable mentality as timing is critical but if you want to have efficiency sometimes you need to pay a bit more.

At the right scale, it is, but the pairing opportunities become significant when a given service represents a significant portion of how people eat. (To give you an idea: at that point, the lobbying against the platform isn’t coming from restaurants but supermarkets.)

It also requires to change the expectations and internal organisation of restaurants:

* you have to tell them that the delivery person will pick both — otherwise they freak out when they don’t run out with the first one;

* you have to ask them to have two orders come out of the kitchen at roughly the same time: fast-order cooks can do that if they know they have to, but if they don‘t, those are quite frequently far apart. And there’s little information coming out of the kitchen telling you that this will be the case when assigning the order.

Handling that kind of organisational change is ambitious when a restaurant is struggling because they have a staffer whose full time job is to copy orders from the delivery tablet into their point-of-sale because the two softwares are not integrated.

It's rare, and really cool, to have someone who's deeply knowledgeable about the workings of a business like this walk folks through things. Thanks for sharing!!!

Reply on news.ycombinator.com