California Pizza Huts lay off all delivery drivers ahead of minimum wage increas
usatoday.com
usatoday.com
BIL was COO of a pizza chain. The cost for a large pizza was around $1.50 - even for pricey toppings and gluten free bread. Labor is cheap at ~60 seconds per pie. Biggest costs was rent. A $5 raise could be absorbed across and then some with a 10¢ increase in price or adding an extra $1 delivery fee.
Strategically this makes little sense. A key factor of chain pizza’s business model is convenience & cost rather than quality. When faced with the inconvenience of not having delivery available or the extra cost associated with third party delivery services I wonder how many people will just opt for Dominos, Papa Johns or something else?
You don't need a robot pizza machine, you need an operating model where rent doesn't hold your bottom line hostage (based on my very limited understanding of the business fundamentals). Rent goes up? Class 8 Semi pulls up to pull the trailer to somewhere else with hookups.
Edit: thanks for the learnings y’all!
https://www.youtube.com/watch?v=7OTpHqq6bFg # Comparing Chuck E Cheese pizza and a rebranded CEC frozen pizza
https://www.lastsqueaktonight.com/ # Last Week Tonight's alternative episode when they discussed HOAs. it's a full and funny history of the pizza chain and includes the virtual brand
> In 2019, Pizza Hut brought back its 1974 logo, banking on its nostalgic appeal. I figured that would be the end of it, just a simple marketing tactic soon forgotten. There were no plans announced to bring back the logo in stores, much less redesign the restaurants to look like old Pizza Huts from the chain’s heyday.
> But with no fanfare whatsoever, that’s exactly what’s been happening. Pizza Hut has been taking legacy stores and converting them into “Classics.” The formula includes ...
> So far, these stores appear to be limited to smaller markets, where these legacy stores have survived, the bones of the old buildings intact.
> They have generated incredible curiosity and fascination, and when I post photos of them on my Instagram page, they invariably lead to hundreds of comments and excitement and joy that’s impossible to measure. (Here’s a look at the phenomenon on my friend Heath Racela’s Substack.)
... but yea... for pizza, the dine in experience is almost completely gone. Dominos, Little Caesars, Gumby's (for the college town), Pizza Pit, Pizza Hut, Papa Johns. Papa Murphy's takes it to another level without even having ovens (take and bake... which incidentally _also_ allows them to qualify for SNAP https://www.papamurphys.com/faqs/).
You have to look for places like Pizza Factory or Pizza Ranch for a dine in experience (and many other local places that have only one or two places... but very few national chains anymore).
... And then there's Pasqually's Pizza which straddles the line. https://www.pasquallyspizza.com/our-story/ (CEC Entertainment, LLC is Chuck E. Cheese)
The best bet would be to pool resources to operate a single kitchen with multiple individual pizza companies as tenants. Each could run their own prep stations but use shared ovens. But you're back to rent dominating costs even if it's lower than having your own kitchen and oven(s).
Pizza Hut has for many years in a lot of locations maintained more of a restaurant focused approach, often serving AYCE buffet as a destination with proper booths and table service. They have a bunch of retro styled locations in the States that still offer that experience. There’s a pretty neat one that I like in Fredericksburg, TX. The full list of classic locations that I know of is here: https://rolandopujol.substack.com/p/the-retrologists-guide-t...
You want a gas conveyor oven which actually takes a lot of space and needs ~3 meters in front for assembly and 2 meters behind it. Walk in fridge and freezer are at least another shipping container in size. Then there's clean up and other prep space..
For us, wages were more than rent and probably our competitors rents. 2/3rds of wages would be drivers at slow times going to something like 4/5ths during the Superbowl.
It does matter where it's made; a location more distant from customers will mean they get pizza that's less fresh.
There’s even a startup company that will rent you space for running it.
https://cloudkitchens.com/locations/san-francisco-bay-area/
You’re not missing anything. Just bear in mind that demographics drive restaurant delivery businesses intensely and a big part of the business is related to regional demographic trends (and those vary globally quite a lot).
So a nearby pizzeria with its own delivery drivers that has a degree of operational competence can get that pizza in a car immediately, which means that the customers get better pizza, which means they order more pizza from that store.
Uber Eats and DoorDash don’t seem to manage to get pizzas into a car immediately.
I was a little annoyed at the time, but now that you've put it like that, it makes a lot of sense.
I went from hot pizza arriving in 15 minutes to cold pizza arriving in 40+ minutes, if at all. After a few times, I realized the delivery person was now a random doordasher that didn't know the neighborhood, and didn't even have the benefit of seeing my doordash instructions on how to find my townhouse since they were hired by the restaurant.
This is what I was thinking. I don’t live/work in CA, but restaurants in NY who self-deliver also have to consider the high cost of Insurance for delivery drivers compared to the availability of third-party delivery agents.
...and saw the wage increase as a useful distraction to blame.
> Perhaps Yum Brands has the data
> Pizza Hut, owned by the Taco Bell parent company Yum! Brands, said the company was "aware of the recent changes to delivery services at certain franchise restaurants in California."
> "Our franchisees independently own and operate their restaurants in accordance with local market dynamics and comply with all federal, state, and local regulations while continuing to provide quality service and food to our customers via carryout and delivery," Pizza Hut told BI.I'm like wtf, that's all? why haven't that been done already.
When I was delivering pizza, it was usually 30 minutes allotted for delivery: 15 minutes to make the pizza, and 15 minutes to get it into the customer’s hands. With transit time, I would have been doing good to get 2 deliveries an hour.
You didn't deliver multiple pizzas on a single trip?
Maybe Pizza Hut has gotten out of the delivery business because nobody in their right mind would order delivery from Pizza Hut, since they almost always have better options.
Maybe they are focusing more attainable markets: people who wandered in off the street, people who wanted Taco Bell but were really high and forgot, third option not found.
Pizza places have been charging for delivery for a few years now. They don't just absorb it by increasing pizza prices anymore. My guess is their volume has gotten so low or extremely variable that it's hard to plan for the correct number of drivers each night, and the marginal cost of another driver is so high now that they can't just have extra drivers hang around doing nothing, and it's probably harder to keep drivers because they're being poached by all the delivery services.
Strategically, it makes a lot of sense. There are at least a half a dozen popular delivery services with thousands of drivers.
Costco charges $10 for a whole pizza (which you pick up, no delivery). Given their business model, I suspect that number is pretty close to the actual cost of production.
now its italian prices so might need adjustments but lets see
50 cents yeast 1 euro flour 50 cents salt 2 euros tomato passata 1kg 50 cents basil
The rest mozzarella
Now you might want to go over budget a bit and get some olive oil that is expensive, but you just put half a tablespoon per pizza so…
Making pizza is really good business with high margins
Real-world cost optimizers like Costco have some robots (the pizza saucing machine is cool) and they still end up with a cost around $10 per pizza.
Making pizza has high margins when you charge $25 or more per pizza. Not $10. Pizza Hut charges less than $25 but that includes delivery. From a random web link (https://www.vettedbiz.com/pizza-hut-franchise/) franchises average around 15% margins, which is not great.
I don't order delivery very often, so I was surprised when the last time I did it, the pizza place that advertised delivery just silently passed the order on to Doordash, with all the downsides of that process (data sharing, increased price, decreased pay for the driver, and generally worse service). Maybe this is just how most places do it now, but I was surprised.
I understand that Doordash gives workers the option of being paid minimum wage, but they get money only when the worker is actively making a delivery, so almost by definition that means less than minimum wage in practice. I'm not sure what the fairest strategy would be, because it's not like there are defined shifts for gig workers, but it feels like they could find a better policy than this.
Is it even an option in California?
"Guaranteed minimum earnings: When you dash in California you earn at least 120% of minimum wage (based on the local minimum wage at the pick-up location) for active time on the platform (time spent on a delivery, starting from when you accept an offer to when you complete it), plus $0.34 per mile during active time, when driving a motor vehicle (for example, a car, motorcycle, motor scooter)."
https://help.doordash.com/dashers/s/california-dashers
https://driver-support.grubhub.com/hc/en-us/articles/3600538...
> …but they get money only when the worker is actively making a delivery…
"Active time" is acceptance to delivery, including wait time.
how is that legal?
There's a lot of unreasonable abuse of private data in the US, but this isn't it.
I will strongly suspect that the big centres in california will do likewise, or potentially the state as whole.
And it's no wonder. Restaurants delivering have very low overhead. A phone line and a delivery driver.
When you're on grubhub/doordash/etc, now somebody has to pay for a mountain of software engineers, marketing expenses, servers, customer service people, executive comp, etc. It inserted an expensive middleman where there was none.
alas, it's probably still a better option than each restaurant trying to build their own website/app. But not better than picking up food or calling the restaurant for delivery.
I think in general it works for pizzas because pizzas have very high margins so that some or all delivery costs can be bundled in the retail price of the pizza.
That model was vastly preferable, as delivery people were familiar with the neighborhood and you wouldn’t find yourself accidentally ordering from a restaurant on the other side of Manhattan that will essentially guarantee your food will be cold.
As far as the number of engineers required, I think you vastly underestimate the tech and infrastructure required. Sure a few dozen engineers could build the core matching and routing engine and the restaurant and delivery person apps, but all of the scaffolding around that is huge. Who does customer support? How does the customer get ahold of the delivery person? What happens when an order gets misdelivered? How do you deal with the various regulations in different municipalities around pay? Heck, paying people is a few dozen people alone.
And then you have to think about supporting all of these things in places where the delivery models might be totally different- car delivery is totally different than walking delivery. What about users whose orders are late? In some places they have health regulations that preclude delivering food that has been waiting for over a certain time. The list goes on and on.
Keeping wages artificially low (with Immigration for example) disincentivizes businesses from investing in new technology (aka LSDs => Labor Saving Devices). Productivity declines. The economy stagnates.
Are temp workers for DoorDash et al. paid the new fast food minimum wage when performing contract work for fast food businesses in California?
Yes and no, if my understanding of the current CA gig economy is correct.
They will be guaranteed $20 an hour (edit: plus a 20% premium?) while picking up and delivering, but earn nothing while waiting to receive an order to work on.
This may seem bad on the surface, but many delivery folks I have spoken to value the flexibility of not having to be on someone else’s schedule.
Definitely not Best Buy. There is only an increase for fast food workers and certain health care workers.
Not sure whether food delivery gig work will fall under “fast food”. Probably not.
Note that I think most of the CA people make 19+ an hour for “pick up and delivery” already. $16 an hour plus $3.20 for the gig bump plus mileage (and tax write offs).
Pizza Whatever Corp outsources delivery for $X less per hour than a fast food worker would cost, either pocketing the difference in wages rather than paying it to workers as the state intended, and/or undercutting the prices of any competitors still using delivery employees.
I imagine there would be interesting outcomes from filing unpaid wages claims with the California m labor department against Doordash and other temp agencies for the difference between hourly wages paid and fast food worker hourly wages owed, when performing delivery services for fast food businesses that are in-scope for the law.
Now that prices are high and margins are tightened (blame practical downstream or “greedy corporations” or just MBAs, I don’t care) that subsidy isn’t bearable. So you pay for delivery.
The couple of dollars extra for delivery fees started maybe in the mid/late 2000s where I am (midwest USA).
Or not. Sometimes extra costs simply come out of the bottom line because it is better to make a delivery sale with lower margin, than lose the sale entirely.
The idea that it must be subsidized only makes sense if every pizza place has no profit.
Various services, credit cards, and banks will get you "premium" membership for free at this point, but the store front on Door dash.com is locked down corporate shit that barely allows substitutions, no notes, and no coupons.
Ordering on the restaurants actual website will get you the coupons, the member points, the specials, but then they hide the fact it's delivered by a delivery app until the very last step, which charges the full fee of the delivery app plus a little more to make up for what the company is paying for the service. You end being able to get what you actually want but still pay more.
Then you get a driver sitting around so they can make multiple deliveries while your food gets cold.
And they still want a tip.
And Door dash couldn't make a profit when we were all locked inside of our houses and restaurants could only make deliveries.
It will be nice when people realize how shitty the deal has become and these delivery service companies finally crash and we go back to restaurants needing their own drivers
Compare that to paying someone $20 an hour, with no guarantee that that single employee will do four deliveries each hour. If it's a typical day, you may send them out to 20 or fewer deliveries in an eight hour shift, and they get $160 for that shift. Compared to Grubhub, which charges a flat $120 for those 20 deliveries.
Not to mention the benefit of not worrying about them calling out sick, training, payroll taxes, etc.
And, again, Pizza Hut is likely able to negotiate something better than that 20%.
https://get.grubhub.com/faq/what-fees-does-grubhub-charge-re...
Pizza Hut to lay off California workers after minimum wage increase - https://news.ycombinator.com/item?id=38784345 - Dec 27th, 2023 (12 comments)
California Pizza Hut Lays Off Delivery Drivers Amid New Wage Law - https://news.ycombinator.com/item?id=38778657 - Dec 26th, 2023 (79 comments) [flagged]
California Pizza Hut operators laying off all delivery drivers - https://news.ycombinator.com/item?id=38775754 - Dec 26th, 2023 (47 comments)
Even in the 90s their pizza sent me running to the bathroom it had so much oil in it.
There was a time when it was popular for its cheap and consistent qualities.
But now there are so many options, and so many customizations and flavor with relative cost that it’s clear the brand was going to die anyway.
That doesn’t excuse their piss poor messaging that was the real grievance most former drinkers had. Insulting and attacking your primary customers defensive someone who is never going to be your customer is just not a good move.
But as the effectiveness, it was a prime situation, not necessarily the world’s most effective boycott.
Much more corrosive to hiring is the amount of paperwork involved.
[1] https://davidcard.berkeley.edu/papers/njmin-aer.pdf
[2] https://irle.berkeley.edu/publications/working-papers/minimu...
[3] https://www.journals.uchicago.edu/doi/abs/10.1086/685449
Paperwork? Really?
It’s almost like there are other variables involved. And again, you’re comparing highly-productive regions to ones that require federal subsidies to stay afloat.
Pretending that companies can do things they can't afford to, by paying people less than they need, also has consequences. Although they're not really "unforeseen" since we've been seeing the consequences of it for decades now.
It's sad that people need these menial jobs--which will probably be automated at some point--to survive, instead of being able to pursue something more meaningful.
As it stands, people just use that as an excuse for retaining sub-livable minimum wages for everyone.
Adjust for GDP/capita or urbanisation (they go hand in hand) and housing cost.
It's not "close to 30%," it is "exactly 25%." Whoever wrote that needs to be sent back to middle school remedial math.
As if I needed another reason to not eat at pizza hut. This sounds like a cynical ploy to get sub-minimum wage gig economy delivery drivers via third party services that they can then blame when the plan goes pear shaped.
Close to 30% is technically true, but it sounds like a bigger hike to the reader.
Anyway bad reporting..
Minimum wage increased from $15 to $16
Minimum wage for fast food workers increased from $15 to $20